12 ms·

My god, it's like the blueprint to a Ponzi scheme

by kodah 4y ago

madamelic 4y ago
From the Sequoia article on SBF / FTX, it's very likely to be able to trade internationally because each country requires you to have a bank account in that country to be able to access their markets. In the Sequoia article, SBF gained his initial funding for FTX from executing trades from the US to Japan, where BTC was overpriced because no one bothered to arbitrage it because of the setup difficulty. The way he did this was by contacting a friend to open a bank account in Japan and manage the funding over there while he managed the account US side. I am sure some of it is normal corporate shell game but I'd imagine at least 50% of this setup was for regulatory purposes. Even small fintechs will have "shell game like" company structure to please regulatory forces that require having certain things be independent from the consumer platform even if the two companies are working towards the same goal.
- cma 4y ago
  No one did it for Japan first probably because they have pretty strong criminal liability stuff for securities violations and other financial crimes and don't play the "no fault settlement" game.
  - madamelic 4y ago
    It's not illegal to arbitrage but yeah I think what you are pointing at is you have to be regulatory-ily buttoned up for Japan markets vs a more loose market where you don't have to be super careful & can learn as you go. So SBF having been in finance before (Jane Street), he knew where the footsteps were and how to do it vs a fly-by night crypto investor with no finance background.
    - paganel 4y ago
      Supposedly the Japan “subsidiary” (if you can call it that) was set up by a Japanese person and a resident of Japan, who was a contact of SBF through the Effective Altruism thing. I think they knew something was shady, because the account they had opened in Japan was with a small rural Japanese bank. When that “arbitrage” turned out to be really lucrative one of the founders of Skype (Talinn something) gave SBF a $50 million loan. SBF and that Talinn guy knew each other also from that Effective Altruism sect-like thing. All this info was part of a Sequoia congratulatory piece on SBF, they of course had also given him money. The article has since been taken down, it’s still reachable through Web Archive.
      - vkou 4y ago
        > The article has since been taken down, it’s still reachable through Web Archive. I've skimmed through it, and by god, I was surprised Sequoia wasn't crediting the sun rising each morning to SBF.
- cavisne 4y ago
  This guy has major Epstein vibes (minus the girls). comes out of nowhere super politically connected, investing in research, with a pretty dubious origin story of how he got rich.
  - whimsicalism 4y ago
    That's a major reach.
- skeeter2020 4y ago
  That sounds to me a lot like a cover story to try and convince people there was actually a value-add. I'm skeptical that the barriers were so high they discouraged anyone from seizing essentially free money, but he solved this with a Japanese friend's bank account.
tptacek 4y ago
What do you even need a blueprint for? The guy did an interview with Matt Levine and laid the Ponzi scheme straight out: scammers make boxes that pay fake coins when you store your money in them, they put so much money into the boxes that the fake coins seem valuable, then they rug pull everyone and move on to the next one. That's how he described his own business.
- perihelions 4y ago
  (Here's the link to that Matt Levine interview: https://www.bloomberg.com/news/articles/2022-04-25/sam-bankman-fried-described-yield-farming-and-left-matt-levine-stunned https://www.bloomberg.com/news/articles/2022-04-25/sam-bankm... )
  - piva00 4y ago
    I remember listening to that interview and this part always got me: > Matt: (27:13) > I think of myself as like a fairly cynical person. And that was so much more cynical than how I would've described farming. You're just like, well, I'm in the Ponzi business and it's pretty good. I seriously cannot understand how after this interview Sam still had any kind of support from VCs and so on. I hope the late 2010s-early 2020s will be remembered as the dot-com era of extremely dumb money...
    - lotsofpulp 4y ago
      > I seriously cannot understand how after this interview Sam still had any kind of support from VCs and so on. Because they thought they could make money by finding a bigger fool, or by finding someone who thought they could find an even bigger fool.
      - eternalban 4y ago
        > Because they thought they could make money by finding a bigger fool $10B "somehow" "gone" is QED that someone did find their marks. More interesting is how none of these guys are seeing the inside of a jail and doing the jailhouse orgies. I wonder if 'defenestration' will become a meme in crypto world too.
mensetmanusman 4y ago
Someone needs to replace calling cards with crypto-currency in this Office skit: https://youtu.be/lC5lsemxaJo https://youtu.be/lC5lsemxaJo It fits perfectly
tonetheman 4y ago
It is not "like" a blueprint. It IS a blueprint.

My god, it's like the blueprint to a Ponzi scheme

by kodah 4y ago

My god, it's like the blueprint to a Ponzi scheme

From the Sequoia article on SBF / FTX, it's very likely to be able to trade internationally because each country requires you to have a bank account in that country to be able to access their markets. In the Sequoia article, SBF gained his initial funding for FTX from executing trades from the US to Japan, where BTC was overpriced because no one bothered to arbitrage it because of the setup difficulty. The way he did this was by contacting a friend to open a bank account in Japan and manage the funding over there while he managed the account US side. I am sure some of it is normal corporate shell game but I'd imagine at least 50% of this setup was for regulatory purposes. Even small fintechs will have "shell game like" company structure to please regulatory forces that require having certain things be independent from the consumer platform even if the two companies are working towards the same goal.

cma 4y ago
No one did it for Japan first probably because they have pretty strong criminal liability stuff for securities violations and other financial crimes and don't play the "no fault settlement" game.
- madamelic 4y ago
  It's not illegal to arbitrage but yeah I think what you are pointing at is you have to be regulatory-ily buttoned up for Japan markets vs a more loose market where you don't have to be super careful & can learn as you go. So SBF having been in finance before (Jane Street), he knew where the footsteps were and how to do it vs a fly-by night crypto investor with no finance background.
  - paganel 4y ago
    Supposedly the Japan “subsidiary” (if you can call it that) was set up by a Japanese person and a resident of Japan, who was a contact of SBF through the Effective Altruism thing. I think they knew something was shady, because the account they had opened in Japan was with a small rural Japanese bank. When that “arbitrage” turned out to be really lucrative one of the founders of Skype (Talinn something) gave SBF a $50 million loan. SBF and that Talinn guy knew each other also from that Effective Altruism sect-like thing. All this info was part of a Sequoia congratulatory piece on SBF, they of course had also given him money. The article has since been taken down, it’s still reachable through Web Archive.
    - vkou 4y ago
      > The article has since been taken down, it’s still reachable through Web Archive. I've skimmed through it, and by god, I was surprised Sequoia wasn't crediting the sun rising each morning to SBF.
cavisne 4y ago
This guy has major Epstein vibes (minus the girls). comes out of nowhere super politically connected, investing in research, with a pretty dubious origin story of how he got rich.
- whimsicalism 4y ago
  That's a major reach.
skeeter2020 4y ago
That sounds to me a lot like a cover story to try and convince people there was actually a value-add. I'm skeptical that the barriers were so high they discouraged anyone from seizing essentially free money, but he solved this with a Japanese friend's bank account.

tptacek 4y ago

What do you even need a blueprint for? The guy did an interview with Matt Levine and laid the Ponzi scheme straight out: scammers make boxes that pay fake coins when you store your money in them, they put so much money into the boxes that the fake coins seem valuable, then they rug pull everyone and move on to the next one. That's how he described his own business.

perihelions 4y ago
(Here's the link to that Matt Levine interview: https://www.bloomberg.com/news/articles/2022-04-25/sam-bankman-fried-described-yield-farming-and-left-matt-levine-stunned https://www.bloomberg.com/news/articles/2022-04-25/sam-bankm... )
- piva00 4y ago
  I remember listening to that interview and this part always got me: > Matt: (27:13) > I think of myself as like a fairly cynical person. And that was so much more cynical than how I would've described farming. You're just like, well, I'm in the Ponzi business and it's pretty good. I seriously cannot understand how after this interview Sam still had any kind of support from VCs and so on. I hope the late 2010s-early 2020s will be remembered as the dot-com era of extremely dumb money...
  - lotsofpulp 4y ago
    > I seriously cannot understand how after this interview Sam still had any kind of support from VCs and so on. Because they thought they could make money by finding a bigger fool, or by finding someone who thought they could find an even bigger fool.
    - eternalban 4y ago
      > Because they thought they could make money by finding a bigger fool $10B "somehow" "gone" is QED that someone did find their marks. More interesting is how none of these guys are seeing the inside of a jail and doing the jailhouse orgies. I wonder if 'defenestration' will become a meme in crypto world too.

mensetmanusman 4y ago

Someone needs to replace calling cards with crypto-currency in this Office skit: https://youtu.be/lC5lsemxaJo https://youtu.be/lC5lsemxaJo It fits perfectly

tonetheman 4y ago

It is not "like" a blueprint. It IS a blueprint.