5 ms·

Well Known Short Seller Claims SBF Is a Fraud Weeks Ago

93 points by eigenvalue 4y ago

andrewstuart 4y ago
So is everyone assuming the remaining big players in crypto are straight, or crooked as question marks?
- zen21 4y ago
  SBF had the reputation of being the most honest person in crypto.
  - JamesianP 4y ago
    so you're saying that still might be true?
  - rippercushions 4y ago
    There's a legendary interview between SBF and Matt "Money Stuff" Levine, where he straight up admits to crypto being a Ponzi scheme. So you've got this boxes and it’s kind of dumb, but like what's the end game, right? This box is worth zero obviously. And like that, you know, you can't like keep this smart cap or something. But on the other hand, if everyone kind of now thinks that this box token is worth about a billion dollar market cap, that's what people are pricing it at and sort of has that market cap. Everyone's gonna mark to market. In fact, you can even finance this, right? You put X token in a borrow lending protocol and borrow dollars with it. If you think it's worth like less than two thirds of that, you could even just like put some in there, take the dollars out. Never, you know, give the dollars back. You just get liquidated eventually. 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...
  - PretzelPirate 4y ago
    SBF was marketed by his investors who helped him gain people's trust. That's hard to replicate. It was pretty clear to me that SBF wasn't a good actor in this space because he didn't care about decentralization, just about making as much money as he could however he could in the name of effective altruism. I wasn't the only one suggesting that people stay away from anything SBF had touched.
  - thepasswordis 4y ago
    Absolutely ridiculous take. No he was not.
  - throwup 4y ago
    Speaking as someone tangential to the space, I have to disagree. SBF always been kind of loathed by people in the know. I think the reason was because of his political involvement and how he pushed for regulation, while many in crypto are against the government getting involved. "Scam Bankman Fraud," they called him--the memes write themselves.
- bagels 4y ago
  The safer bet given the history of exchanges, scam coins, and NFT is that they are crooked. This is why Coinbase sent out an email this morning pleading with people not to withdraw because they aren't crooked.
  - AustinDev 4y ago
    Coinbase charges enough fees and has held crypto for me through 2 crashes, I think they're fine. Although 95% of my coins are in wallets that I control so I don't trust them with that much.
  - ralph84 4y ago
    Somehow Coinbase's email didn't include what they include in their SEC filings: “the crypto assets we hold in custody on behalf of our customers could be subject to bankruptcy proceedings and such customers could be treated as our general unsecured creditors"
  - the__alchemist 4y ago
    Saw that email; dumped half my account val into a hardware wallet. Probably will dump the rest in soon.
    - bagels 4y ago
      I moved my very modest half a bitcoin out of Coinbase in Jan when it was clear that bitcoin was going to follow stocks down the tubes.
- deleted 4y ago
  [deleted]
eigenvalue 4y ago
Go to 34 minutes in. Amazing how many red flags there were. This guy has a good track record of exposing fraud, going back to the Lernout & Hauspie days, which the old timers around here will remember.
- naikrovek 4y ago
  all crypto is rife with red flags.
  - mitchdoogle 4y ago
    Crypto is nothing special in this respect.. These red flags you speak are not an issue with crypto, they are an issue with people. Humans have been looking for ways to screw each other over since the dawn of time. If you mint some brass coins and say they are gold, that just makes you a loar. It doesn't mean there's anything wrong with gold.
    - mupuff1234 4y ago
      It's special in the amount of concentrated fraud. I can't think of another legal field with such fraud per sqm density.
    - bogwog 4y ago
      > If you mint some brass coins and say they are gold, that just makes you a loar. It doesn't mean there's anything wrong with gold. If the fraud is rampant enough, then it is a problem with gold: it's too risky to invest in.
    - monkeydreams 4y ago
      > Crypto is nothing special in this respect.. Crypto is nothing special in any respect except crime. Web 3.0 is basically blockchain re-discovering how finance works and why financial regulation is a thing. Coins leveraging coins and pegged to other coins and hedged by yet another coin... None of it reflects a solid foundation and the fact that, for a time, enough people were fooled does not a revolution make.
notlukesky 4y ago
Here is the Video starting at that moment around minute 35: https://youtu.be/VbDiWXFxqr8?t=2140 https://youtu.be/VbDiWXFxqr8?t=2140 Here is an interesting tweet on this worth reading after watching the video: https://twitter.com/RudyHavenstein/status/1591161176465211393 https://twitter.com/RudyHavenstein/status/159116117646521139...
- cavisne 4y ago
  Yep Epstein and him have CIA written all over them.
  - arminiusreturns 4y ago
    Epstein was likely "shared" by multiple intelligence agencies, but all indications are of Mossad running that particular network primarily. See Whitney Webb's great new book(s), One Nation Under Blackmail. (vol 1 and 2) It is likely Epstein was just a front man and Ghislane Maxwell was actually his handler. Now look at who her dad was. Who she grew up with also. Her sisters are one of the hidden threads those on HN might be interested in. Hints of Danny Casalaro's research keep popping up on this topic... edit: I find how quickly stories like these drop off front page suspiciously artificial.
    - Nathanael_M 4y ago
      It has 87 points and it’s 18 hours old, it dropped off because it didn’t generate interest. Also, a bit of advice, finding conspiracy everywhere, weakens your arguments for potentially true conspiracy theories. It could be that your thoughts presented in this comment are completely accurate. However, then accusing the staff of HackerNews of sabotaging and covering up this small, barely-news story makes you look like you see boogeymen everywhere. It removes credence from your more important thoughts.
      - arminiusreturns 4y ago
        At the time it was above the fold and was only 2 hours old, and a refresh <5m later it was off. Is the algorithm documented somewhere? I understand your point and generally agree, but this is repeated pattern I have largely been quiet about for those reasons, but over time it seems... like there might be something there. Not saying there is, just that after enough coincidences it makes one start to consider the possibility.
anm89 4y ago
Not trying to defend SBF or FTX but honestly wasn't that impressed with this critic either. His criticism seems to break down to: 1) Look at him, he's ugly 2) He doesn't have the proper lineage of insider mentors to be allowed to be a billionaire 3) We don't have the full story on the original arbitrage mixed in with some political pandering 4) The compliance officer was sketchy 4 seems to be the only valid point. 3 is worth further research but not really anything in itself. The other 2 reflect more poorly on this guy than SBF. Overall, I don't think this guy really had anything, I think he just didn't like the smell and ended up getting lucky on the timing. But he 100% did not call out any meaningful elements of what ended up happening in any detail.
- propter_hoc 4y ago
  As an entrepreneur in finance for 10 years, I think the guy's perspective is actually pretty understandable. When you've been in finance for a while and have learned how many footguns and ways to go to jail there are to get major regulatory projects licensed and functional, you start to think of projects like "launch a bond offering and get it rated" or "launch an exchange" as so incredibly complex as to be impossible. There's a certain cynicism that comes up in the industry where people think something just can't be done because they know it's so complex to do right. Now I actually think that although this take is realistic, it is actually overly cynical and actually underestimates the possibility of disruption in finance. In actuality, not knowing the complexity allows a young entrepreneur to develop a simplistic plan and pitch it with conviction to VCs who also don't know any better. The mistake experienced people are making is that their experience tells them it is only reasonable to do a thing "correctly" or "scalably" when in fact the incorrect, illegal, unscalable way wins you valuable proof points. And with enough proof points and follow-on VC rounds the simplistic plan can mature enough to actually become functional. In the specific case of SBF and FTX, I do think the critic's seemingly superficial cynicism was actually both well-founded and ultimately correct. Launching an exchange functionally, legally and scalably was in fact too much for the inexperienced leadership of the business. They tried really hard to make a business model that worked and scaled fast. But in doing so, they ended up with effectively designing a circular reference (trading their own token) which made a lot of money for a while, but ended up crashing their business. I think they were well-intentioned, but it is true that more experienced leadership would not have tried the self-referential growth strategies FTX/Alameda engaged in. And in retrospect the critic's spidey sense was right; the pace of growth of FTX was bizarrely unsustainable and likely pointed to an underlying system that didn't make sense.
rlt 4y ago
It always struck me as odd that this guy came out of nowhere to become one of the wealthiest people in crypto in a few years. I don’t know if his adherence to effective altruism had anything to do with this outcome, but taken to an extreme I could see someone rationalizing fraud to redistribute wealth in a way that maximizes benefit to others. Basically Robin Hood.
- factsarelolz 4y ago
  Tens of millions of dollars to political campaigns?
  - ummonk 4y ago
    Buy off politicians to keep the fraud going so you can funnel more money to your charity causes!
    - foogazi 4y ago
      Or a front to launder money via crypto into “causes”
doorman2 4y ago
This is fascinating analysis. Not just the specific details about SBF and FTX, but the insight into the short seller’s process of company analysis. One thing became apparent to me. Our industry (tech) is rife with so many snake oil salesman. During the decade-long bull run, it was easy to look like a genius. But the water is going out and we’re going to see who is swimming naked. It’s time for the tech business cycle to end. The waste needs to be purged. A Fed pivot is just a pipe dream.
throwup 4y ago
https://fortune.com/2022/06/01/crypto-billionaire-sam-bankman-fried-give-away-his-fortune/ https://fortune.com/2022/06/01/crypto-billionaire-sam-bankma... > Giant crypto exchange founder Sam Bankman-Fried promises to give away most of his $21 billion fortune Sounds like he kept his promise in a way!
- deleted 4y ago
  [deleted]
memish 4y ago
How many people trusted SBF_FTX because of his celebrity supporters, his appearances with politicians, his Stanford professor parents? "I'm a big advocate for Sam because he has 2 parents that are compliance lawyers. If there's ever a place I can be where I'm not going to get in trouble, it's gonna be FTX" https://twitter.com/Guruleaks1/status/1591086077489844224 https://twitter.com/Guruleaks1/status/1591086077489844224 We outsourced trust to people in his proximity and because he was one of the main crypto advisors to congress.
- deleted 4y ago
  [deleted]
- googlryas 4y ago
  I see this logic all over the place(parents did X, so kids raised by parents will be super Xers). But it completely misses one of the key elements - the parents doing X may have done X because they believed in it, whereas the kid might do X simply because it's the family business. So the motivation is entirely missing, and it's seen as a birthright rather than a calling. Maybe his parents became compliance officers because they are assiduously moral law and order types. That's not necessarily a trait that gets passed down to your offspring.
paxys 4y ago
The problem is that everyone is always saying that everything is fraud. How do you know who to believe?
- willnonya 4y ago
  If it's politics the odds are they're wrong. Anything else the odds are in their favor.
- roncesvalles 4y ago
  Easy heuristic: every billionaire in crypto except Satoshi is a fraudster. Maybe it's overfitted maybe not but historically you'd be correct 100% of the time.
  - tim333 4y ago
    Vitalik seems ok but yeah.
subroutine 4y ago
Larry David also predicted this in an ftx super bowl ad: https://youtu.be/BH5-rSxilxo https://youtu.be/BH5-rSxilxo
- rootsudo 4y ago
  Hilarious and Ouch.
ethotool 4y ago
Every so often I would come across articles on CNBC written about this crypto genius (SBF) and they always reminded me of the media buzz around Elizabeth Holmes back in the day.
foogazi 4y ago
Is this an Iran/Contra type operation? They got the money out - mixed it with legit knife holders - and now they pull out and burn the evidence

93 points by eigenvalue 4y ago

andrewstuart 4y ago

So is everyone assuming the remaining big players in crypto are straight, or crooked as question marks?

zen21 4y ago
SBF had the reputation of being the most honest person in crypto.
- JamesianP 4y ago
  so you're saying that still might be true?
- rippercushions 4y ago
  There's a legendary interview between SBF and Matt "Money Stuff" Levine, where he straight up admits to crypto being a Ponzi scheme. So you've got this boxes and it’s kind of dumb, but like what's the end game, right? This box is worth zero obviously. And like that, you know, you can't like keep this smart cap or something. But on the other hand, if everyone kind of now thinks that this box token is worth about a billion dollar market cap, that's what people are pricing it at and sort of has that market cap. Everyone's gonna mark to market. In fact, you can even finance this, right? You put X token in a borrow lending protocol and borrow dollars with it. If you think it's worth like less than two thirds of that, you could even just like put some in there, take the dollars out. Never, you know, give the dollars back. You just get liquidated eventually. 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...
- PretzelPirate 4y ago
  SBF was marketed by his investors who helped him gain people's trust. That's hard to replicate. It was pretty clear to me that SBF wasn't a good actor in this space because he didn't care about decentralization, just about making as much money as he could however he could in the name of effective altruism. I wasn't the only one suggesting that people stay away from anything SBF had touched.
- thepasswordis 4y ago
  Absolutely ridiculous take. No he was not.
- throwup 4y ago
  Speaking as someone tangential to the space, I have to disagree. SBF always been kind of loathed by people in the know. I think the reason was because of his political involvement and how he pushed for regulation, while many in crypto are against the government getting involved. "Scam Bankman Fraud," they called him--the memes write themselves.
bagels 4y ago
The safer bet given the history of exchanges, scam coins, and NFT is that they are crooked. This is why Coinbase sent out an email this morning pleading with people not to withdraw because they aren't crooked.
- AustinDev 4y ago
  Coinbase charges enough fees and has held crypto for me through 2 crashes, I think they're fine. Although 95% of my coins are in wallets that I control so I don't trust them with that much.
- ralph84 4y ago
  Somehow Coinbase's email didn't include what they include in their SEC filings: “the crypto assets we hold in custody on behalf of our customers could be subject to bankruptcy proceedings and such customers could be treated as our general unsecured creditors"
- the__alchemist 4y ago
  Saw that email; dumped half my account val into a hardware wallet. Probably will dump the rest in soon.
  - bagels 4y ago
    I moved my very modest half a bitcoin out of Coinbase in Jan when it was clear that bitcoin was going to follow stocks down the tubes.
deleted 4y ago
[deleted]

eigenvalue 4y ago

Go to 34 minutes in. Amazing how many red flags there were. This guy has a good track record of exposing fraud, going back to the Lernout & Hauspie days, which the old timers around here will remember.

naikrovek 4y ago
all crypto is rife with red flags.
- mitchdoogle 4y ago
  Crypto is nothing special in this respect.. These red flags you speak are not an issue with crypto, they are an issue with people. Humans have been looking for ways to screw each other over since the dawn of time. If you mint some brass coins and say they are gold, that just makes you a loar. It doesn't mean there's anything wrong with gold.
  - mupuff1234 4y ago
    It's special in the amount of concentrated fraud. I can't think of another legal field with such fraud per sqm density.
  - bogwog 4y ago
    > If you mint some brass coins and say they are gold, that just makes you a loar. It doesn't mean there's anything wrong with gold. If the fraud is rampant enough, then it is a problem with gold: it's too risky to invest in.
  - monkeydreams 4y ago
    > Crypto is nothing special in this respect.. Crypto is nothing special in any respect except crime. Web 3.0 is basically blockchain re-discovering how finance works and why financial regulation is a thing. Coins leveraging coins and pegged to other coins and hedged by yet another coin... None of it reflects a solid foundation and the fact that, for a time, enough people were fooled does not a revolution make.

notlukesky 4y ago

Here is the Video starting at that moment around minute 35: https://youtu.be/VbDiWXFxqr8?t=2140 https://youtu.be/VbDiWXFxqr8?t=2140 Here is an interesting tweet on this worth reading after watching the video: https://twitter.com/RudyHavenstein/status/1591161176465211393 https://twitter.com/RudyHavenstein/status/159116117646521139...

cavisne 4y ago
Yep Epstein and him have CIA written all over them.
- arminiusreturns 4y ago
  Epstein was likely "shared" by multiple intelligence agencies, but all indications are of Mossad running that particular network primarily. See Whitney Webb's great new book(s), One Nation Under Blackmail. (vol 1 and 2) It is likely Epstein was just a front man and Ghislane Maxwell was actually his handler. Now look at who her dad was. Who she grew up with also. Her sisters are one of the hidden threads those on HN might be interested in. Hints of Danny Casalaro's research keep popping up on this topic... edit: I find how quickly stories like these drop off front page suspiciously artificial.
  - Nathanael_M 4y ago
    It has 87 points and it’s 18 hours old, it dropped off because it didn’t generate interest. Also, a bit of advice, finding conspiracy everywhere, weakens your arguments for potentially true conspiracy theories. It could be that your thoughts presented in this comment are completely accurate. However, then accusing the staff of HackerNews of sabotaging and covering up this small, barely-news story makes you look like you see boogeymen everywhere. It removes credence from your more important thoughts.
    - arminiusreturns 4y ago
      At the time it was above the fold and was only 2 hours old, and a refresh <5m later it was off. Is the algorithm documented somewhere? I understand your point and generally agree, but this is repeated pattern I have largely been quiet about for those reasons, but over time it seems... like there might be something there. Not saying there is, just that after enough coincidences it makes one start to consider the possibility.

anm89 4y ago

Not trying to defend SBF or FTX but honestly wasn't that impressed with this critic either. His criticism seems to break down to: 1) Look at him, he's ugly 2) He doesn't have the proper lineage of insider mentors to be allowed to be a billionaire 3) We don't have the full story on the original arbitrage mixed in with some political pandering 4) The compliance officer was sketchy 4 seems to be the only valid point. 3 is worth further research but not really anything in itself. The other 2 reflect more poorly on this guy than SBF. Overall, I don't think this guy really had anything, I think he just didn't like the smell and ended up getting lucky on the timing. But he 100% did not call out any meaningful elements of what ended up happening in any detail.

propter_hoc 4y ago
As an entrepreneur in finance for 10 years, I think the guy's perspective is actually pretty understandable. When you've been in finance for a while and have learned how many footguns and ways to go to jail there are to get major regulatory projects licensed and functional, you start to think of projects like "launch a bond offering and get it rated" or "launch an exchange" as so incredibly complex as to be impossible. There's a certain cynicism that comes up in the industry where people think something just can't be done because they know it's so complex to do right. Now I actually think that although this take is realistic, it is actually overly cynical and actually underestimates the possibility of disruption in finance. In actuality, not knowing the complexity allows a young entrepreneur to develop a simplistic plan and pitch it with conviction to VCs who also don't know any better. The mistake experienced people are making is that their experience tells them it is only reasonable to do a thing "correctly" or "scalably" when in fact the incorrect, illegal, unscalable way wins you valuable proof points. And with enough proof points and follow-on VC rounds the simplistic plan can mature enough to actually become functional. In the specific case of SBF and FTX, I do think the critic's seemingly superficial cynicism was actually both well-founded and ultimately correct. Launching an exchange functionally, legally and scalably was in fact too much for the inexperienced leadership of the business. They tried really hard to make a business model that worked and scaled fast. But in doing so, they ended up with effectively designing a circular reference (trading their own token) which made a lot of money for a while, but ended up crashing their business. I think they were well-intentioned, but it is true that more experienced leadership would not have tried the self-referential growth strategies FTX/Alameda engaged in. And in retrospect the critic's spidey sense was right; the pace of growth of FTX was bizarrely unsustainable and likely pointed to an underlying system that didn't make sense.

rlt 4y ago

It always struck me as odd that this guy came out of nowhere to become one of the wealthiest people in crypto in a few years. I don’t know if his adherence to effective altruism had anything to do with this outcome, but taken to an extreme I could see someone rationalizing fraud to redistribute wealth in a way that maximizes benefit to others. Basically Robin Hood.

factsarelolz 4y ago
Tens of millions of dollars to political campaigns?
- ummonk 4y ago
  Buy off politicians to keep the fraud going so you can funnel more money to your charity causes!
  - foogazi 4y ago
    Or a front to launder money via crypto into “causes”

doorman2 4y ago

This is fascinating analysis. Not just the specific details about SBF and FTX, but the insight into the short seller’s process of company analysis. One thing became apparent to me. Our industry (tech) is rife with so many snake oil salesman. During the decade-long bull run, it was easy to look like a genius. But the water is going out and we’re going to see who is swimming naked. It’s time for the tech business cycle to end. The waste needs to be purged. A Fed pivot is just a pipe dream.

throwup 4y ago

https://fortune.com/2022/06/01/crypto-billionaire-sam-bankman-fried-give-away-his-fortune/ https://fortune.com/2022/06/01/crypto-billionaire-sam-bankma... > Giant crypto exchange founder Sam Bankman-Fried promises to give away most of his $21 billion fortune Sounds like he kept his promise in a way!

deleted 4y ago
[deleted]

memish 4y ago

How many people trusted SBF_FTX because of his celebrity supporters, his appearances with politicians, his Stanford professor parents? "I'm a big advocate for Sam because he has 2 parents that are compliance lawyers. If there's ever a place I can be where I'm not going to get in trouble, it's gonna be FTX" https://twitter.com/Guruleaks1/status/1591086077489844224 https://twitter.com/Guruleaks1/status/1591086077489844224 We outsourced trust to people in his proximity and because he was one of the main crypto advisors to congress.

deleted 4y ago
[deleted]
googlryas 4y ago
I see this logic all over the place(parents did X, so kids raised by parents will be super Xers). But it completely misses one of the key elements - the parents doing X may have done X because they believed in it, whereas the kid might do X simply because it's the family business. So the motivation is entirely missing, and it's seen as a birthright rather than a calling. Maybe his parents became compliance officers because they are assiduously moral law and order types. That's not necessarily a trait that gets passed down to your offspring.

paxys 4y ago

The problem is that everyone is always saying that everything is fraud. How do you know who to believe?

willnonya 4y ago
If it's politics the odds are they're wrong. Anything else the odds are in their favor.
roncesvalles 4y ago
Easy heuristic: every billionaire in crypto except Satoshi is a fraudster. Maybe it's overfitted maybe not but historically you'd be correct 100% of the time.
- tim333 4y ago
  Vitalik seems ok but yeah.

subroutine 4y ago

Larry David also predicted this in an ftx super bowl ad: https://youtu.be/BH5-rSxilxo https://youtu.be/BH5-rSxilxo

rootsudo 4y ago
Hilarious and Ouch.

ethotool 4y ago

Every so often I would come across articles on CNBC written about this crypto genius (SBF) and they always reminded me of the media buzz around Elizabeth Holmes back in the day.

foogazi 4y ago

Is this an Iran/Contra type operation? They got the money out - mixed it with legit knife holders - and now they pull out and burn the evidence