6 ms·

Alameda, FTX Executives Are Said to Have Known FTX Was Using Customer Funds

77 points by nnx 4y ago

nnx 4y ago
“In a video meeting with Alameda employees late Wednesday Hong Kong time, Alameda CEO Caroline Ellison said that she, Mr. Bankman-Fried, and two other FTX executives, Nishad Singh and Gary Wang, were aware of the decision to send customer funds to Alameda”
- lgl 4y ago
  Gambler mentality: 1. "Invest" (borrow/steal) large amount of money 2. Bet as a madman and obviously win big cause I'm such a hot shot 3. Repay every debt and take profit! 4. How could that have gone wrong?!?!!1 What's the difference?
  - hospadar 4y ago
    Lol yup - I think the differences are "start off rich" and "use capitalism instead of casino"
- deleted 4y ago
  [deleted]
- bookofjoe 4y ago
  FunFact: >Alameda CEO @carolinecapital's Dad, Glenn Ellison, is the Department Head of Economics at @MIT Source: https://twitter.com/jagoecapital/status/1590751676105125888 https://twitter.com/jagoecapital/status/1590751676105125888
  - deleted 4y ago
    [deleted]
  - yeahwhatever10 4y ago
    Her Dad and the Chair of the SEC were department colleagues? It's always who you'd expect.
    - bogomipz 4y ago
      Yes and before becoming Chair at the SEC, Professor Gary Gensler taught a course at MIT called "Blockchain And Money."[1][2] Given that both SBF's parents are Professors at Stanford, this couple were very much ivory tower children. It would really be something if Gary Gensler was part of the SEC probe looking into the FTX collapse.[3] It's practically a Hollywood screenplay that almost writes itself. 1. https://ocw.mit.edu/courses/15-s12-blockchain-and-money-fall-2018/ https://ocw.mit.edu/courses/15-s12-blockchain-and-money-fall... 2. https://www.youtube.com/watch?v=EH6vE97qIP4 https://www.youtube.com/watch?v=EH6vE97qIP4 3. https://thenewscrypto.com/sec-chairman-gensler-discusses-crypto-regulation-following-ftx-drops/ https://thenewscrypto.com/sec-chairman-gensler-discusses-cry...
      - apollyon95 4y ago
        Both of her parents are professors at MIT. If they had a kid regression to the mean in IQ would be like 140+.
pinewurst 4y ago
https://archive.ph/Mct5c https://archive.ph/Mct5c
hn_throwaway_99 4y ago
Of course they knew - someone needed to sign off on that transfer. I posted this comment in another thread, but some very good on-chain evidence that Alameda was posting a huge chunk of FTT that it received as part of the original FTT ICO back to FTX as collateral, and that SBF tweeted lies about that transaction at the end of September: https://news.ycombinator.com/item?id=33568688 https://news.ycombinator.com/item?id=33568688
- nocoiner 4y ago
  That’s really interesting. Seems, though, like there are two elements missing that would really tie this down (and maybe details of these elements have subsequently emerged in recent days or will emerge): 1. Shouldn’t the FTX.us president’s resignation have occurred back in Q2 when FTX customer money was allegedly being used to prop up Alameda? I don’t understand why whatever happened in Q2 was OK with him (unless he didn’t know about it, or course), but repaying FTX was a bridge too far for him. 2. As I read the thread you linked, it doesn’t seem like there was any on-chain indication of Alameda/FTX transactions in Q2? Still, really interesting theory and tantalizing evidence. Edit: Ah, just saw another post below that SBF had a backdoor to obfuscate transfers between Alameda and FTX. That could explain #2.
threeseed 4y ago
All of the senior executives (including CEOs) were living together in the same house in the Bahamas and allegedly were involved in a polyamorous relationship. So under those circumstances surely everyone knew what everyone else was doing.
- deleted 4y ago
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- deleted 4y ago
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- thepasswordis 4y ago
  I don't think you have to be quite as nice about this, these people did just steal about $10 BILLION dollars from people in what is likely one of the biggest frauds in history. It was a bunch of 20 year olds living in an orgy penthouse in the bahamas doing drugs and scamming people out of money. It honestly sounds like a cult. Some of the leaked emails from SBF where he pushes drugs onto people for "performance" makes it absolutely sound like a cult.
  - Parmenidea 4y ago
    Where are these leaked emails?
    - thepasswordis 4y ago
      https://twitter.com/AutismCapital/status/1591333446995283969 https://twitter.com/AutismCapital/status/1591333446995283969 Here's Caroline (Sam's girlfriend, and the person who was running Alameda Research, the fund that he was shoveling customer deposits into to prop up) talking about her amphetamine use: https://twitter.com/carolinecapital/status/1379036346300305408 https://twitter.com/carolinecapital/status/13790363463003054...
      - ttul 4y ago
        Apparently they didn’t invest in media training.
jeffbee 4y ago
This is how the FTX-Alameda perpetual motion machine worked. Alameda was a bad/failing prop trading firm. FTX appeared to be valuable because smarter firms were attracted to the exchange by the opportunity to take money from Alameda. In order to perpetuate the appearance, FTX had to inject money into Alameda, so Alameda could continue their negative strategies, so the exchange appeared to be busy. The more Alameda lost, the more smarter people showed up to take their money, and the faster FTX had to shovel funds into the hole. This abruptly stopped working as soon as inflows to FTX stopped arriving. The whole scheme has now entered the "whoopsie we got hacked" phase that inevitably concludes every crypto scam, in which the insiders are liquidating and laundering depositor's coins, and buying real estate in non-extradition countries.
- deleted 4y ago
  [deleted]
- bogomipz 4y ago
  >" FTX appeared to be valuable because smarter firms were attracted to the exchange by the opportunity to take money from Alameda." >"The more Alameda lost, the more smarter people showed up to take their money, and the faster FTX had to shovel funds into the hole." I am not following this. How exactly did "smarter firms" take Alameda's money by using FTX's exchange?
  - MrMan 4y ago
    I think the other poster is saying that if Alameda or FTX were losing money on trades, someone smarter was on the other side of those trades, but I dont think that is necessarily true.
cyanydeez 4y ago
I love how completely complicatedly stupid these scams are.
- mancerayder 4y ago
  And suddenly a well-timed "hack" and 600M disappear...
DantesKite 4y ago
“ Reuters and The Block confirm that SBF had a backdoor that could move funds between FTX/Alameda without triggering internal audits or accounting. This allowed Sam to borrow 1:1 any amount of user deposits between the two "separate" entities.” https://twitter.com/autismcapital/status/1591459380742225922?s=46&t=pKWPcWZ6810H_gbwI0KBOQ https://twitter.com/autismcapital/status/1591459380742225922...
- ttul 4y ago
  “ In a subsequent examination, FTX legal and finance teams also learned that Bankman-Fried implemented what the two people described as a "backdoor" in FTX's book-keeping system, which was built using bespoke software. They said the "backdoor" allowed Bankman-Fried to execute commands that could alter the company's financial records without alerting other people, including external auditors. This set-up meant that the movement of the $10 billion in funds to Alameda did not trigger internal compliance or accounting red flags at FTX, they said.” https://www.reuters.com/markets/currencies/exclusive-least-1-billion-client-funds-missing-failed-crypto-firm-ftx-sources-2022-11-12/ https://www.reuters.com/markets/currencies/exclusive-least-1...
  - ttul 4y ago
    If SBF created an accounting hack to intentionally hide things from auditors, he’s definitely going to jail…
VonGuard 4y ago
Bankman-Fried is in Argentina now. https://twitter.com/flightradar24/status/1591348369271971841 https://twitter.com/flightradar24/status/1591348369271971841 I doubt he's coming back.
- fnordpiglet 4y ago
  Except, again, his legal insight isn’t very profound. There’s an extradition treaty with Argentina.
  - nemo44x 4y ago
    It could be because Argentina has a lot of “Cuevas” which is an illegal exchange where you can swap crypto for USD. Plus a host of other things you can get away with down there.
    - hn_throwaway_99 4y ago
      Lol. Yeah, I'm sure SBF is planning to try to get a couple hundred million out by showing up at a few Cuevas. People don't even bother to stop for 5 minutes to ask if their conspiracy theories make sense even if everything in the theory is true.
      - fnordpiglet 4y ago
        You guys are both off base. He has been running the worlds largest Cuevas and he’s just shifting his base of operations.
- nemo44x 4y ago
  Ha, smart move on his part. The movie that gets made from this is going to be incredible.
  - memish 4y ago
    Martin Scorsese is starting on a rough draft and Jonah Hill getting into character.
paxys 4y ago
Is anyone really buying SBF's excuse that they "accidentally" used the funds because the accounts were labeled incorrectly. I mean, come on. Of course they did it willingly. You don't just trade to the tune of $5-10B without knowing where the money came from. He also assured everyone on Twitter that FTX US was fully solvent and then filed for bankruptcy hours later.
- adam_arthur 4y ago
  It’s completely idiotic on the face of it. Far too large a sum of money to move around on a misunderstanding
deevolution 4y ago
Disgusting. Everyone trusted him because he and his family are basically washington insiders. He used that trust to scam millions of people. Just goes to show if you become buddy buddy and make contributions to congress you can get away with anything...
- MichaelCollins 4y ago
  > Disgusting. Everyone trusted him because he and his family are basically washington insiders. https://en.wikipedia.org/wiki/Affinity_fraud https://en.wikipedia.org/wiki/Affinity_fraud
- deleted 4y ago
  [deleted]

77 points by nnx 4y ago

nnx 4y ago

“In a video meeting with Alameda employees late Wednesday Hong Kong time, Alameda CEO Caroline Ellison said that she, Mr. Bankman-Fried, and two other FTX executives, Nishad Singh and Gary Wang, were aware of the decision to send customer funds to Alameda”

lgl 4y ago
Gambler mentality: 1. "Invest" (borrow/steal) large amount of money 2. Bet as a madman and obviously win big cause I'm such a hot shot 3. Repay every debt and take profit! 4. How could that have gone wrong?!?!!1 What's the difference?
- hospadar 4y ago
  Lol yup - I think the differences are "start off rich" and "use capitalism instead of casino"
deleted 4y ago
[deleted]
bookofjoe 4y ago
FunFact: >Alameda CEO @carolinecapital's Dad, Glenn Ellison, is the Department Head of Economics at @MIT Source: https://twitter.com/jagoecapital/status/1590751676105125888 https://twitter.com/jagoecapital/status/1590751676105125888
- deleted 4y ago
  [deleted]
- yeahwhatever10 4y ago
  Her Dad and the Chair of the SEC were department colleagues? It's always who you'd expect.
  - bogomipz 4y ago
    Yes and before becoming Chair at the SEC, Professor Gary Gensler taught a course at MIT called "Blockchain And Money."[1][2] Given that both SBF's parents are Professors at Stanford, this couple were very much ivory tower children. It would really be something if Gary Gensler was part of the SEC probe looking into the FTX collapse.[3] It's practically a Hollywood screenplay that almost writes itself. 1. https://ocw.mit.edu/courses/15-s12-blockchain-and-money-fall-2018/ https://ocw.mit.edu/courses/15-s12-blockchain-and-money-fall... 2. https://www.youtube.com/watch?v=EH6vE97qIP4 https://www.youtube.com/watch?v=EH6vE97qIP4 3. https://thenewscrypto.com/sec-chairman-gensler-discusses-crypto-regulation-following-ftx-drops/ https://thenewscrypto.com/sec-chairman-gensler-discusses-cry...
    - apollyon95 4y ago
      Both of her parents are professors at MIT. If they had a kid regression to the mean in IQ would be like 140+.

pinewurst 4y ago

https://archive.ph/Mct5c https://archive.ph/Mct5c

hn_throwaway_99 4y ago

Of course they knew - someone needed to sign off on that transfer. I posted this comment in another thread, but some very good on-chain evidence that Alameda was posting a huge chunk of FTT that it received as part of the original FTT ICO back to FTX as collateral, and that SBF tweeted lies about that transaction at the end of September: https://news.ycombinator.com/item?id=33568688 https://news.ycombinator.com/item?id=33568688

nocoiner 4y ago
That’s really interesting. Seems, though, like there are two elements missing that would really tie this down (and maybe details of these elements have subsequently emerged in recent days or will emerge): 1. Shouldn’t the FTX.us president’s resignation have occurred back in Q2 when FTX customer money was allegedly being used to prop up Alameda? I don’t understand why whatever happened in Q2 was OK with him (unless he didn’t know about it, or course), but repaying FTX was a bridge too far for him. 2. As I read the thread you linked, it doesn’t seem like there was any on-chain indication of Alameda/FTX transactions in Q2? Still, really interesting theory and tantalizing evidence. Edit: Ah, just saw another post below that SBF had a backdoor to obfuscate transfers between Alameda and FTX. That could explain #2.

threeseed 4y ago

All of the senior executives (including CEOs) were living together in the same house in the Bahamas and allegedly were involved in a polyamorous relationship. So under those circumstances surely everyone knew what everyone else was doing.

deleted 4y ago
[deleted]
deleted 4y ago
[deleted]
thepasswordis 4y ago
I don't think you have to be quite as nice about this, these people did just steal about $10 BILLION dollars from people in what is likely one of the biggest frauds in history. It was a bunch of 20 year olds living in an orgy penthouse in the bahamas doing drugs and scamming people out of money. It honestly sounds like a cult. Some of the leaked emails from SBF where he pushes drugs onto people for "performance" makes it absolutely sound like a cult.
- Parmenidea 4y ago
  Where are these leaked emails?
  - thepasswordis 4y ago
    https://twitter.com/AutismCapital/status/1591333446995283969 https://twitter.com/AutismCapital/status/1591333446995283969 Here's Caroline (Sam's girlfriend, and the person who was running Alameda Research, the fund that he was shoveling customer deposits into to prop up) talking about her amphetamine use: https://twitter.com/carolinecapital/status/1379036346300305408 https://twitter.com/carolinecapital/status/13790363463003054...
    - ttul 4y ago
      Apparently they didn’t invest in media training.

jeffbee 4y ago

This is how the FTX-Alameda perpetual motion machine worked. Alameda was a bad/failing prop trading firm. FTX appeared to be valuable because smarter firms were attracted to the exchange by the opportunity to take money from Alameda. In order to perpetuate the appearance, FTX had to inject money into Alameda, so Alameda could continue their negative strategies, so the exchange appeared to be busy. The more Alameda lost, the more smarter people showed up to take their money, and the faster FTX had to shovel funds into the hole. This abruptly stopped working as soon as inflows to FTX stopped arriving. The whole scheme has now entered the "whoopsie we got hacked" phase that inevitably concludes every crypto scam, in which the insiders are liquidating and laundering depositor's coins, and buying real estate in non-extradition countries.

deleted 4y ago
[deleted]
bogomipz 4y ago
>" FTX appeared to be valuable because smarter firms were attracted to the exchange by the opportunity to take money from Alameda." >"The more Alameda lost, the more smarter people showed up to take their money, and the faster FTX had to shovel funds into the hole." I am not following this. How exactly did "smarter firms" take Alameda's money by using FTX's exchange?
- MrMan 4y ago
  I think the other poster is saying that if Alameda or FTX were losing money on trades, someone smarter was on the other side of those trades, but I dont think that is necessarily true.

cyanydeez 4y ago

I love how completely complicatedly stupid these scams are.

mancerayder 4y ago
And suddenly a well-timed "hack" and 600M disappear...

DantesKite 4y ago

“ Reuters and The Block confirm that SBF had a backdoor that could move funds between FTX/Alameda without triggering internal audits or accounting. This allowed Sam to borrow 1:1 any amount of user deposits between the two "separate" entities.” https://twitter.com/autismcapital/status/1591459380742225922?s=46&t=pKWPcWZ6810H_gbwI0KBOQ https://twitter.com/autismcapital/status/1591459380742225922...

ttul 4y ago
“ In a subsequent examination, FTX legal and finance teams also learned that Bankman-Fried implemented what the two people described as a "backdoor" in FTX's book-keeping system, which was built using bespoke software. They said the "backdoor" allowed Bankman-Fried to execute commands that could alter the company's financial records without alerting other people, including external auditors. This set-up meant that the movement of the $10 billion in funds to Alameda did not trigger internal compliance or accounting red flags at FTX, they said.” https://www.reuters.com/markets/currencies/exclusive-least-1-billion-client-funds-missing-failed-crypto-firm-ftx-sources-2022-11-12/ https://www.reuters.com/markets/currencies/exclusive-least-1...
- ttul 4y ago
  If SBF created an accounting hack to intentionally hide things from auditors, he’s definitely going to jail…

VonGuard 4y ago

Bankman-Fried is in Argentina now. https://twitter.com/flightradar24/status/1591348369271971841 https://twitter.com/flightradar24/status/1591348369271971841 I doubt he's coming back.

fnordpiglet 4y ago
Except, again, his legal insight isn’t very profound. There’s an extradition treaty with Argentina.
- nemo44x 4y ago
  It could be because Argentina has a lot of “Cuevas” which is an illegal exchange where you can swap crypto for USD. Plus a host of other things you can get away with down there.
  - hn_throwaway_99 4y ago
    Lol. Yeah, I'm sure SBF is planning to try to get a couple hundred million out by showing up at a few Cuevas. People don't even bother to stop for 5 minutes to ask if their conspiracy theories make sense even if everything in the theory is true.
    - fnordpiglet 4y ago
      You guys are both off base. He has been running the worlds largest Cuevas and he’s just shifting his base of operations.
nemo44x 4y ago
Ha, smart move on his part. The movie that gets made from this is going to be incredible.
- memish 4y ago
  Martin Scorsese is starting on a rough draft and Jonah Hill getting into character.

paxys 4y ago

Is anyone really buying SBF's excuse that they "accidentally" used the funds because the accounts were labeled incorrectly. I mean, come on. Of course they did it willingly. You don't just trade to the tune of $5-10B without knowing where the money came from. He also assured everyone on Twitter that FTX US was fully solvent and then filed for bankruptcy hours later.

adam_arthur 4y ago
It’s completely idiotic on the face of it. Far too large a sum of money to move around on a misunderstanding

deevolution 4y ago

Disgusting. Everyone trusted him because he and his family are basically washington insiders. He used that trust to scam millions of people. Just goes to show if you become buddy buddy and make contributions to congress you can get away with anything...

MichaelCollins 4y ago
> Disgusting. Everyone trusted him because he and his family are basically washington insiders. https://en.wikipedia.org/wiki/Affinity_fraud https://en.wikipedia.org/wiki/Affinity_fraud
deleted 4y ago
[deleted]