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FTX’s SBF had a secret 'back door' to transfer billions off the books
- gsibble 4y agoThe more I read about this the more insane it gets.
- midislack 4y agoThey'll all get away clean. Check out Sam's parents, and other attached people...
- pasttense01 4y agoCrypto has a strong reputation as a haven for money laundering, drug sales... So if any of the Mexican/South American drug cartels lost a lot of money Sam and the other top management of those companies could end up dead.
- altdataseller 4y agoSerious Q, but what incentive would they have in killing him? Would that get them their money back? Wouldn't they lose more than they could gain?
- googlryas 4y agoI can't speak to the plausibility of this actually happening here specifically, but usually it is done to set an example for future folk who might try some funny business.
- Eisenstein 4y agoIf they can't get their money back, then would they why not kill him?
- wmf 4y agoSo you're saying they should torture him first, extract some money, then kill him?
- enchantments 4y agoBut that's how it works in the movies!
- iszomer 4y agoI guess in the more mainstreamed (or conspiratorial?) memeable circles, one would hope they don't get Epsteined; McAfee of the more recent note.
- tedunangst 4y agoTime for some game theory...
- sgammon 4y agoAnger
- acdha 4y agoTo encourage their other money launderers to stay in line. Criminals can’t rely on things like contracts since they can’t take someone to court so one way to prevent cheating is the threat of violence against the person or their family. In this case, I’d bet that he’s safe if he ends up in federal custody since being in prison is also effective punishment from this perspective. If not, it’s easy to imagine something happening to him if he tries to hide somewhere since the message “you can’t run far enough” will heard by everyone in that world.
- aabhay 4y agoI actually think this blowback is going to hit Sam's parents, who are part of the liberal intelligentsia. Sam himself is unquestionably going to jail or exile.
- deleted 4y ago[deleted]
- umeshunni 4y agoSam is the 2nd largest campaign contributor this election season. He’ll probably get away with this.
- pacaro 4y agoNot if he's not likely to contribute in the future, if he's broke they no longer care about him
- asah 4y agoWait you're saying politicians will keep the money?!! I'm shocked SHOCKED! /s
- acdha 4y agoThat seems unlikely - this is too blatant and, as we saw with Madoff, mismanaging your clients money tends to be taken more seriously than some other white-collar crimes.
- jefftk 4y ago"SBF convicted of a felony before 2026" is at 87%: https://manifold.markets/mr22222222/sbf-convicted-of-a-felony-before-20 https://manifold.markets/mr22222222/sbf-convicted-of-a-felon...
- bmitc 4y agoI'm not sure. The worst thing you can do is steal from rich people and be a fraudster but not be actually wealthy and powerful. See Elizabeth Holmes, Trevor Milton, Billy McFarland, and others.
- michaericalribo 4y agoThere’s also the matter of the hacked funds last night, and the juicy theory that SBF used his back door to steal even more cash. You can’t make it up!
- a9h74j 4y agoI want to call this the 'freeze plug' -- as with molten salt nuclear, extract liquidity in case of emergency.
- xisthesqrtof9 4y agoHuh, I wonder where he is now. No way he died in India.
- braingenious 4y agoThis has been some of the funniest few days in recent memory. Even my crypto true-believer HODL maximalist friends are questioning the entire ecosystem and its value. I think it’s funny that so many people have been hypnotized by get-rich-quick schemes and promises of a utopian monetary system while forgetting what the original —actual— value proposition of crypto was: Buying heroin. As a corollary to “not your keys not your coins” I submit “if you can’t confidently exchange it for illegal drugs, it’s not a currency”
- oldgradstudent 4y ago> the original —actual— value proposition of crypto was: Buying heroin. That's totally unfair. It was buying all kinds of drugs, and weapons, and child porn, and stolen credit cards, and hiring assassins. The assassins invariably turned out to be working for the FBI, of course.
- anonym29 4y agoThe value proposition was uncensorability, irreversibility, non-inflationary nature, and permissionless nature. It's a tool that can be used for good or evil, just like the personal automobile, which was also abused in early years for malicious ends - just as telephony, the internet, and a number of other technologies were. Criminals are early adopters of new & emerging technologies, that doesn't make those technologies inherently evil. Also, why lump drug transactions in with weapons / CSAM / cc fraud / assassinations? Most drug buyers are not hurting anyone.
- fakedang 4y ago> Also, why lump drug transactions in with weapons / CSAM / cc fraud / assassinations? Most drug buyers are not hurting anyone. The marketplace for all of the above (except assassination) was the same - Silk Road. I remember seeing different sections for weapons, credit cards, fake ids and drugs, but I don't remember seeing a section for CSAM unless it was masquerading as something else.
- paulpauper 4y agoIt's tempting to say he did it or inside job, but things never are as obvious as they seem. Why not just quietly siphon off funds from a cold wallet to his personal wallet? Why use a malicious app at all? This leads me to believe it was not an inside job.
- Eisenstein 4y ago> It's tempting to say he did it or inside job, but things never are as obvious as they seem. Then again, sometimes the kid standing in the kitchen with the chocolate on his face and his hands behind his back looking guilty actually did steal the cookies from the cookie jar...
- andreareina 4y agoI have no opinion on the inside job, but if someone were to drain the funds I'd expect it to be more deniably than directly transferring to one's own wallet.
- paulpauper 4y agoit would be impossible to know whose wallet it belongs to. He could just make a transfer to an address in which he controls the key and then many years later access it once safe in Dubai or wherever.
- bobbylarrybobby 4y agohttps://twitter.com/fasterthanlime/status/1591221068286414848 https://twitter.com/fasterthanlime/status/159122106828641484...
- deleted 4y ago[deleted]
- whatever1 4y agoI am glad that most of HN had called this crypto/NFT/web3.0/ICO BS loong time ago. That contrasts with Mega VCs, celebrities, politicians etc who were praising this tech-glorified Ponzi scheme. Good job to us!
- chrisco255 4y agoThis has happened in tradfi more times than anyone can count. Lehman, Enron, Madoff, etc. Far more scams in tradfi.
- lakecresva 4y agoHell yeah. If we can't detect all fraud all the time, we shouldn't bother trying to detect any new forms of fraud that emerge.
- nicbou 4y agoSame with central banks. If the brakes occasionally fail, get rid of them!
- deleted 4y ago[deleted]
- KptMarchewa 4y agoYet every example you gave was over 10 years ago and there has been regulation enacted to prevent that kind of exploit. Meanwhile every week some crypto scam blows losing some people billions, hundreds of millions or just tens if it's a good week.
- chrisco255 4y agoFor a more recent example, how about $100B in Covid Relief Funds stolen: https://www.cnbc.com/2021/12/21/criminals-have-stolen-nearly-100-billion-in-covid-relief-funds-secret-service.html https://www.cnbc.com/2021/12/21/criminals-have-stolen-nearly... The crypto market blowups pale in comparison to even dotcom era exuberance, and the recovery from bear market conditions has been much more rapid (usually less than 3 years to recover to previous levels). Crypto rebuilds quicker, and grows more resilient with every passing year. On-chain exchanges like Uniswap can't be hacked, can't misrepresent funds or exchange rates, and are fully open source. This is the future we're working towards. Not centralized scam operations like FTX.
- andirk 4y agoThis is a story of a corrupt CEO. The main crypto part of it is that FTT was seen as actual money on its balance sheets. This individual stealing people's money sheds light on how regulations exist for a reason, especially when handling billions of USD. Doesn't really speak positively or poorly on cryptocurrency as a technology though.
- ryanSrich 4y agoBTC and ETH have held support considerably well through this. I think SBF backed shitcoins like SOL are probably in for a world of hurt. But overall, I don’t think these events do much damage to crypto in the long run.
- ethbr0 4y agoIt speaks to the fact that in the absence of regulation, you get exactly what happened repeatedly in Eve Online -- people eventually get bored and/or things get tough, and then they decide it's easier to steal money. Banking regulations exist to counterbalance the personal incentive to abuse any authority you have and take off which what you can take. In the absence of regulations, everyone does exactly that... eventually.
- formerkrogemp 4y ago> In the absence of regulations, everyone does exactly that... eventually. Even with regulation we probably all have our number, our price.
- snowwrestler 4y agoTHE big argument in favor of cryptocurrency as a concept was that it freed people to store and transact value without interference or oversight by governments and institutions. A big argument against cryptocurrency was that those governments and institutions had developed financial oversight for a reason.
- hailwren 4y agoThere’s a weird false equivalence here. Whenever critics hear government oversight and interference, they immediately point to the governments that manage their currency relatively well and say “look, these governments do therefore no one needs to worry”. History and contemporary geopolitics are both littered with examples of governments that absolutely ruin their population’s lives with currency problems. What if it were possible to have consumer protection regulation and also remove some of the nasty side effects of government and institutional preference in monetary policy?
- stefan_ 4y agoThe irony is that the guy didn't even plain steal and embezzle it, he was so full of himself he thought he could just increase it with his magic trading firm.
- wmf 4y agoThe Quadriga guy did the same thing (although he didn't bother calling it a hedge fund).
- vgatherps 4y agoI posted a comment on this in another thread but probably worth repeating here. This is going to be THE compliance case study on two things: 1. Access controls - If the CEO can secretly manipulate records, it's obviously game over. 2. Compliance is sort of an all-or-nothing game. You either do it all, or a sufficiently motivated party will slip through the cracks that you leave.
- deleted 4y ago[deleted]
- azlyrics 4y agoI think the far simpler root cause of all this is amphetamine abuse. A prolonged state of sleep shortening (he openly talks of using amphetamines and sleeping pills in a tweet from a year ago) and mania causes psychosis. It's likely that Sam genuinely believed his own deceptions that he created earlier to grift and the amphetamine have eroded his capacity to manage risks such as committing multiple felonies that no other CEO would dare because of its obvious consequences such as spending the rest of your life behind a prison. I've heard a few legal experts and their take was : Sam & Caroline are going to spend the rest of their lives locked up. The reality still hasn't sunk in yet seeing Sam's wild apology that destroyed his last possible defense of alleging incompetence (he's depiction of himself as a bad coder that caused the situation) with a weird insistence that what he tweeted is not admission.
- vgatherps 4y agoDefinitely played a role. It seems pretty clear from interviews that they have pretty bad god/savior complexes as well. Would definitely play into the delusions. This is exactly why you need strict compliance controls! So your drug addicted executives can't go do something crazy
- rukshn 4y agoI know there are inherent issues like high energy consumption in the technology. But I believe that blockchain and the decentralization has some value to it. For example where I'm coming from, I can't accept payments via PayPal, it's nothing to do with PayPal but our government is not pushing to meet the requirements to get PayPal to our country. Also we can't hold USD due to government regulations, if we get the transfers via a bank, so every USD is converted to local currency which is getting devalued faster than USD. Therefore for people like us the easiest way to get money is via the blockchain. I think the problem is not with the technology but with people who used it to get rich quick by running these Ponzi schemes and used the technology to create things that doesn't improve the way we transfer wealth but instead used to invent NFTs which is again a get rich quick scheme. I hope this does not mean the end of blockchain and crypto as a technology, but just as the bursting of the dot-com bubble, we will see some good companies and ideas emerging out of this crisis.
- jiggawatts 4y ago> people who used it to get rich quick by running these Ponzi schemes The problem with any new currency is that unless an entire government forces it on people, there's no real reason for anyone to use it. Think about it: what use is a currency that no bank will store, no business will accept as payment, and nobody else has ever heard of? There needs to be some incentive to "get the ball rolling". Bitcoin relied on using an artificially imposed cap on the total coins to force the currency to be deflationary, rewarding early adopters. The earlier you get it, and the more you commit, the more you are rewarded. This gets things moving, hopefully to the point where it becomes a real currency. The hiccup with this is that it turns any currency utilising this mechanism into a giant Ponzi scheme. It's a inherent trait of deflationary currencies, and no amount of arguing will ever make that not be true. Rewarding the early adopters with the cash deposited by later adopters is the point! It's not some accidental side-effect that can be swept under the rug. It's also the literal textbook definition of a Ponzi scheme. Other people saw that there was $$$ to be made, so this concept has been copied into virtually all cryptocurrencies. What would be the point of some SV startup of 10 pimply kids making a currency that didn't reward early adopters? Nobody would give a shit, not even their own friends and relatives. But if there's that sweet early-adopter profits to be made? Suddenly billionaires will dump a few million in and profit. This is just the nature of the entire ecosystem now, and arguments against are either hopeless naive, or a waste of everyone's time. The only way crypto can ever be legitimised is not "organically", like it is now, but by the actions of large organisations. If a bunch of banks got together to make "Terran Credits" based on a blockchain, without the deflationary aspect, that would work, perhaps used for centuries... but nobody could "get rich quick" off it, so it wouldn't be an exciting web 3.0 opportunity. It would just be... money. Oh, and of course, the corollary is that if big banks or some governments got together to make "Earth Bux" or whatever, you can bet it would have all the same rules and restrictions around it that there are now around holding gold, USD, or whatever. Wherever you are, the government will continue to impose their will upon you, one way or another.
- malikNF 4y agoTo the ones who are saying this is a failure of crypto currencies. FTX was a regulated exchange, so your alternative to crypto currencies is then broken as well, the regulators didn't then do their job, this scammer Sam Bankman-Fried was allowed to create fake money out of thin air and the regulators were not able to stop them. If you can't follow the mantra "not your keys not your crypto currencies" or if you don't have the technical ability to hold your own keys then don't take part in it. You let someone else hold your crypto currencies, don't take the time to check if the said people holding your money has any validity and then you lose all your money? it unfortunately is your fault for trusting a scammer, you got duped by a scammer, just because someone can run a Superbowl advert, get main stream media to call them an amazing vegan who's such an amazing role models to us all, or hire a few celebrities to say good about their company doesn't make them someone you can trust. Crypto currencies and block-chains are still a very young and developing industry, its risky, there are thieves like Sam Bankman-Fried and then there are politicians and other special interest groups who will get in to bed with these scammers and try to take your hard earned money from you. Don't be a victim to this kind of scum. Crypto currencies and blockchains are here to stay.
- boopboopbadoop 4y ago> You let someone else hold your crypto currencies, don't take the time to check if the said people holding your money has any validity and then you lose all your money? it unfortunately is your fault for trusting a scammer Sequoia and their team of analysts, lawyers, etc did not see anything wrong with FTX. You expect individual investors to be able to research and see something wrong?
- malikNF 4y agoWell goes to show Sam Bankman-Fried was a world class con-man, or Sequoia and their team of analysts, lawyers, etc are no better than the folks who fall for scammers and con men then. In a lot of crypto currency circles people were questioning FTX, many warned about leverage. * There can only be 21 million btc. * If someone says you can leverage BTC they are selling you something that probably doesn't exist. * If you don't hold your own BTC you don't own any BTC.
- jonthepirate 4y agoHow could this all happen? Is there no regulation?
- throwaway9870 4y agoRegulation can help detect fraud, it might discourage fraud, but it can't prevent it. MF Global, Enron, Maddoff, etc. How long did Maddoff run his little scheme before being caught?
- PKop 4y agoThat's like saying why does crime happen, are there no laws? He broke plenty of regulations by co-mingling customer funds, trading deposits, and it seems just recently flat out stealing.
- jmyeet 4y agoThe psychology of this is fascinating. Here we have crypto golden child SBF worth billions of dollars. He literally never had to do anything for the rest of his life. Even if he lost billions on Alameda and/or fTX he'd still be completely fine. Instead, he seemingly stole FTX customer assets in a failed attempt to save Alameda, run by his girlfriend. The upside here was what? More money? How much money do you need? Or is it not about the money but rather he simply values how he's perceived? So instead he's going to be a John McAfee like figure or spend a significant chunk (if not the entirety) of the rest of his life in prison because this will absolutely end in US criminal prosection. As an aside, crypto-skeptics such as myself will point out using an exchange like this still requires trust (like TradFi). DeFi Andys will say DeFi doesn't. Crypto Andys will still argue crypto's imagined benefits but one of those "benefits" is the irreversibility of transactions, which means in cases like this where assets are stolen, backdoored, hacked (I'm being generous) or whatever, you have no recourse to get them back.
- Eisenstein 4y ago> Here we have crypto golden child SBF worth billions of dollars. He literally never had to do anything for the rest of his life. Even if he lost billions on Alameda and/or fTX he'd still be completely fine. Instead, he seemingly stole FTX customer assets in a failed attempt to save Alameda, run by his girlfriend. You can see that the same drivers and personality traits that allow a person to succeed at such an enterprise are the same ones which would lead a person to fail at such an enterprise.
- ilrwbwrkhv 4y agoAlso in the pockets of a few Sequoia partners?
- helsontaveras18 4y agoSo what kind of backdoor is this? Is he claiming that his Quickbooks is mislabeled? Or is this blockchain analysis?
- root_axis 4y agoNearly a decade after mtgox and this insanity has only grown.
- pifm_guy 4y agoIs it possible to run a crypto exchange 'honestly'? Ie. Actually holding all the assets you claim to hold? I suspect the answer might be no... If you were to set up an honest exchange today, you would be outcompeted by dishonest exchanges who spend all their customer deposits on marketing schemes, referral bonuses, liquidity incentives, etc.
- TedDoesntTalk 4y agoCoinbase
- imtringued 4y agoYes but the problem is that in these heavily regulated sectors it is impossible to build a startup organically. If there were carveouts for startups with low quantities per customer and low total volume then we would have seen a lot more regulated exchanges. Also, existing banks or exchanges must provide white label services to those startups because if there are only two companies that can comply with the regulations, then those must act as regulated utilities.
- stjohnswarts 4y agoDoes anyone know what these $2Billion, $10bb, etc actual are? Is that in crypto coins? Dollars? I assume it's not stocks/bonds since those can be easily traced.
- adabaed 4y agoThere is no doubt that the executive team at FTX should be investigated and pay for what they have done to their users, but let me tell you one thing, they did not force you lazy greedy humans to put a dime into FTX without reading what is an exchange and why everything you have inside there is not yours. Given this, the fact that some of you believe that this is a flaw in blockchain technology worries me because: either you just hate (stupid position, it's like hating toasters) and you're taking pleasure in other people's misery or you really don't know what blockchain is and you don't understand the value it can add. The saddest? That tomorrow another Ivy League graduate with trouble understanding a Ponzi scheme will go to a VC and be given millions to create nothing.
- TomSwirly 4y agoYour attitude toward your fellow humans isn't so good, and comes out in each line of what you write. Maybe you should rethink your contempt for humanity? You don't see very happy. > they did not force you lazy greedy humans No, if a CEO lies and commits fraud to steal from investors, it is the CEO's moral and ethical fault. > the fact that some of you believe that this is a flaw in blockchain technology worries me All of blockchain technology is "a flaw". And thousands of lines of my C++ are in one of the top five blockchains, so it isn't ignorance on my part to say this. So far, no application of the blockchain has appeared that isn't cryptocurrencies. The consensus phase is wildly expensive, and yet not at all useful for anything else. And cryptocurrencies are almost as old as the smartphone, and yet the only applications so far are "evading government regulations" (what most people call "crime") and wild, unsupported speculation. Don't get me wrong. Strong cryptography is great. Digital signatures are great. Merkle trees are great. Just not the blockchain.
- adabaed 4y agoI'll pass the personal stuff, I hope you realize you're calling another human unhappy when you're saying I have a bad attitude towards others. Interesting at least. So in your opinion (correct me if I've misunderstood), having a tool that decentralizes power isn't worth the energy it consumes? Is that why you call it "flawed technology"? With infinite clean energy, would you agree that this is actually a good idea or not?
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- Damian21 4y ago[dead]