10 ms·

He's also being purposefully obtuse about his 2 largest regrets - the "poorly labeled" account and underestimating the size of the withdrawals. He's still beha

He's also being purposefully obtuse about his 2 largest regrets - the "poorly labeled" account and underestimating the size of the withdrawals. He's still behaving as if having billions of liabilities in real money backed by funny money "assets" is somehow acceptable and everything would have been fine if it wasn't for the "last week".

bjornsing 4y ago
But maybe it could have been? I’m a complete crypto skeptic who would never touch anything like FTT, but it’s not an obvious Ponzi scheme. I think one of the troubles with crypto is that it’s very easy to operate what is effective a Ponzi scheme, without fully realizing it yourself.
- ShamelessC 4y ago
  Eh, it is _obviously_ a ponzi scheme after doing a bit of research. In this podcast he all but says it out loud. https://jaxandmartinshow.com/sam-bankman-fried-transcript/ https://jaxandmartinshow.com/sam-bankman-fried-transcript/
  - MarkPNeyer 4y ago
    This quote is very interesting because he seems to try and argue for its legitimacy at the end. “Is that even wrong,” he asks. You get the impression that he believes in something like a postmodern theory of value that says, you need nothing fundamental for a thing to have value. Mass appeal is sufficient. So he looks at dogecoin and thinks, like many of us: this serves no purpose and makes no sense. He simply concludes its nonzero price is evidence against prices being real, rather than a prediction of dogecoin’s future value.
    - jjeaff 4y ago
      He's not wrong about value. Plenty of valuable things in society have not fundamental value. High end art and luxury brand clothing are two examples. And no, a $50m van Gogh does not have utility because you can enjoy it. Because you could enjoy a $200 reproduction just as well.
      - lupire 4y ago
        Telling that your example is the most famous example of a fraudulent market.
  - HDThoreaun 4y ago
    He was describing yield farming schemes, not FTX or FTT.
- PeterisP 4y ago
  This is not a novel problem - the same situation occurs in "pre-crypto finance" with other non-stable assets like stock and currency risk; that's why we do have all kinds of frameworks on how to properly account for required reserves with the assumption that $1 B (current!) worth of such assets is not enough to cover $1B of cash liabilities.
- imtringued 4y ago
  If it has no way to wind down to zero it is a Ponzi scheme. Yes the USD and other fiat currencies are partially ponzi schemes as well but only the store of value part.
  - kibwen 4y ago
    This is diluting the definition of "ponzi scheme" to the point of uselessness. State-backed central currencies emerged because people in informal economies were bartering to exchange goods and services, which is less efficient than having a standardized medium of exchange, so central authorities issued currency in order to increase the efficiency of the economy. That's not a ponzi scheme, because the value of the currency doesn't rely on some greater fool buying the currency from you. Yes, you can use these currencies as a store of value, and therefore get utility from exchanging them with somebody in the future, but that's not where the value of the currency itself derives from (which is 1. the utility of the currency itself (people want to transact in it in personal affairs, because it's more efficient and reliable than the alternative), and 2. the authority of the state (people must transact in it in state affairs)). Call it what you will, but it's not a ponzi scheme. If you're looking for things in traditional fintech that resemble a ponzi scheme, look at something like a non-voting stock without a dividend.
    - theknocker 4y ago
    - jrochkind1 4y ago
      I believe there isn't a lot of historical evidence that state-backed currencies emerged to deal with undesirable aspects of barter. That's pretty much just a myth people decided made sense, rather than something that happened in history. We mostly don't know why money/currency came into existence, it happened so long ago. There is some evidence that at least in some places it was to fund armies or generally provide more state (or pre-state ruler) control of the economy. I don't really know what impact that has on whatever argument you're having, but anyway.
- Melting_Harps 4y ago
  > I’m a complete crypto skeptic who would never touch anything like FTT, but it’s not an obvious Ponzi scheme. I think one of the troubles with crypto is that it’s very easy to operate what is effective a Ponzi scheme, without fully realizing it yourself. I'm pretty certain most of us, at least in the BTC community, were mocking this yield farming as the new ICO since it's inception. The Effective Alturism, and his parent connection to Silicon Valley via Stanford make it clearer this was the typical disruptor cosplaying grifting that happens all the time: see Theranos.
  - mkagenius 4y ago
    > this was the typical disruptor cosplaying grifting Being connected and well off, should now be a sign of lack of inventive mind than having one. VCs think they are risk takers but rather go for well connected SV folks unconsciously or consciously to avoid risks. I hope these two three episodes like Theranos put some sense in them.
    - pooper 4y ago
      Problem is that this is only apparent in hindsight. How do you tell apart Theranos and something like Color Labs[techcrunch]? Sometimes it isn't even clear in hindsight. From the outside, both are novel ideas. Both had talented workers working on novel ideas. I don't know enough/anything about biochemistry so I don't know if the vision Theranos sold was even possible but how do I know that the all public all the time but only to someone physically nearby you photo sharing idea (of color) would work either? How do you decide who to back? [Techcrunch] https://techcrunch.com/2011/03/23/color-looks-to-reinvent-social-interaction-with-its-mobile-photo-app-and-41-million-in-funding/ https://techcrunch.com/2011/03/23/color-looks-to-reinvent-so... Edit: another post on HN: what is "growth hacking"? https://news.ycombinator.com/item?id=33582002 https://news.ycombinator.com/item?id=33582002
      - linuxftw 4y ago
        As a lay person, it might be difficult. As a well funded VC, I'd expect due diligence beyond the level of 'let me see your balance sheet' before investing millions of dollars. One particular item of fraud was the claim that their machines were on helicopters in US-led war zones. Okay, show me the contract details for this, or some kind of evidence this is actually true, and then I will verify with the counter party to ensure it's not completely bologna. Not to mention the entire concept of 'nano-tainers' and doing blood work with a single drop of blood seemed physically improbable, and literal Nobel level scientists would need to be involved, people with decades of experience in the field, not a random college dropout. > all public all the time but only to someone physically nearby you photo sharing idea (of color) would work either? I can't see the appeal of that whatsoever. At least with instagram or whatever you can have followers, and then monetize those followers one way or another. On the flip side, it might be an interesting avenue for prostitutes and drug dealers to advertise their services discretely in public places.
- FollowingTheDao 4y ago
  Ponzi schemes are not obvious, until they’re totally obvious. That’s why they keep happening. A lot of people will explain to others that it’s a Ponzi scheme, but those people are making so much money that hey don’t want to hear it. Crypto is a Ponzi scheme, and it always was. I’m not just talking about these companies, being Ponzi schemes, I’m talking about the whole ecosystem being a Ponzi scheme. You can either listen to those of us telling you cook those a Ponzi scheme or you can focus on your greed. Your choice.
  - bernawil 4y ago
    At this point everybody is pretty competent at identifying pyramid schemes. Now people enter them willingly hoping to cash out on time, no different than gambling. The scam now is making people believe they are higher in the pyramid than they really are.
  - lizknope 4y ago
    You don't have to listen to me or another expert saying that FTX was a ponzi scheme. Literally just listen to SBF himself. He described his business as a ponzi scheme. If that isn't obvious then I don't know what is. This is Coffeezilla's summary of SBF on the Odd Lots podcast with financial analyst Matt Levine https://www.youtube.com/watch?v=sucxhGOv9ww https://www.youtube.com/watch?v=sucxhGOv9ww
    - gruez 4y ago
      > Literally just listen to SBF himself. He described his business as a ponzi scheme 1. you should actually listen to the podcast, or at least skim the transcript[1], rather than trusting some second hand account by some youtuber. In the podcast, he's describing an abstract token that offers no utility, not FTT and certainly not the exchange itself. 2. At least from skimming the whitepaper for FTT, there's at least a plausible business model (eg. through exchange fees). That's not to say it's not a ponzi scheme, because many ponzi schemes claim they have a plausible business model, but that's different than literally describing yourself as a ponzi scheme. That would require you to put out a whitepaper that's like "we fully expect this token/company to make zero money and all profits to earlier investors come from later investors". [1] https://www.bloomberg.com/news/articles/2022-04-25/odd-lots-full-transcript-sam-bankman-fried-and-matt-levine-on-crypto https://www.bloomberg.com/news/articles/2022-04-25/odd-lots-...
- darkerside 4y ago
  Most things are on some level a Ponzi scheme. That said, I think the real problem here was undercapitalization. It seems akin to throwing a party at your home that has a structural addition not up to code, and then when it collapses under the weight, saying it was just bad luck.
  - paulusthe 4y ago
    No, they're not. The definition of "Ponzi scheme" is not "something financial I think is a scam" as most people use it. It's a very specific type of financial fraud. "Everything is a Ponzi" is a lazy analysis only made possible by having a lazy definition of what a Ponzi scheme is
    - darkerside 4y ago
      A Ponzi scheme is a form of fraud that lures investors and pays profits to earlier investors with funds from more recent investors. Many things from MLM to social security to VC markets can be viewed as a Ponzi scheme.
      - skinnymuch 4y ago
        Your second paragraph doesn’t indicate that’s most things. Those are the obvious ones.
    - carlivar 4y ago
      Here's the definition: https://www.investopedia.com/terms/p/ponzischeme.asp https://www.investopedia.com/terms/p/ponzischeme.asp I think the point is that there are more structures out there like this than we think. Social Security for example. Just do a web search and you'll see it's a rather mainstream question. Also there are so many unfunded public pensions that could meet the definition. Perhaps the difference is transparency. We know these public programs are currently in bad shape, but private schemes are completely opaque until they collapse.
      - skinnymuch 4y ago
- mannykannot 4y ago
  > But maybe it could have been? Maybe for a while, but ultimately no - reality will assert itself even if you have stopped believing in it. Made-up valuations of faith-based assets are insubstantial, and anything that is entirely that is completely without substance. There's no financial principle which says it is not a Ponzi scheme until you notice that it is.
- unboxingelf 4y ago
  Oh SBF realized it was a ponzi, he literally described it as such in an interview!
paulusthe 4y ago
As if poor labeling results in $8bn of customer funds being lent to the CEO's hedge fund

bjornsing 4y ago

But maybe it could have been? I’m a complete crypto skeptic who would never touch anything like FTT, but it’s not an obvious Ponzi scheme. I think one of the troubles with crypto is that it’s very easy to operate what is effective a Ponzi scheme, without fully realizing it yourself.

ShamelessC 4y ago
Eh, it is _obviously_ a ponzi scheme after doing a bit of research. In this podcast he all but says it out loud. https://jaxandmartinshow.com/sam-bankman-fried-transcript/ https://jaxandmartinshow.com/sam-bankman-fried-transcript/
- MarkPNeyer 4y ago
  This quote is very interesting because he seems to try and argue for its legitimacy at the end. “Is that even wrong,” he asks. You get the impression that he believes in something like a postmodern theory of value that says, you need nothing fundamental for a thing to have value. Mass appeal is sufficient. So he looks at dogecoin and thinks, like many of us: this serves no purpose and makes no sense. He simply concludes its nonzero price is evidence against prices being real, rather than a prediction of dogecoin’s future value.
  - jjeaff 4y ago
    He's not wrong about value. Plenty of valuable things in society have not fundamental value. High end art and luxury brand clothing are two examples. And no, a $50m van Gogh does not have utility because you can enjoy it. Because you could enjoy a $200 reproduction just as well.
    - lupire 4y ago
      Telling that your example is the most famous example of a fraudulent market.
- HDThoreaun 4y ago
  He was describing yield farming schemes, not FTX or FTT.
PeterisP 4y ago
This is not a novel problem - the same situation occurs in "pre-crypto finance" with other non-stable assets like stock and currency risk; that's why we do have all kinds of frameworks on how to properly account for required reserves with the assumption that $1 B (current!) worth of such assets is not enough to cover $1B of cash liabilities.
imtringued 4y ago
If it has no way to wind down to zero it is a Ponzi scheme. Yes the USD and other fiat currencies are partially ponzi schemes as well but only the store of value part.
- kibwen 4y ago
  This is diluting the definition of "ponzi scheme" to the point of uselessness. State-backed central currencies emerged because people in informal economies were bartering to exchange goods and services, which is less efficient than having a standardized medium of exchange, so central authorities issued currency in order to increase the efficiency of the economy. That's not a ponzi scheme, because the value of the currency doesn't rely on some greater fool buying the currency from you. Yes, you can use these currencies as a store of value, and therefore get utility from exchanging them with somebody in the future, but that's not where the value of the currency itself derives from (which is 1. the utility of the currency itself (people want to transact in it in personal affairs, because it's more efficient and reliable than the alternative), and 2. the authority of the state (people must transact in it in state affairs)). Call it what you will, but it's not a ponzi scheme. If you're looking for things in traditional fintech that resemble a ponzi scheme, look at something like a non-voting stock without a dividend.
  - theknocker 4y ago
  - jrochkind1 4y ago
    I believe there isn't a lot of historical evidence that state-backed currencies emerged to deal with undesirable aspects of barter. That's pretty much just a myth people decided made sense, rather than something that happened in history. We mostly don't know why money/currency came into existence, it happened so long ago. There is some evidence that at least in some places it was to fund armies or generally provide more state (or pre-state ruler) control of the economy. I don't really know what impact that has on whatever argument you're having, but anyway.
Melting_Harps 4y ago
> I’m a complete crypto skeptic who would never touch anything like FTT, but it’s not an obvious Ponzi scheme. I think one of the troubles with crypto is that it’s very easy to operate what is effective a Ponzi scheme, without fully realizing it yourself. I'm pretty certain most of us, at least in the BTC community, were mocking this yield farming as the new ICO since it's inception. The Effective Alturism, and his parent connection to Silicon Valley via Stanford make it clearer this was the typical disruptor cosplaying grifting that happens all the time: see Theranos.
- mkagenius 4y ago
  > this was the typical disruptor cosplaying grifting Being connected and well off, should now be a sign of lack of inventive mind than having one. VCs think they are risk takers but rather go for well connected SV folks unconsciously or consciously to avoid risks. I hope these two three episodes like Theranos put some sense in them.
  - pooper 4y ago
    Problem is that this is only apparent in hindsight. How do you tell apart Theranos and something like Color Labs[techcrunch]? Sometimes it isn't even clear in hindsight. From the outside, both are novel ideas. Both had talented workers working on novel ideas. I don't know enough/anything about biochemistry so I don't know if the vision Theranos sold was even possible but how do I know that the all public all the time but only to someone physically nearby you photo sharing idea (of color) would work either? How do you decide who to back? [Techcrunch] https://techcrunch.com/2011/03/23/color-looks-to-reinvent-social-interaction-with-its-mobile-photo-app-and-41-million-in-funding/ https://techcrunch.com/2011/03/23/color-looks-to-reinvent-so... Edit: another post on HN: what is "growth hacking"? https://news.ycombinator.com/item?id=33582002 https://news.ycombinator.com/item?id=33582002
    - linuxftw 4y ago
      As a lay person, it might be difficult. As a well funded VC, I'd expect due diligence beyond the level of 'let me see your balance sheet' before investing millions of dollars. One particular item of fraud was the claim that their machines were on helicopters in US-led war zones. Okay, show me the contract details for this, or some kind of evidence this is actually true, and then I will verify with the counter party to ensure it's not completely bologna. Not to mention the entire concept of 'nano-tainers' and doing blood work with a single drop of blood seemed physically improbable, and literal Nobel level scientists would need to be involved, people with decades of experience in the field, not a random college dropout. > all public all the time but only to someone physically nearby you photo sharing idea (of color) would work either? I can't see the appeal of that whatsoever. At least with instagram or whatever you can have followers, and then monetize those followers one way or another. On the flip side, it might be an interesting avenue for prostitutes and drug dealers to advertise their services discretely in public places.
FollowingTheDao 4y ago
Ponzi schemes are not obvious, until they’re totally obvious. That’s why they keep happening. A lot of people will explain to others that it’s a Ponzi scheme, but those people are making so much money that hey don’t want to hear it. Crypto is a Ponzi scheme, and it always was. I’m not just talking about these companies, being Ponzi schemes, I’m talking about the whole ecosystem being a Ponzi scheme. You can either listen to those of us telling you cook those a Ponzi scheme or you can focus on your greed. Your choice.
- bernawil 4y ago
  At this point everybody is pretty competent at identifying pyramid schemes. Now people enter them willingly hoping to cash out on time, no different than gambling. The scam now is making people believe they are higher in the pyramid than they really are.
- lizknope 4y ago
  You don't have to listen to me or another expert saying that FTX was a ponzi scheme. Literally just listen to SBF himself. He described his business as a ponzi scheme. If that isn't obvious then I don't know what is. This is Coffeezilla's summary of SBF on the Odd Lots podcast with financial analyst Matt Levine https://www.youtube.com/watch?v=sucxhGOv9ww https://www.youtube.com/watch?v=sucxhGOv9ww
  - gruez 4y ago
    > Literally just listen to SBF himself. He described his business as a ponzi scheme 1. you should actually listen to the podcast, or at least skim the transcript[1], rather than trusting some second hand account by some youtuber. In the podcast, he's describing an abstract token that offers no utility, not FTT and certainly not the exchange itself. 2. At least from skimming the whitepaper for FTT, there's at least a plausible business model (eg. through exchange fees). That's not to say it's not a ponzi scheme, because many ponzi schemes claim they have a plausible business model, but that's different than literally describing yourself as a ponzi scheme. That would require you to put out a whitepaper that's like "we fully expect this token/company to make zero money and all profits to earlier investors come from later investors". [1] https://www.bloomberg.com/news/articles/2022-04-25/odd-lots-full-transcript-sam-bankman-fried-and-matt-levine-on-crypto https://www.bloomberg.com/news/articles/2022-04-25/odd-lots-...
darkerside 4y ago
Most things are on some level a Ponzi scheme. That said, I think the real problem here was undercapitalization. It seems akin to throwing a party at your home that has a structural addition not up to code, and then when it collapses under the weight, saying it was just bad luck.
- paulusthe 4y ago
  No, they're not. The definition of "Ponzi scheme" is not "something financial I think is a scam" as most people use it. It's a very specific type of financial fraud. "Everything is a Ponzi" is a lazy analysis only made possible by having a lazy definition of what a Ponzi scheme is
  - darkerside 4y ago
    A Ponzi scheme is a form of fraud that lures investors and pays profits to earlier investors with funds from more recent investors. Many things from MLM to social security to VC markets can be viewed as a Ponzi scheme.
    - skinnymuch 4y ago
      Your second paragraph doesn’t indicate that’s most things. Those are the obvious ones.
  - carlivar 4y ago
    Here's the definition: https://www.investopedia.com/terms/p/ponzischeme.asp https://www.investopedia.com/terms/p/ponzischeme.asp I think the point is that there are more structures out there like this than we think. Social Security for example. Just do a web search and you'll see it's a rather mainstream question. Also there are so many unfunded public pensions that could meet the definition. Perhaps the difference is transparency. We know these public programs are currently in bad shape, but private schemes are completely opaque until they collapse.
    - skinnymuch 4y ago
mannykannot 4y ago
> But maybe it could have been? Maybe for a while, but ultimately no - reality will assert itself even if you have stopped believing in it. Made-up valuations of faith-based assets are insubstantial, and anything that is entirely that is completely without substance. There's no financial principle which says it is not a Ponzi scheme until you notice that it is.
unboxingelf 4y ago
Oh SBF realized it was a ponzi, he literally described it as such in an interview!

paulusthe 4y ago

As if poor labeling results in $8bn of customer funds being lent to the CEO's hedge fund