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Ask HN: How did the CFTC and SEC miss FTX and Alameda?

• PaulHoule 4y ago
  Most of FTX was outside the US and outside the US jurisdiction https://www.cryptovantage.com/best-crypto-exchanges/ftx-vs-ftx-us/ https://www.cryptovantage.com/best-crypto-exchanges/ftx-vs-f...
  • orionion 4y ago
    > Trust and Security > FTX and FTX US follow the same security standards and neither site has ever been hacked. Both platforms encourage two-factor authentication (2FA), and both practice cold storage of user funds. > The only difference is that FTX has an insurance fund for users that is funded through their trading fees. If a hack were to occur, FTX can reimburse affected users. FTX US doesn’t have insurance in that manner, crypto lost through a hack isn’t covered, but USD deposits are FDIC insured. Because the original FTX has a more comprehensive insurance fund for users, it gets the edge here. Don't worry... He's going to jail...
• mattbrewsbytes 4y ago
  The SEC creates rules and has zero jurisdiction for criminal prosecution, they refer potential cases to DOJ. They probably lean on having air tight cases because their opponents are better financially prepared to spend their way around any lawsuit/action. Also, the stock market cops are essentially FINRA (self policing non government company), SEC is the rule writer and hand slapper for the most part. I don't know how crypto regulations were supposed to be setup. If it was the same setup as SEC/FINRA where entities have to self-report data, then fraud would be somewhat easy.
  • boppo1 4y ago
    Sure, but SBF was palling around hard with these people. Even if the SEC isn't responsible, why not talk to their buddies at FINRA and say "hey these people smell like another Madoff"?
• blitzar 4y ago
  Which one is it, pick one ffs ... crypto is unreglated or crypto is regulated? Why does everyone bang on about how it is not trad finance and it shouldnt be regulated, tell you all about how they are genius tier traders who make tons of money BUT its the governments fault they lost it all for not regulating their unregulated financial "investments" hard enough.
  • boppo1 4y ago
    I think that's a case-by-case thing and we're finding out the answers to it now. I had no stake in FTX and keep almost all of my rather meager crypto in paper wallets. My point here isn't about whether or not I think crypto should be regulated. My point is if crypto is going to be regulated, shouldn't regulators be able to sniff out a bad actor? Imagine if Madoff had started working with the SEC to help consult on policy. Wouldn't people have been upset with the SEC when he went bust since he was rubbing shoulders with them?
    • kasey_junk 4y ago
      So about Madoff: https://en.wikipedia.org/wiki/Bernie_Madoff#Government_access https://en.wikipedia.org/wiki/Bernie_Madoff#Government_acces... He was rubbing shoulders with many of the financial regulators including the SEC and people were pretty upset about it.
      • tanseydavid 4y ago
        Madoff was "Chairman of the NASDAQ" in 1990, 1991 and 1993. You might expect him to have many contacts with SEC personnel during this period. Building his image along the way.
    • jdm2212 4y ago
      FTX is a Bahamas-based company. Why would US regulators be regulating a Bahamas company with no US presence?
      • kobalsky 4y ago
• kasey_junk 4y ago
  The cftc has ~700 employees total, not just investigators, total employees. They do not typically proactively investigate firms, they do so when there is evidence of a violation, usually after complaints of losses are made. Also, due to resource constraints they tend to prioritize investigations by the number of people impacted. FTX frankly doesn’t meet either of those bars. By the time people would complain about losses the whole thing unravelled and as big a topic it is on hn not many people are actually impacted by it. At least compared to some of the big gold grifts that are out there.
  • JamesianP 4y ago
    I think this is the most important point. When everyone seems to be making money it's hard for agencies to make much headway in investigating them. Who will blow the whistle besides some cantankerous contrarians with no inside info? And presumably the company leadership were savvy enough to make up plausible storied for how everything was legit (hopefully it wasn't the "worthless box" explanation that the SEC way buying).
• logicalmonster 4y ago
  Just wondering: why would the regulators (with whatever minimal regulation exists now) even want to catch any large-scale fraud? It's to their greatest benefit to have a few good examples of crypto crashes in order to gain a casus belli to have full-scale crypto regulation.
• barnabee 4y ago
  Madoff was absolutely working with and connected to regulators [0] in various capacities. The idea that the current regulatory framework really helps consumers or effectively polices the truly bad actors is unfortunately far from the truth. So yes, people should be upset with the SEC and other regulators, and should demand more appropriate and effective regulation (and/or enforcement) that actually targets the worst behaviour and protects the most vulnerable, rather than policing access and providing incumbents with a regulatory moat for little or no benefit. [0] https://en.wikipedia.org/wiki/Bernie_Madoff#Government_access https://en.wikipedia.org/wiki/Bernie_Madoff#Government_acces...
• deleted 4y ago
  [deleted]
• fiat_fandango 4y ago
  It's called having influence over US officials just short of bribery.
• norwalkbear 4y ago
  It's about incentives. FTX "donated" to the right people and Bankman/Ellison families were very politically connected to the democrats and Biden admin.