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this is exactly what happended at FTX/Alameda. A bunch of "smart" guys who backstopped and over-extended loans to players, and their losses were magnified with

this is exactly what happended at FTX/Alameda. A bunch of "smart" guys who backstopped and over-extended loans to players, and their losses were magnified with their over-leveraged positions, that was backed up with assets with no values. That's exactly what happens in just about every financial scandal.

simiones 4y ago
FTX took customer deposits (which were supposed to be held in custody and untouched, according to their TOS) and loaned them out to Alameda to gamble with. That is entirely different from being over-leveraged and having your debts default.
- JamesianP 4y ago
  I think the "gambling" you referred to was their point, not the accounting games they subsequently played to try and get back into the black.
  - simiones 4y ago
    My point is that the real problem isn't that Alameda was over-leveraged or gambling, it's that SBF stole user funds from FTX to try to rescue Alameda. This is not what (some of) those other companies did.
    - naijaboiler 4y ago
      from SBF perspective Alameda & FTX are the same. Yeah yeah they are separate legal entities, but in actual practise, one market-made for the other, and he treated them like one is left hand, the other is right hand So yeah Alameda gambled, overleverated and lost money just like nearly every other financial crises in history, SBF then fraudulently moved money from FTX to cover Alameda's gambling losses. I won't be shocked if FTX has alway been the source of funding for Alameda's gambling, just that Alameda was winning when everything was rosy. then the crypto market turned
- gruez 4y ago
  >FTX took customer deposits (which were supposed to be held in custody and untouched, according to their TOS) Can you provide the exact wording? At least when it comes traditional finance, if there's margin involved (FTX most definitely has margin), your deposits/holdings are fair game for your broker to use as they please. https://www.sec.gov/oiea/investor-alerts-and-bulletins/ib_marginaccount https://www.sec.gov/oiea/investor-alerts-and-bulletins/ib_ma... >Some margin accounts allow the brokerage firm to lend out securities in the account to a third-party, at any time without notice or compensation to the account holder, if the investor has any outstanding margin loan in the account
  - HideousKojima 4y ago
    "You control the Digital Assets held in your Account," says Section 8.2 of the terms. "Title to your Digital Assets shall at all times remain with you and shall not transfer to FTX Trading." The terms continue: "None of the Digital Assets in your Account are the property of, or shall or may be loaned to, FTX Trading; FTX Trading does not represent or treat Digital Assets in User’s Accounts as belonging to FTX Trading." https://www.axios.com/2022/11/12/ftx-terms-service-trading-customer-funds https://www.axios.com/2022/11/12/ftx-terms-service-trading-c...
- JumpCrisscross 4y ago
  > FTX took customer deposits (which were supposed to be held in custody and untouched, according to their TOS) and loaned them out to Alameda to gamble with This is what I initially suspected. But we can see FTX's balance sheet [1]. There is no loan to Alameda. "FTX shot its customer money into some still-unexplained reaches of the astral plane" is the best explanation we have for billions of missing dollars [2]. [1] https://www.ft.com/content/0c2a55b6-d34c-4685-8a8d-3c9628f1f185 https://www.ft.com/content/0c2a55b6-d34c-4685-8a8d-3c9628f1f... [2] https://www.bloomberg.com/opinion/articles/2022-11-14/ftx-s-balance-sheet-was-bad https://www.bloomberg.com/opinion/articles/2022-11-14/ftx-s-...
  - DebtDeflation 4y ago
    I have a hunch that: >negative $8bn entry described as “hidden, poorly internally labled ‘fiat@’ account” probably had something to do with the loan as that seems to be roughly the amount and the description literally makes no sense.
    - dwater 4y ago
      It's also possible that the one hastily thrown together excel spreadsheet the CEO himself chose to release doesn't include the full accounting. Maybe Sam decided to leave off an illegal off-book loan?
      - JumpCrisscross 4y ago
        > doesn't include the full accounting I think the running bet is there is no full accounting.
  - kryogen1c 4y ago
    > we can see FTX's balance sheet [1]. There is no loan The problem with this is that the customer funds are also not present on their balance sheet. Levine opined about this yesterday; Like 3 of the biggest assets are coins ftx didn't pay for - so where did the money go? That's why the Alameda explanation is likely, in one way or another. Money had to go somewhere.
jasode 4y ago
>this is exactly what happended at FTX/Alameda. A bunch of "smart" guys [...] No, they're different situations. The current details trickling out of the FTX scandal is that CEO Samuel Bankman-Fried secretly used customer funds to prop up Alameda which is unethical and criminal. This is fraud. In contrast, the LTCM guys lost billions honestly and transparently via flawed math models based on overconfident assumptions of price spread behavior. That wasn't criminal fraud. There was no illegal transfer of investor funds.
- naijaboiler 4y ago
  ignore the fraudulent part of covering up the money, how Alameda lost money is the same as how LTCM guys lost money. guys who think they are too smart and made wrong predictions about the market. That part is very very similar. SBF then compounded it by layering fraud on top of the "im too smart to fail" losses by using customer funds to cover up the losses.

simiones 4y ago

FTX took customer deposits (which were supposed to be held in custody and untouched, according to their TOS) and loaned them out to Alameda to gamble with. That is entirely different from being over-leveraged and having your debts default.

JamesianP 4y ago
I think the "gambling" you referred to was their point, not the accounting games they subsequently played to try and get back into the black.
- simiones 4y ago
  My point is that the real problem isn't that Alameda was over-leveraged or gambling, it's that SBF stole user funds from FTX to try to rescue Alameda. This is not what (some of) those other companies did.
  - naijaboiler 4y ago
    from SBF perspective Alameda & FTX are the same. Yeah yeah they are separate legal entities, but in actual practise, one market-made for the other, and he treated them like one is left hand, the other is right hand So yeah Alameda gambled, overleverated and lost money just like nearly every other financial crises in history, SBF then fraudulently moved money from FTX to cover Alameda's gambling losses. I won't be shocked if FTX has alway been the source of funding for Alameda's gambling, just that Alameda was winning when everything was rosy. then the crypto market turned
gruez 4y ago
>FTX took customer deposits (which were supposed to be held in custody and untouched, according to their TOS) Can you provide the exact wording? At least when it comes traditional finance, if there's margin involved (FTX most definitely has margin), your deposits/holdings are fair game for your broker to use as they please. https://www.sec.gov/oiea/investor-alerts-and-bulletins/ib_marginaccount https://www.sec.gov/oiea/investor-alerts-and-bulletins/ib_ma... >Some margin accounts allow the brokerage firm to lend out securities in the account to a third-party, at any time without notice or compensation to the account holder, if the investor has any outstanding margin loan in the account
- HideousKojima 4y ago
  "You control the Digital Assets held in your Account," says Section 8.2 of the terms. "Title to your Digital Assets shall at all times remain with you and shall not transfer to FTX Trading." The terms continue: "None of the Digital Assets in your Account are the property of, or shall or may be loaned to, FTX Trading; FTX Trading does not represent or treat Digital Assets in User’s Accounts as belonging to FTX Trading." https://www.axios.com/2022/11/12/ftx-terms-service-trading-customer-funds https://www.axios.com/2022/11/12/ftx-terms-service-trading-c...
JumpCrisscross 4y ago
> FTX took customer deposits (which were supposed to be held in custody and untouched, according to their TOS) and loaned them out to Alameda to gamble with This is what I initially suspected. But we can see FTX's balance sheet [1]. There is no loan to Alameda. "FTX shot its customer money into some still-unexplained reaches of the astral plane" is the best explanation we have for billions of missing dollars [2]. [1] https://www.ft.com/content/0c2a55b6-d34c-4685-8a8d-3c9628f1f185 https://www.ft.com/content/0c2a55b6-d34c-4685-8a8d-3c9628f1f... [2] https://www.bloomberg.com/opinion/articles/2022-11-14/ftx-s-balance-sheet-was-bad https://www.bloomberg.com/opinion/articles/2022-11-14/ftx-s-...
- DebtDeflation 4y ago
  I have a hunch that: >negative $8bn entry described as “hidden, poorly internally labled ‘fiat@’ account” probably had something to do with the loan as that seems to be roughly the amount and the description literally makes no sense.
  - dwater 4y ago
    It's also possible that the one hastily thrown together excel spreadsheet the CEO himself chose to release doesn't include the full accounting. Maybe Sam decided to leave off an illegal off-book loan?
    - JumpCrisscross 4y ago
      > doesn't include the full accounting I think the running bet is there is no full accounting.
- kryogen1c 4y ago
  > we can see FTX's balance sheet [1]. There is no loan The problem with this is that the customer funds are also not present on their balance sheet. Levine opined about this yesterday; Like 3 of the biggest assets are coins ftx didn't pay for - so where did the money go? That's why the Alameda explanation is likely, in one way or another. Money had to go somewhere.

jasode 4y ago

>this is exactly what happended at FTX/Alameda. A bunch of "smart" guys [...] No, they're different situations. The current details trickling out of the FTX scandal is that CEO Samuel Bankman-Fried secretly used customer funds to prop up Alameda which is unethical and criminal. This is fraud. In contrast, the LTCM guys lost billions honestly and transparently via flawed math models based on overconfident assumptions of price spread behavior. That wasn't criminal fraud. There was no illegal transfer of investor funds.

naijaboiler 4y ago
ignore the fraudulent part of covering up the money, how Alameda lost money is the same as how LTCM guys lost money. guys who think they are too smart and made wrong predictions about the market. That part is very very similar. SBF then compounded it by layering fraud on top of the "im too smart to fail" losses by using customer funds to cover up the losses.