7 ms·

When you owe the bank a million, you have a problem. When you owe the bank several billion, the bank has a problem. When the unregulated-bank owes billions to

When you owe the bank a million, you have a problem. When you owe the bank several billion, the bank has a problem. When the unregulated-bank owes billions to millions of people, I guess the people have a problem?

ru552 4y ago
If FTX pays anyone back, it will be the institutions that hold their debt.
- rafale 4y ago
  Celsius argued that depositors were actually lenders. I wonder if FTX will try the same angle. It's gonna be harder to justify because while Celsius was all about yield, FTX was a traditional exchange doing custody on behalf of its clients.
  - zoklet-enjoyer 4y ago
    FTX was giving 8% interest on the first $10k deposited. I definitely considered myself a lender and I gtfo before shtf
    - TremendousJudge 4y ago
      What I don't understand is how this kind of stuff doesn't qualify them as a bank
      - labster 4y ago
        Crypto: reimplementing the financial system, poorly.
        trophycase 4y ago
        FTX is not crypto. If you had a bank that accepted ears of corn and bushels of apples for deposit, and trading between them, you wouldn't blame farmers when that bank stole everyone's deposits.
        Sebguer 4y ago
        Barely a year ago, you were telling someone they were ridiculous for claiming that FTX might go under if Tether had a major event: https://news.ycombinator.com/item?id=28797080 https://news.ycombinator.com/item?id=28797080
        trophycase 4y ago
        I said it was ridiculous to claim that Tether collapsing would cause "most major exchanges to go under". Congratulations on totally twisting my words though. "Most major exchanges" don't have much exposure to tether.
        deleted 4y ago
        [deleted]
        ceejayoz 4y ago
        If a whole bunch of banks trading in corn/apples did that, though, things start to be a bit different.
        zoklet-enjoyer 4y ago
        Yeah I would. Why wouldn't you blame the thief?
        andirk 4y ago
        > FTX is not crypto And a bank is not the ears of corn in the analogy. The thief here is FTX which is like the bank. You don't blame the corn for being stolen. Yes, blame the thief.
        zoklet-enjoyer 4y ago
        Oops. I somehow read that completely opposite of what it said
        JamesianP 4y ago
        Certainly that's true of the overall sector. But crypto as a technology has some advantages and some disadvantages, same for traditional banking. People were arguing even before the crash that FTX was combining disadvantages of both.
      - lazide 4y ago
        Well, first the regulators would need to grow a pair.
  - deleted 4y ago
    [deleted]
- thewataccount 4y ago
  Not FTX - but I know Coinbase has stated in their earnings report that they will use user deposits to pay debtors back first in the case of bankruptcy. Edit - better explanations below this Also a friendly reminder to everyone not to trust any exchange at all with crypto unless you're actively trading it, keep it in a wallet!
  - bonestamp2 4y ago
    I forgot about that. I don't have much at coinbase, but going to move that over to my ledger where it should be anyway.
    - maerF0x0 4y ago
      > my ledger where it should be anyway. +1 to this. Remember the classic phrase that goes something like "Not your keys, not your crypto"
  - Gwypaas 4y ago
    They want to do that, pending what the bankruptcy court would decide which they have no power to influence. Like the Kraken ToS. > Ownership. Title to Digital Assets shall at all times remain with you and shall not transfer to Payward, except as provided herein. All interests in Digital Assets we hold for Kraken Accounts are held for customers, are not property of Payward. As the owner of Digital Assets in your Kraken Account, you bear all risk of loss of such Digital Assets. None of the Digital Assets in your Kraken Account are the property of Payward. Payward does not represent or treat assets in your Kraken Account as belonging to Payward. However, a court may disagree with Payward’s treatment of your assets and subject them to claims of Payward’s creditors. https://www.kraken.com/legal https://www.kraken.com/legal Which means that the current fad of "proof of reserves" means absolutely nothing without the liabilities side, both customer accounts and for the company itself.
    - thewataccount 4y ago
      Thanks for the correction!
- encryptluks2 4y ago
  What about institutions that owe FTX and Alameda Research money? Didn't FTX and Alameda invest in companies as well.. and will those companies still owe a percentage of those investments in order to liquidate money?
  - skinnymuch 4y ago
    Presumably yeah. Like the Robinhood stake is surely going to be liquidated. Do they own large stakes in many other liquid companies?
    - encryptluks2 4y ago
      Yes, they have been investing in various crypto companies for a long time. Their name has frequently been attached as seed investors in numerous startups, specifically in the Solana ecosystem.
stefan_ 4y ago
Read some of the letters to the judge in the Celsius bankruptcy: https://twitter.com/molly0xFFF/status/1550160830762782724 https://twitter.com/molly0xFFF/status/1550160830762782724 I think when massive scams like FTX start airing Super Bowl ads, we all have a problem.
- pjc50 4y ago
  Does America even have an Advertising Standards Agency? It seems like you can just air massive frauds to everyone and nobody notices.
  - noasaservice 4y ago
    Well, kind of. The Federal Trade Commission (FTC) does handle fraudulent advertisements and the like.... If they even address your complaint, AND if the complaint comes in your favor, you are still guaranteed nothing. And the "punishments" are at the level of 'just doing business' for most cases. With FTX, its when rich people get hit is when the government gets involved. The rest of us can get stuffed.
  - andirk 4y ago
    The commercials said "fortune favors the _brave_" where brave almost literally means risky. Take note of every commercial you see and you'll notice that some huge % of them have dead bodies on their balance sheets, poisoned water, coups, criminal behavior. Like how the (unnamed?) main character of Fight Club's job as an insurance adjuster was to figure out if it was cheaper to do a recall or pay off the victims' families. All that said, yeah absolutely no one even glancing at FTX's books before letting them in the room is very 2008-ish.
splitstud 4y ago
agumonkey 4y ago
> the people have a problem? the people are the problem
- lazide 4y ago
  Why not both?
  - ben_w 4y ago
    Money: the problem of the people, by the people, for the people.
JamesianP 4y ago
At least one bright side. The victims definitely have a case against FTX and gang, but not against me or other taxpayers..
rodgerd 4y ago
> When the unregulated-bank owes billions to millions of people, I guess the people have a problem? That should definitely be the case. The moral risk of anyone else covering this would be catastrophic.
jeroenhd 4y ago
Isn't that the point of dealing with unregulated businesses? To cut through the red tape of protective regulation and responsibility? Huge risk, but potentially huge rewards. The bankruptcy will divide whatever value is still left to be divided. Some of the missing value may be obtained from the malicious people behind the company through lawsuits, and some people may go to jail for knowingly scamming people. In the end, this is not a bank, and the regulations protecting people from scummy banks, even the new legislations written after the 2008 crisis, don't apply. This isn't the first business with millions of customers to go bankrupt. When such a company fails, getting your money back is your problem. Large-scale mismanagement and uneducated customer bases like this is the reason banks and other finance companies are under so much regulatory pressure.

ru552 4y ago

If FTX pays anyone back, it will be the institutions that hold their debt.

rafale 4y ago
Celsius argued that depositors were actually lenders. I wonder if FTX will try the same angle. It's gonna be harder to justify because while Celsius was all about yield, FTX was a traditional exchange doing custody on behalf of its clients.
- zoklet-enjoyer 4y ago
  FTX was giving 8% interest on the first $10k deposited. I definitely considered myself a lender and I gtfo before shtf
  - TremendousJudge 4y ago
    What I don't understand is how this kind of stuff doesn't qualify them as a bank
    - labster 4y ago
      Crypto: reimplementing the financial system, poorly.
      - trophycase 4y ago
        FTX is not crypto. If you had a bank that accepted ears of corn and bushels of apples for deposit, and trading between them, you wouldn't blame farmers when that bank stole everyone's deposits.
        Sebguer 4y ago
        Barely a year ago, you were telling someone they were ridiculous for claiming that FTX might go under if Tether had a major event: https://news.ycombinator.com/item?id=28797080 https://news.ycombinator.com/item?id=28797080
        trophycase 4y ago
        I said it was ridiculous to claim that Tether collapsing would cause "most major exchanges to go under". Congratulations on totally twisting my words though. "Most major exchanges" don't have much exposure to tether.
        deleted 4y ago
        [deleted]
        ceejayoz 4y ago
        If a whole bunch of banks trading in corn/apples did that, though, things start to be a bit different.
        zoklet-enjoyer 4y ago
        Yeah I would. Why wouldn't you blame the thief?
        andirk 4y ago
        > FTX is not crypto And a bank is not the ears of corn in the analogy. The thief here is FTX which is like the bank. You don't blame the corn for being stolen. Yes, blame the thief.
        zoklet-enjoyer 4y ago
        Oops. I somehow read that completely opposite of what it said
      - JamesianP 4y ago
        Certainly that's true of the overall sector. But crypto as a technology has some advantages and some disadvantages, same for traditional banking. People were arguing even before the crash that FTX was combining disadvantages of both.
    - lazide 4y ago
      Well, first the regulators would need to grow a pair.
- deleted 4y ago
  [deleted]
thewataccount 4y ago
Not FTX - but I know Coinbase has stated in their earnings report that they will use user deposits to pay debtors back first in the case of bankruptcy. Edit - better explanations below this Also a friendly reminder to everyone not to trust any exchange at all with crypto unless you're actively trading it, keep it in a wallet!
- bonestamp2 4y ago
  I forgot about that. I don't have much at coinbase, but going to move that over to my ledger where it should be anyway.
  - maerF0x0 4y ago
    > my ledger where it should be anyway. +1 to this. Remember the classic phrase that goes something like "Not your keys, not your crypto"
- Gwypaas 4y ago
  They want to do that, pending what the bankruptcy court would decide which they have no power to influence. Like the Kraken ToS. > Ownership. Title to Digital Assets shall at all times remain with you and shall not transfer to Payward, except as provided herein. All interests in Digital Assets we hold for Kraken Accounts are held for customers, are not property of Payward. As the owner of Digital Assets in your Kraken Account, you bear all risk of loss of such Digital Assets. None of the Digital Assets in your Kraken Account are the property of Payward. Payward does not represent or treat assets in your Kraken Account as belonging to Payward. However, a court may disagree with Payward’s treatment of your assets and subject them to claims of Payward’s creditors. https://www.kraken.com/legal https://www.kraken.com/legal Which means that the current fad of "proof of reserves" means absolutely nothing without the liabilities side, both customer accounts and for the company itself.
  - thewataccount 4y ago
    Thanks for the correction!
encryptluks2 4y ago
What about institutions that owe FTX and Alameda Research money? Didn't FTX and Alameda invest in companies as well.. and will those companies still owe a percentage of those investments in order to liquidate money?
- skinnymuch 4y ago
  Presumably yeah. Like the Robinhood stake is surely going to be liquidated. Do they own large stakes in many other liquid companies?
  - encryptluks2 4y ago
    Yes, they have been investing in various crypto companies for a long time. Their name has frequently been attached as seed investors in numerous startups, specifically in the Solana ecosystem.

stefan_ 4y ago

Read some of the letters to the judge in the Celsius bankruptcy: https://twitter.com/molly0xFFF/status/1550160830762782724 https://twitter.com/molly0xFFF/status/1550160830762782724 I think when massive scams like FTX start airing Super Bowl ads, we all have a problem.

pjc50 4y ago
Does America even have an Advertising Standards Agency? It seems like you can just air massive frauds to everyone and nobody notices.
- noasaservice 4y ago
  Well, kind of. The Federal Trade Commission (FTC) does handle fraudulent advertisements and the like.... If they even address your complaint, AND if the complaint comes in your favor, you are still guaranteed nothing. And the "punishments" are at the level of 'just doing business' for most cases. With FTX, its when rich people get hit is when the government gets involved. The rest of us can get stuffed.
- andirk 4y ago
  The commercials said "fortune favors the _brave_" where brave almost literally means risky. Take note of every commercial you see and you'll notice that some huge % of them have dead bodies on their balance sheets, poisoned water, coups, criminal behavior. Like how the (unnamed?) main character of Fight Club's job as an insurance adjuster was to figure out if it was cheaper to do a recall or pay off the victims' families. All that said, yeah absolutely no one even glancing at FTX's books before letting them in the room is very 2008-ish.

splitstud 4y ago

agumonkey 4y ago

> the people have a problem? the people are the problem

lazide 4y ago
Why not both?
- ben_w 4y ago
  Money: the problem of the people, by the people, for the people.

JamesianP 4y ago

At least one bright side. The victims definitely have a case against FTX and gang, but not against me or other taxpayers..

rodgerd 4y ago

> When the unregulated-bank owes billions to millions of people, I guess the people have a problem? That should definitely be the case. The moral risk of anyone else covering this would be catastrophic.

jeroenhd 4y ago

Isn't that the point of dealing with unregulated businesses? To cut through the red tape of protective regulation and responsibility? Huge risk, but potentially huge rewards. The bankruptcy will divide whatever value is still left to be divided. Some of the missing value may be obtained from the malicious people behind the company through lawsuits, and some people may go to jail for knowingly scamming people. In the end, this is not a bank, and the regulations protecting people from scummy banks, even the new legislations written after the 2008 crisis, don't apply. This isn't the first business with millions of customers to go bankrupt. When such a company fails, getting your money back is your problem. Large-scale mismanagement and uneducated customer bases like this is the reason banks and other finance companies are under so much regulatory pressure.