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I think the underlying message here is regulation failed. You can dance around and shout "crypto" and people will apparently just stop doing due diligence. All

I think the underlying message here is regulation failed. You can dance around and shout "crypto" and people will apparently just stop doing due diligence. All these companies - the VCs, the advertisers etc. all relied on "This isn't an actual literal ponzi though right?" and the US regulators were like "LOL IDK". It's kind of the regulators job not to be trusting in VCs and reputation and really do the work.

dragontamer 4y ago
What? FTX isn't a US security that was traded on any platform. VCs (and accredited investors) are people rich enough, that the USA / regulators have deemed it "fine" if they lose a lot of money. Accredited investors are supposed to have over $1M bucks not because it proves that they're smart. Its so that when they inevitably get caught in a Ponzi scheme or whatever, USA doesn't have to rush in and save their money. Welcome to USA. If you're an accredited investor and/or Venture Capitalist, the training wheels are entirely off. You're on your own. -------- There's no FDIC insurance or SEC governing FTX's deposits. Its wholly unregulated, and in the Bahamas to boot.
- danans 4y ago
  > Welcome to USA. If you're an accredited investor and/or Venture Capitalist, the training wheels are entirely off. Who were they were trying to reach with their Superbowl ads, VCs? I suspect not.
  - User23 4y ago
    Roughly 10% of American households are accredited. Bilking affluent boomers is a big business.
    - danans 4y ago
      Was accreditation a requirement for investing in FTX? It doesn't seem like it from the accounts of retail investors losing significant amounts of money.
- lmm 4y ago
  The US legal system needs to start going after VCs that invest in criminal companies. They may not be breaking the law themselves, but they profit off lawbreaking, and they're the ones with the deep pockets. (Isn't this the whole point of RICO?)
- SilverBirch 4y ago
  FTX took deposits from unaccredited US investors with specific guarantees about what would happen with the money and they filed for bankruptcy in Delaware. I don't care about the VCs getting their money, I'm happy they go to zero etc- I'm saying the opposite, the VCs gave a false sense of security to regular folk that FTX was legit, but in reality FTX was telling depositors that they were doing all these things to protect them that they weren't. At minimum, the regulators should say "Hey, you can't tell people their money is safe if it isn't" (siloed customer accounts etc) at best the regulators should say "Hey, you have to make sure regular consumers are safe if you plan to take money from US consumers".
  - freejazz 4y ago
    What does filing for bankruptcy in Delaware have to do with anything?
    - HWR_14 4y ago
      US law vs. Panamanian law.
      - freejazz 4y ago
        If its not a US corp they aren't going to apply US bankruptcy law, they will apply the bankruptcy law of the jurisdiction the corp is registered in. They went to the US court because it will be a quicker disposition of the case.
        HWR_14 4y ago
        They have a US division. Multinationals going bankrupt seems like there will be issues about which group owns what and the various obligations between them.
        freejazz 4y ago
        So the bankruptcy of the US division will have US law, the others will according to their own jurisdictions. > Multinationals going bankrupt seems like there will be issues about which group owns what and the various obligations between them. Yes, which will be decided according to the bankruptcy law of the corp's incorporation, not the one it chooses. You are confusing choice of law with venue.
- black_13 4y ago
AlexandrB 4y ago
Isn't half the point of "crypto" to have an unregulated financial market? FTX operated out of the Bahamas for a reason. How can regulators fail to regulate a company that's not even based in their jurisdiction. You might have a point with FTX.US though.
- SilverBirch 4y ago
  They filed for bankruptcy in Delaware, and FTX US is bust. So I think it's more than just the weird bahamanian guys went crazy.
- trompetenaccoun 4y ago
  That's the antithesis of cryptocurrency. It's just regular plain old fraud and that's what the SEC is supposed to regulate. That's the only reason they exist. FTX is an exchange where you can trade cryptocurrencies for fiat currencies. If it were a decentralized on-chain exchange, how would they have stolen all this money without anyone noticing? That's the very point of public blockchains, if it had been a crypto market everyone could have watched the money disappear. Actually, a proper defi market should be set up so that the creators never even can misappropriate founds even if they wanted to, because they won't have access. Anyone can convince themselves of what the contract does by simply reading it. You don't have to trust some weird guy and his company in the Bahamas, you can verify it. Centralized exchanges like FTX and Binance do not operate this way. The closest you can get is Coinbase since they're public and need to be audited.
  - Forgeties79 4y ago
    > That's the antithesis of cryptocurrency. It's just regular plain old fraud and that's what the SEC is supposed to regulate. Hate to be that guy, but most people using crypto have been committing (tax) fraud for years. Knowingly or unknowingly.
    - trompetenaccoun 4y ago
      The statement wasn't that people using cryptocurrencies can't break the law. It's that blockchains solve this trust problem that exists in traditional finance. Very obviously the regulation we have does not work, you don't have to look at exchanges to understand that. The very same problems exist in banking but most poor folks in developed countries don't notice since even if the funds are lost there is some insurance. You could have such insurance for crypto exchange funds as well, but ultimately the people are always paying the bill when their money gets "lost", whether they understand this or not. Insurance costs money. A better system would be a more transparent one where the money can not simply disappear in the first place.
TacticalCoder 4y ago
> I think the underlying message here is regulation failed. You can dance around and shout "crypto" and people will apparently just stop doing due diligence Regulation failed? The media were complicit into this. Presenting SBF as the second coming of the Christ because he'd give it all to charities / non-profits / help advance science / etc. Regulator people fell for this. I'm not so sure it's "accredited investors" we need as much as "accredited journalists".
freejazz 4y ago
FTX didn't have a bitlicense because it deals with so many of the exact problems FTX had...

dragontamer 4y ago

What? FTX isn't a US security that was traded on any platform. VCs (and accredited investors) are people rich enough, that the USA / regulators have deemed it "fine" if they lose a lot of money. Accredited investors are supposed to have over $1M bucks not because it proves that they're smart. Its so that when they inevitably get caught in a Ponzi scheme or whatever, USA doesn't have to rush in and save their money. Welcome to USA. If you're an accredited investor and/or Venture Capitalist, the training wheels are entirely off. You're on your own. -------- There's no FDIC insurance or SEC governing FTX's deposits. Its wholly unregulated, and in the Bahamas to boot.

danans 4y ago
> Welcome to USA. If you're an accredited investor and/or Venture Capitalist, the training wheels are entirely off. Who were they were trying to reach with their Superbowl ads, VCs? I suspect not.
- User23 4y ago
  Roughly 10% of American households are accredited. Bilking affluent boomers is a big business.
  - danans 4y ago
    Was accreditation a requirement for investing in FTX? It doesn't seem like it from the accounts of retail investors losing significant amounts of money.
lmm 4y ago
The US legal system needs to start going after VCs that invest in criminal companies. They may not be breaking the law themselves, but they profit off lawbreaking, and they're the ones with the deep pockets. (Isn't this the whole point of RICO?)
SilverBirch 4y ago
FTX took deposits from unaccredited US investors with specific guarantees about what would happen with the money and they filed for bankruptcy in Delaware. I don't care about the VCs getting their money, I'm happy they go to zero etc- I'm saying the opposite, the VCs gave a false sense of security to regular folk that FTX was legit, but in reality FTX was telling depositors that they were doing all these things to protect them that they weren't. At minimum, the regulators should say "Hey, you can't tell people their money is safe if it isn't" (siloed customer accounts etc) at best the regulators should say "Hey, you have to make sure regular consumers are safe if you plan to take money from US consumers".
- freejazz 4y ago
  What does filing for bankruptcy in Delaware have to do with anything?
  - HWR_14 4y ago
    US law vs. Panamanian law.
    - freejazz 4y ago
      If its not a US corp they aren't going to apply US bankruptcy law, they will apply the bankruptcy law of the jurisdiction the corp is registered in. They went to the US court because it will be a quicker disposition of the case.
      - HWR_14 4y ago
        They have a US division. Multinationals going bankrupt seems like there will be issues about which group owns what and the various obligations between them.
        freejazz 4y ago
        So the bankruptcy of the US division will have US law, the others will according to their own jurisdictions. > Multinationals going bankrupt seems like there will be issues about which group owns what and the various obligations between them. Yes, which will be decided according to the bankruptcy law of the corp's incorporation, not the one it chooses. You are confusing choice of law with venue.
black_13 4y ago

AlexandrB 4y ago

Isn't half the point of "crypto" to have an unregulated financial market? FTX operated out of the Bahamas for a reason. How can regulators fail to regulate a company that's not even based in their jurisdiction. You might have a point with FTX.US though.

SilverBirch 4y ago
They filed for bankruptcy in Delaware, and FTX US is bust. So I think it's more than just the weird bahamanian guys went crazy.
trompetenaccoun 4y ago
That's the antithesis of cryptocurrency. It's just regular plain old fraud and that's what the SEC is supposed to regulate. That's the only reason they exist. FTX is an exchange where you can trade cryptocurrencies for fiat currencies. If it were a decentralized on-chain exchange, how would they have stolen all this money without anyone noticing? That's the very point of public blockchains, if it had been a crypto market everyone could have watched the money disappear. Actually, a proper defi market should be set up so that the creators never even can misappropriate founds even if they wanted to, because they won't have access. Anyone can convince themselves of what the contract does by simply reading it. You don't have to trust some weird guy and his company in the Bahamas, you can verify it. Centralized exchanges like FTX and Binance do not operate this way. The closest you can get is Coinbase since they're public and need to be audited.
- Forgeties79 4y ago
  > That's the antithesis of cryptocurrency. It's just regular plain old fraud and that's what the SEC is supposed to regulate. Hate to be that guy, but most people using crypto have been committing (tax) fraud for years. Knowingly or unknowingly.
  - trompetenaccoun 4y ago
    The statement wasn't that people using cryptocurrencies can't break the law. It's that blockchains solve this trust problem that exists in traditional finance. Very obviously the regulation we have does not work, you don't have to look at exchanges to understand that. The very same problems exist in banking but most poor folks in developed countries don't notice since even if the funds are lost there is some insurance. You could have such insurance for crypto exchange funds as well, but ultimately the people are always paying the bill when their money gets "lost", whether they understand this or not. Insurance costs money. A better system would be a more transparent one where the money can not simply disappear in the first place.

TacticalCoder 4y ago

> I think the underlying message here is regulation failed. You can dance around and shout "crypto" and people will apparently just stop doing due diligence Regulation failed? The media were complicit into this. Presenting SBF as the second coming of the Christ because he'd give it all to charities / non-profits / help advance science / etc. Regulator people fell for this. I'm not so sure it's "accredited investors" we need as much as "accredited journalists".

freejazz 4y ago

FTX didn't have a bitlicense because it deals with so many of the exact problems FTX had...