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FTX used corporate funds to purchase employee homes, new filing shows
- randal_handle 4y agoSpeculation, but it appears from the books that the reason FTX was so fast is because they never actually bought or sold any user assets and would just report it as bought and sold on their website.
- twiddling 4y agosigh. a scam, through and through.
- factsarelolz 4y agoFTX and SBF will be the grift that keeps on grifting as more details come out. These stories will continue to drip out as the media conglomerates cash out on that ad rev. I am already starting to check out on this story due to being inundated with details on a daily basis. “At this point, what difference does it make?” - someone famous
- 55555 4y agoThe new CEO of FTX states that FTX had no accounting department. lol. > “The Debtors do not have an accounting department,” Ray wrote, stating he expected it would be “some time” before reliable financial statements could be prepared.
- shakezula 4y agoI guess I’m not that surprised after seeing that balance sheet from FTX floating around.
- delusional 4y agoIt's not floating around, that makes it sound like it maybe wasn't real. It was published by the financial times. It's real. He's trying to sell that tire fire to investors.
- bluedevil2k 4y agoThis shouldn’t be surprising at all after seeing their balance sheet with round numbers like $5,000,000,000 in assets and $12,000,000,000 in liabilities. It looked like SBF made it in Excel while his LoL game was loading.
- bombcar 4y agoI want that XLSX file. I want to print out that spreadsheet for my bedsheet. It's a work of art; it should be hung in every office in the country as a reminder.
- emehex 4y agoHere it is! https://d1e00ek4ebabms.cloudfront.net/production/7ab64a3b-6ce0-47cc-96ac-5e2d2a8c5d6c.png https://d1e00ek4ebabms.cloudfront.net/production/7ab64a3b-6c...
- bombcar 4y agoThank you! That's the highest resolution PNG of it I've seen so far, but someday I hope to get the actual XLSX.
- HWR_14 4y agoYou can retype it. I don't there are any supporting sheets. It should take like 2 minutes
- weezin 4y agoExhibit A of the incompetence defense.
- notahacker 4y agoThink it'd be Exhibit A for the prosecution tbh. They were a financial services company run by ex-traders, not a mum and pop shop that might genuinely be running a legitimate business on napkin math
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- frankjr 4y agoI wonder how that could have possibly worked. I mean they had more than a hundred companies in various countries - somebody must have occasionally filed documents / reports with the local authorities, right?
- mikeyouse 4y agoThey haven't named the firm, but the same paragraph goes on to say that they used an external accounting partner for their books.
- SevenNation 4y agoFollow the links through the other article gives this: > Bankman-Fried and FTX “management practices included the use of an unsecured group email account as the root user to access confidential private keys and critically sensitive data for the FTX Group companies around the world, the absence of daily reconciliation of positions on the blockchain, the use of software to conceal the misuse of customer funds.” https://www.cnbc.com/2022/11/17/ftx-ceo-shreds-bankman-fried-never-seen-such-a-failure-of-controls-.html https://www.cnbc.com/2022/11/17/ftx-ceo-shreds-bankman-fried... Everything up to that last part could be chalked up to idiot savants doing their thing. But as the saying goes, the cover up is the crime.
- mac3n 4y agoNot that surprising if they had to live in the Bahamas. Just means that they will lose their homes.
- ilrwbwrkhv 4y agoNah. They have already siphoned enough money through shell companies to buy many houses. International money trails are almost impossible to disentangle.
- bluedevil2k 4y agoThey’re not impossible any more and with this getting so much press and the US government likely looking to make an example of SBF, look to get a very detailed trail of where all the $ went. I mean, do you really think, factoring in that he had no accountants and no compliance at all, that he somehow had some of the best money launderers and embezzlers in the world? I highly doubt it, it was probably as amateur as the rest of the company.
- bkishan 4y ago> the US government likely looking to make an example of SBF. Considering the silence from top officials, I don't think this is going to be true. Don't forget he donated ~$50M to the democrats for the mid-terms and was the second biggest dem donor.
- selectodude 4y agoMadoff was a Democratic mega-donor and he went to jail as well.
- gamblor956 4y agoIn the primaries, to House candidates, many of whom lost their primaries to other Democrats. So there's a fair amount of bad blood between SBF and the Dems that actually made it to the election. And on top of that, the GOP won the House. What sort of quid pro quo are you expecting him to get from the losing party, most of whom he pissed off?
- testplzignore 4y agoI would guess that the accounting firm that did the audit will be going the way of Arthur Andersen after the Enron scandal. And how many of their clients also have "interesting" financials?
- pigeons 4y agoCan't make this stuff up. https://www.coindesk.com/business/2022/11/11/meet-the-metaverse-night-clubloving-audit-firm-that-presided-over-ftxs-financials/ https://www.coindesk.com/business/2022/11/11/meet-the-metave...
- foenix 4y agoWait... is this the same Prager-prefix as the PragerU folks? My goodness this stupidity is a conglomerate industry if so.
- Cyberdog 4y agoWhat a bizarre conclusion-jump. More than one person in the world is named Prager, you know.
- triggercut 4y ago>“I don’t know anything about FTX,” said Jerry Eitel, the partner emeritus and chief metaverse officer at Prager Metis. “I’m retired,” Eitel added, before disconnecting on the phone. (Eitel is a one-time CoinDesk contributor.) The head of Prager Metis’ audit practice could not be reached for comment. Wow Another Simpsons did it first moment (https://frinkiac.com/img/S07E15/318918.jpg https://frinkiac.com/img/S07E15/318918.jpg)
- bostonsre 4y agoChief metaverse officer sounds like a position in the counsel of ricks.
- zimpenfish 4y ago
- foobarian 4y agoThis whole mess makes me wonder, what if they did everything right, with proper accounting and compliance practices etc.? Would we have ended up with a successful crypto business that would advance the whole field forward? Perhaps Coinbase is an example of that, though maybe not as well known due to less drama?
- HDThoreaun 4y agoIt's really hard to separate FTX's success from alameda. One theory now is that Alameda had recently been losing money hand over fist providing liquidity to FTX. Would FTX have anywhere near the volume without easy Alameda liquidity allowing traders to make tons of money?
- lordnacho 4y agoOnce the snowball is rolling, any particular market maker becomes a lot less important. They come for retail, and retail comes because there's market makers. Perhaps as a kick starter Alameda was important, but I doubt they were needed after the usual suspects came on.
- HDThoreaun 4y agoSure, if all the market makers are in to profit. If alameda was providing quotes that consistently lose money only to FTX then retail and other flow would generally tend to migrate there since the spreads are better than other exchanges.
- _fat_santa 4y agoMy impression is Coinbase is the thing that FTX was claiming to be, a well run exchange. Looking back, them purchasing the naming rights to Miami's stadium and all the A list celebrities prompting it just added this fake layer of trust. It's very easy to see the celebrity endorsements, puff pieces and the companies name plastered over a stadium as endorsements of how solid the business is, after all, a bunch of kids living in the Bahama's couldn't just buy all this right?...right? While FTX tried to gain respectability through all that, seems that Coinbase is taking the tack of just focus on the fundamentals of the business and build trust that way (you know the old school way).
- traveler01 4y agoLet's take into consideration this company got billions in investments. How and why...?
- llampx 4y agoTINA Greater Fool Theory Take your pick
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- moneycantbuy 4y agohow did ftx successfully raise so much vc money recently? do these top vc firms do no due diligence?
- ingenieros 4y agoEffective altruism at its finest. LOL
- gruez 4y agoWhat does effective altruism have to do with VCs that invested in FTX and their due diligence? If anything effective altruism is downstream from that.
- ingenieros 4y agoSam used the EA card and his generous donations to places like MIT's Media Lab in the same way Epstein did. This not only earned him tons of goodwill from the scientific community, but it also allowed him to rub shoulders with the likes of Tony Blair and Clinton. Who wouldn't want to invest in someone who is helping to make the world better and has all these aforementioned personalities and institutions helping to provide an air of legitimacy to his pursuits? (Also, the guy who coined the term EA sat on the board of his FTX fund and was helping to facilitate deals with people like Elon Musk) https://www.vox.com/future-perfect/23458282/effective-altruism-sam-bankman-fried-ftx-crypto-ethics https://www.vox.com/future-perfect/23458282/effective-altrui...
- gruez 4y agoHow does this relate to effective altruism as a whole? SBF does these things... therefore this kind of behavior is endemic in the effective altruism community?
- pessimizer 4y agoThat its community idealized and gathered around a man with no moral center who thought their entire movement was both a joke and a way to avoid scrutiny for his ongoing frauds. That, at the least, gives an indication that its intellectual underpinnings are not solid.
- Animats 4y agoThis is the kind of theft that puts people in prison fast. It will take years to untangle the whole financial mess, but buying a house with company funds right before a bankruptcy is easy to explain to a jury.
- jandrese 4y agoAnd these people are young. Bernie Madoff at least had the smarts to be old before he was caught so life in jail is basically a whatever for him.
- ineedasername 4y ago>in prison fast Maybe not too fast (or at all) for SBF though. His father is a Stanford Law professor and that doesn't come without some connection to the rest of the legal world-- and so, assuming SBF is likely to have some method of funding, a flavor of defense along these lines could keep him out of jail: "SBF was simply an idealistic young man who tried to strike out in a new direction in the financial world. But he'd only had a year or two of experience and found himself in a crypto industry filled with scammers and VC forms eager with FOMO failed to provide the guidance or ensure proper governance as would usually be the case. And so business SBF built was very ad hoc on the inside and when things started crashing down SBF made some extremely poor but well intentioned decisions. But now? He's learned his lesson" And then he gets his probation and a ban from working in the industry for X years. And maybe even a handslap jail sentence. Based on what's come out so far that has some small chance of still being how he gets off the hook, but it's early days and getting worse by the tweet.
- midjji 4y agoGreat, that means someone might get some money back when they are sold.
- sgammon 4y agoWow. He just completely roasted SBF. It is completely insane to see this laid bare.
- w23j 4y agoThose are some candid remarks by the new CEO. "I have over 40 years of legal and restructuring experience. [...] Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here. From compromised systems integrity and faulty regulatory oversight abroad, to the concentration of control in the hands of a very small group of inexperienced, unsophisticated[1] and potentially compromised individuals, this situation is unprecedented."[2] I am really looking forward to the next Matt Levine column going through this filing! [1] Ouch that hurts. At least you want to go down in history as a criminal mastermind! [2] https://pacer-documents.s3.amazonaws.com/33/188450/042020648197.pdf https://pacer-documents.s3.amazonaws.com/33/188450/042020648...
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- boring_twenties 4y ago> I am really looking forward to the next Matt Levine column going through this filing! Got u fam: https://archive.ph/VaSw8 https://archive.ph/VaSw8
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- ShamelessC 4y agoNot from finance - what is meant here by “potentially compromised”? Is that just as vague in context?
- mikeyouse 4y agoEmployee theft - CYA in case they're not, but heavily implying that there's evidence of criminal activity from the inexperienced and unsophisticated people in control of FTX.
- vkou 4y agoIt means that after looking at the books for a week, he thinks that key employees at the firm may have been crooks, as opposed to idiots.
- tppiotrowski 4y ago"including a loan of FTT tokens to BlockFi Inc. in a principal amount of FTT tokens valued at $250 million as of September 30, 2022." [1] [1] https://pacer-documents.s3.amazonaws.com/33/188450/042020648197.pdf https://pacer-documents.s3.amazonaws.com/33/188450/042020648...
- hcrisp 4y agoSBF seems to have claimed that funds sent to Alameda were loans. Can he do that here too (even if accounting was sloppy)? If so how does that differ from what other financial institutions do, unless it is in the degree of leverage and risk they take on? I am just imagining a headline like "<your bank> used corporate funds to purchase employee home".
- texaslonghorn5 4y agoftx created new tokens and loaned them to alameda, and then alameda posted them as collateral to borrow money from ftx customers.
- FridgeSeal 4y agoCrypto people complain about governments “just printing money” and then go and do shit like this. It boggles the mind.
- BoiledCabbage 4y agoIt's almost as if crypto is mainly just scams, and people in the process of being fooled by scams.
- throw_m239339 4y ago> It's almost as if crypto is mainly just scams, and people in the process of being fooled by scams. It is a scam, crypto is essentially people making their own money backed by nothing but hype. The entire industry will collapse way before the regular financial system ever does. Crypto has no fundamentals, none, zip, if not the FIAT people are willing to lose in an attempt to get rich quickly.
- bedhead 4y agoIt's called theft.
- GaryNumanVevo 4y agoTo be honest: I'm just happy I get to experience another Enron, but this time I can watch it in real time on Twitter!
- digianarchist 4y agoThe Enron scandal would have been much more interesting if their CEO had tweeted through it.
- encoderer 4y agosame creative use of mark to market accounting but compared to FTX, Enron was fraud on difficult mode. They had to (attempt to) actually build things like power plants in India. FTX just yeeted tokens to bag holders based on fancy darkmode graphic design and a screwball haircut.
- xdavidliu 4y ago> FTX just yeeted ticker symbols to bag holders based on fancy darkmode graphic design and a screwball haircut. I understand the words in this sentence individually, but not the sentence in its entirety. Can anyone translate?
- Aperocky 4y agoFTX gave out fancy worthless digital garbage in exchange for real cash from "investors"
- dymk 4y ago> yeeted ticker symbols presented prices for worthless securities > to bag holders to now-defrauded clients of the FTX website > fancy darkmode graphic design a slick, sort of professional looking website > and a screwball haircut and a screwball haircut
- oblio 4y ago
- boh 4y agoIn a separate article Ray also said: “Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here,” And this is the same man who oversaw the liquidation of Enron. "Ray said he had found at FTX international, FTX US and Bankman-Fried’s Alameda Research trading company “compromised systems integrity”, “faulty regulatory oversight” and a “concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals”. via https://archive.ph/jBZKM https://archive.ph/jBZKM
- gdw2 4y agoI wonder if this could result in another round of costly SOX-like regulations?
- mikeyouse 4y agoI really doubt it - it was just a dumb unregulated offshore startup doing a bunch of stuff that's already illegal. SOX wouldn’t help since FTX apparently didn’t have anything resembling audited financials vs Enron, a public company that abused GAAP to generate misleading financials. It would be a much different story if FTX had gone public or if they had a reputable audit firm vouching for them.
- PragmaticPulp 4y agoWhy would it? FTX wasn’t playing by existing US regulations anyway. Even the most basic regulations would have squashed FTX’s entire fraud from the start. They weren’t bothering to play by any rules because they knew they could get away with it.
- whatshisface 4y agoRegulations didn't stop Enron.
- muglug 4y ago
- seydor 4y agothey were probably going to give them to the homeless ...
- jonathankoren 4y agoThe EA shtick really feels like Big Tony walking Bart through the logic that selling stolen cigarettes to strangers by the truck load is the same as stealing bread to feed your starving family.
- gabcoh 4y agoI don't know why it would feel like that. The EA community came out immediately and very forcefully in opposition to SBF and this perversion of EA philosophy since the FTX blow up [1] and they have been vocally opposed to shady practices in the service of EA since long before the last week. [1]: https://forum.effectivealtruism.org/posts/XHrHsrQGyr4NnqCA7/we-must-be-very-clear-fraud-in-the-service-of-effective https://forum.effectivealtruism.org/posts/XHrHsrQGyr4NnqCA7/...
- SV_BubbleTime 4y agoGroup distances themselves from person that made them look bad? Hmm, that's an unusual scenario.
- mrguyorama 4y agoIn what way is "scam your way to billions so you can donate billions" incompatible with EA? Honestly it seems like it would be the expected outcome. EA is the pinnacle of "the ends justify the means"
- ShamelessC 4y agoInsofar as EA depends on the delusion that one is and always will be incredibly lucky, or was born into fortune. (Does it? Genuinely curious- it comes across rather tone deaf as an outsider)
- 4y ago
- TheAlchemist 4y agoHow can anybody be surprised ? The 2 biggest players - Tether and Binance are much worse and still very well alive. Both are several times bigger (on paper) than FTX. Binance is already banned in most countries and without headquarters. Do anybody believes they have a proper gouvernance ? Tether was proved to lie about it réserves several times, recently started publishing attestations about reserves - attestations that are obviously false - the numbers don’t really add up. For all we know, both could disappear tomorrow with all the money and nobody would be able to say where and how it’s gone !
- radicalbyte 4y ago> both could disappear tomorrow with all the money If they go then the magic beans are worth $0. In which case - what are the damages? They've ran away with magic beans worth $0. To quote Monty Python: "I mean, what have you got to lose? You know, you come from nothing. You're going back to nothing. What have you lost? Nothing."
- BobbyJo 4y agoTether prints tokens in exchange for money. Them disappearing means they took the money and abandoned their magic bean IOUs.
- foepys 4y agoDo they actually exchange them for money or are they just creating them? There has never been a reputable audit of Tether.
- discodave 4y agoTether's 'market cap' is like 60 billion or whatever, I think most of that was just created out of thin air, but I think some of it was exchanged for real dollars, like a few percent, maybe a couple of billion dollars. In which case, when the fraud comes crashing down, they will have stolen hundreds of millions, to maybe a couple of billion dollars. Imagine if somebody stole a piece of art worth hundreds of millions of dollars...
- tibbydudeza 4y agoSo FTX was run by a bunch of financially incompetent people - VCs seems to be no better.
- jl6 4y agoThese people are in custody, right?
- i_am_proteus 4y agoThe organization that held these people in custody gave them to a hedge fund to cover trading losses. Nobody is sure where these people are now.
- oarabbus_ 4y agoNot as of this moment, no.
- tibbydudeza 4y agoSBF is a fraudster and criminal - he "loaned" 3.3 bullion from Almeda Research. It makes Enron seem like side show.
- reddog 4y agoNo, the Enron scandal was much, much bigger. In 2000 Enron had a market cap of over $60 billion and was "reporting" $100 billion in revenue. It ended up losing it's sharholders $74 billion and all 20,000 employees their jobs. At the time it's bankrupcy was the largest in history. The scandal also drove Enron's accounting firm, Aurthur Anderson, out of business costing all 85,000 their employess their jobs.
- mikeyouse 4y agoRight. All of these "bigger than Enron" or "bigger than Madoff" claims are so dumb. Much of the money lost on FTX was in the form of magic bean tokens that people pretended were worth billions of dollars - they weren't actually worth billions of dollars.
- skippyboxedhero 4y agoRight, but the money lost was USD deposits. Madoff was magic beans, he just invented $50bn of money that he said he made for investors. SBF was depositing customer money into his hedge fund directly (FTX didn't even have a bank account). So this is a relatively big fraud because it was USD value multiple billions, likely near $10bn. This was money stolen directly from customers. The $1bn that SBF took directly out of the company into his personal bank account (which shortly thereafter went into the bank account of the DNC) was a small part of the fraud.
- dragonwriter 4y ago> SBF was depositing customer money into his hedge fund directly (FTX didn't even have a bank account). Even the CEO running the whole set of related entities in bankruptcy doesn't know which of the FTX-related entities had bank accounts and what accounts they were because they literally didn't keep records of that. Or who their employees were. Or, well, much of anything. Probably because the whole corporate structure was a paper thin veneer over fraud, amd discussing the individual paper entities as if they were meaningfully distinct in any way is mostly missing the point.
- jmyeet 4y agoOnce again I need to poin tout the shocking truth that FTX had no CFO [1]. The CFO's experience and reputation is waht gives investors and regulators confidence that the financial statements that the CFO literally signs off on are valid. Listed companies on the NASDAQ and NYSE have lots of requirements here (eg internal and external audits). Obviously these don't apply to FTX but the truly shocking thing here is the likes of Sequoia and other sophisticated investors did not require an adult in the room in the form of a CFO. They literally handed billions of dollars to a 20-something with absolutely no supervision or accountability. I would not be surprised if this lack of oversight doesn't land them in court from customers and other investors. You may think they are shielded from this through limited liability and corporate structures but that doesn't innoculate them against tort claims and you could probably make the case they are recklessly negligent or even as far as being liable in conspiracy to commit fraud (before or after the fact). SBF engaged in on-the-record messages with a reporter about this. This is how clueless this man is. He either doesn't have lawyers or he's ignoring them as any lawyer will tell you to STFU [2]. No good can come of this ans. SBF and his cohorts are facing the prospect of being on the run for the rest of their lives from US authorities or possibly even spending the rest of their lives in prison. It's that serious. [1]: https://www.ledgerinsights.com/ftx-warning-signs-no-cfo/ https://www.ledgerinsights.com/ftx-warning-signs-no-cfo/ [2]: https://www.youtube.com/watch?v=sgWHrkDX35o https://www.youtube.com/watch?v=sgWHrkDX35o
- ceejayoz 4y ago> He either doesn't have lawyers... His parents are both lawyers! And law professors! Specializing in compliance and ethics!
- eternalban 4y agoThis blame game again. Look, the universe is a deterministic machine. SBF or his mom and dad are no more to blame than you were when you accidentally squashed a bug walking this morning! Should we start taking everyone to account for their actions? Where will this end?
- 4y ago
- zinekeller 4y agoWow, he also worked at Enron's bankruptcy. I just learned of it now, and I now get it why people are comparing FTX to Enron.
- miga 4y agoEmployee loyalty programmes are common among tech. Considering the cost of hiring, and retraining employees. Do not forget about security.
- spaceman_2020 4y agoThere's billions missing. Investments in non-crypto assets that are not on the books and have no clear paper trail. It increasingly looks like FTX was a money laundering operation.
- pigtailgirl 4y ago"Finally, and critically, the Debtors have made clear to employees and the public that Mr. Bankman-Fried is not employed by the Debtors and does not speak for them. Mr. Bankman-Fried, currently in the Bahamas, continues to make erratic and misleading public statements. Mr. Bankman-Fried, whose connections and financial holdings in the Bahamas remain unclear to me, recently stated to a reporter on Twitter: “F** regulators they make everything worse” and suggested the next step for him was to “win a jurisdictional battle vs. Delaware”." hah!
- agumonkey 4y agohere's the whole chat https://archive.ph/4dD0d https://archive.ph/4dD0d quite interesting
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- shawn-butler 4y agoI wonder how much of the $30(?) million he donated to democratic political campaigns this cycle will turn out to have been customers’ funds too? Had to have been one of the top donors.
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- aswanson 4y agoStuff like this makes me less regretful of ignoring the original bitcoin posting on HN by chaostheory.
- ineedasername 4y agoSBF: “You know what was maybe my biggest single f----p?” he asked. “Chapter 11.” ~1 Week in to the melt down of a massive, hilariously horrifying structure of $Billions intricately tied up in a mixture of hubris, malfeasance, scam artistry, good intentions (maybe?) and... his biggest regret is that in, perhaps, a moment of sanity he filed for bankruptcy in a jurisdiction that is expert in handling the fallout from this kind of thing. (well, I'm not sure Delaware has actually ever seen this kind of thing before) This does not reflect well upon his character and perhaps belies his claims that all he wants to do now is find some way of rescuing things from the ashes to make whole the folks whose assets were incinerated
- UnBankmanUrself 4y ago
- egberts1 4y ago$418M went into cold wallets. - how convenient for SEC.