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I'm surprised anyone is surprised. The selling point of crypto always seemed to be the ability to elude regulation, and so they did, and so the obvious temptati

by eqmvii 4y ago

I'm surprised anyone is surprised. The selling point of crypto always seemed to be the ability to elude regulation, and so they did, and so the obvious temptations were tempting... A vocal community has been calling out the blatant scams and corruption for years. The information was readily available to anyone doing even the most basic due diligence.

indigodaddy 4y ago
Does/will the lack of regulations infer milder criminal penalties?
- gkilmain 4y ago
  I like this question. Do we then base the penalties purely on pain suffered by the scammed?
  - from 4y ago
    Even if they can’t establish securities fraud it seems like they have wire fraud based on the deleted tweets alone. Plus whatever internal accounting manipulations he had going on are likely some form of honest services fraud. Plus they were handling some international withdrawals through a front company in California that pretended to be an electronics wholesaler called North Dimension Inc which from what I can tell did not register with FINCEN so they have unlicensed money transmitter and potentially some other fraud because they likely misrepresented the business to banks too. For sentencing you basically get a score that increases with loss amount, increases with whether any victims faced financial hardship (in this case obviously yes), and decreases with things like cooperation and acceptance of responsibility. See https://www.sentencing.us/ https://www.sentencing.us/. But IANAL.
- HWR_14 4y ago
  Probably not. Enron actually may have steered clear of violating any regulations. At the very least, the government lawyers were afraid to subject a jury to months of accounting regulations and debates over not black or white issues. So they just made the case that the sum of all the actions was an accounting fraud. And they got the CEO/CFO/CFO's wife (who helped/would have gotten the Chairman, but he died and several others in jail for it. I would put money that SBF is going to prison for decades -or- evades US prosecution by managing to avoid extradition.
  - PubliusMI 4y ago
  - indigodaddy 4y ago
    Thanks. So is it expected than he will jet off to somewhere before being arrested? Justice Dept or whatever relevant agency should act quick shouldn’t they? But I guess the answer there alludes back to a sibling comment’s point of testing the Justice system against someone with such a wide swale of influence/connections..
    - HWR_14 4y ago
      He has been in the Bahamas for a while. Theoretically, the Bahamanian officials are keeping him from leaving the country. The US does have an extradition treaty with the Bahamas, but they have their own crimes they want to try him for first. It's possible he could beat extradition. I don't think that's likely, but it's certainly legally possible.
- somenameforme 4y ago
  Fraud, and other such white collar crime, has very harsh high-end penalties when the government chooses to enforce it with each offense potentially reaching 20+ years. If the government chooses to enforce the law, SBF could easily spend the rest of his life in prison. The question is will they? That's what makes this case so interesting to observe. SBF is extremely well connected, donated to all the right people, and even actively advocated for their causes. It's a major, and very visible, test of the US Justice system.
yifanl 4y ago
The surprise isn't that how disorganized they were _internally_. Even if it's an open secret that the money hose isn't strictly above board, it was assumed that at least, the guys in charge were keeping track of the money, even if only for purely selfish cover-my-ass purposes.
- lazide 4y ago
  Or even just to know how much money they had where, to loot it.
  - HWR_14 4y ago
    Once they looted the money, making the records disappear sounds smart.
    - lazide 4y ago
      Usually that means something like keeping two sets of books. In this case, there's... half a book? Or at least seems like that's the extent of it. Also a half filled out spreadsheet that doesn't make any sense. It would be surprisingly bad even for a fly by night scammer who skimmed $100k before the cops caught up with him, let alone a billion+ dollar operation. But good point. Essentially, 'less evidence to shred if we never had it in the first place'?
georgeecollins 4y ago
The thing that shocks me is that anyone still trusts any of these exchanges except maybe Coinbase. I just heard the Kraken CEO in an interview touting his "partial balance sheet audit" for 2021. The interviewer asked if Kraken would have a full balance sheet audit (proving reserves) this year. The CEO couldn't commit to a timeline for a full audit (ie not in 2022) but pointed out reserves were just "one component" of protecting customer's assets. That's like a captain saying that he wasn't going to check if there is a hole in the boat because hull integrity is just one component of a ship's voyage. And on Reddit people seem to think Kraken is very dependable.
- gitfan86 4y ago
  I don't expect the Coinbase CEO to secretly leave the country with gold bars. But I do expect Coinbase to either go bankrupt or to face major lawsuits for years and to have very poor stock performance.
  - polygamous_bat 4y ago
    And yet I imagine people will be surprised when they find out that Coinbase insiders have only been selling (and have sold almost $4B worth of) their stocks every since the direct listing (not even IPO). [0] Chances are, Coinbase was more of your garden variety pump and dump where you hype your useless startup up, and dump it on retail at a hugely inflated "market price". [0] https://www.marketbeat.com/stocks/NASDAQ/COIN/insider-trades/ https://www.marketbeat.com/stocks/NASDAQ/COIN/insider-trades...
    - dahdum 4y ago
      Your link shows $82M of buying by insiders compared to just $47M of selling over the past 12 months, so I'm not sure I understand your point.
      - graeme 4y ago
        Interesting. 100% of buys were from two directors, Tobias Lutke of Shopify and Fred Ehrsam, former cofounder. 100% of sells have been management.
babypuncher 4y ago
Many people's critical thinking skills go out the window whenever they think there is easy money on the table. That is how scams like these thrive, and how casinos get so big.
notch656a 4y ago
but they also did that with their customers' fiat deposits which went through the traditional regulated finance network. Does that mean the point of fiat is to elude regulation too? Whatever regulations there are on fiat apparently didn't stop them from defrauding their customer's fiat. AFAIK straight up stealing customer's deposits in a way the contract specifically says you will not, whether in USD or UnicornBucks, is some form of theft/fraud/embezzlement and already illegal.
pr337h4m 4y ago
A huge chunk of SBF's lobbying was to get on-chain DeFi banned. He was the biggest promoter of regulation, OFAC, KYC, etc in the space. His downfall, which began with the leak of the draft of the anti-DeFi and pro-KYC DCCPA bill he lobbied for, was catalyzed by people (including CZ) becoming enraged at him for trying to hurt FTX's strongest competitors using his DC connections.
- DennisP 4y ago
  Strangely enough, on-chain defi has no issues with insiders secretly siphoning off funds for their own trading.
  - cool_dude85 4y ago
    No? I thought lots of that on-chain stuff was getting "hacked" all the time.
    - redox99 4y ago
      Yep, No. On chain you can't have "insiders secretly siphoning off funds for their own trading". Hacking is a different issue (comparable to, lets say MtGox).
xnyan 4y ago
>A vocal community has been calling out the blatant scams and corruption for years. The information was readily available to anyone doing even the most basic due diligence. Successful scams are like successful cults, nobody has ever joined a harmful cult thinking that they are joining a harmful cult. A good scam will never seem like a scam to the victim. The biggest risk factor in falling for a scam is believing that it can't happen to you. The blatant scams and corruption are actually an incentive for many people who believed that they would be the beneficiaries of the scam, not the victim.
blablabla123 4y ago
> A vocal community has been calling out the blatant scams and corruption for years And not only that, even people who made fortunes in the financial markets. > and so the obvious temptations were tempting... But that is what happened. It's bad for people who've put in money they couldn't afford to lose
abxytg 4y ago
"The information was readily available to anyone doing even the most basic due diligence" This is just provably not true. if you can find 3 credible people saying that FTX was lending out customer funds to the tune of $5+bn before 10/31/2022 I'll eat my shoe. the smartest critics in the room were taken as much by surprise at the extent of the crash and contagion as the most idiot-degen-ape. and it doesn't do anyone any favors to pretend it was obvious.
cypress66 4y ago
Yes, that's the selling point of crypto. This is not about crypto however, which continues to work perfectly fine, this is about an exchange. Nobody would be opposed to have these companies audited. In fact people have been asked for tether and so on to be audited for ages. The problem is anytime regulations are mentioned, they are about hurting the user, and not preventing things like FTX from happening. I'm talking of things like the bill SBF himself proposed, which aimed to fuck defi (actual crypto, where you can't steal people's money like FTX did), to force people into these centralized exchanges where you don't actually own or hold any crypto.

by eqmvii 4y ago

indigodaddy 4y ago

Does/will the lack of regulations infer milder criminal penalties?

gkilmain 4y ago
I like this question. Do we then base the penalties purely on pain suffered by the scammed?
- from 4y ago
  Even if they can’t establish securities fraud it seems like they have wire fraud based on the deleted tweets alone. Plus whatever internal accounting manipulations he had going on are likely some form of honest services fraud. Plus they were handling some international withdrawals through a front company in California that pretended to be an electronics wholesaler called North Dimension Inc which from what I can tell did not register with FINCEN so they have unlicensed money transmitter and potentially some other fraud because they likely misrepresented the business to banks too. For sentencing you basically get a score that increases with loss amount, increases with whether any victims faced financial hardship (in this case obviously yes), and decreases with things like cooperation and acceptance of responsibility. See https://www.sentencing.us/ https://www.sentencing.us/. But IANAL.
HWR_14 4y ago
Probably not. Enron actually may have steered clear of violating any regulations. At the very least, the government lawyers were afraid to subject a jury to months of accounting regulations and debates over not black or white issues. So they just made the case that the sum of all the actions was an accounting fraud. And they got the CEO/CFO/CFO's wife (who helped/would have gotten the Chairman, but he died and several others in jail for it. I would put money that SBF is going to prison for decades -or- evades US prosecution by managing to avoid extradition.
- PubliusMI 4y ago
- indigodaddy 4y ago
  Thanks. So is it expected than he will jet off to somewhere before being arrested? Justice Dept or whatever relevant agency should act quick shouldn’t they? But I guess the answer there alludes back to a sibling comment’s point of testing the Justice system against someone with such a wide swale of influence/connections..
  - HWR_14 4y ago
    He has been in the Bahamas for a while. Theoretically, the Bahamanian officials are keeping him from leaving the country. The US does have an extradition treaty with the Bahamas, but they have their own crimes they want to try him for first. It's possible he could beat extradition. I don't think that's likely, but it's certainly legally possible.
somenameforme 4y ago
Fraud, and other such white collar crime, has very harsh high-end penalties when the government chooses to enforce it with each offense potentially reaching 20+ years. If the government chooses to enforce the law, SBF could easily spend the rest of his life in prison. The question is will they? That's what makes this case so interesting to observe. SBF is extremely well connected, donated to all the right people, and even actively advocated for their causes. It's a major, and very visible, test of the US Justice system.

yifanl 4y ago

The surprise isn't that how disorganized they were _internally_. Even if it's an open secret that the money hose isn't strictly above board, it was assumed that at least, the guys in charge were keeping track of the money, even if only for purely selfish cover-my-ass purposes.

lazide 4y ago
Or even just to know how much money they had where, to loot it.
- HWR_14 4y ago
  Once they looted the money, making the records disappear sounds smart.
  - lazide 4y ago
    Usually that means something like keeping two sets of books. In this case, there's... half a book? Or at least seems like that's the extent of it. Also a half filled out spreadsheet that doesn't make any sense. It would be surprisingly bad even for a fly by night scammer who skimmed $100k before the cops caught up with him, let alone a billion+ dollar operation. But good point. Essentially, 'less evidence to shred if we never had it in the first place'?

georgeecollins 4y ago

The thing that shocks me is that anyone still trusts any of these exchanges except maybe Coinbase. I just heard the Kraken CEO in an interview touting his "partial balance sheet audit" for 2021. The interviewer asked if Kraken would have a full balance sheet audit (proving reserves) this year. The CEO couldn't commit to a timeline for a full audit (ie not in 2022) but pointed out reserves were just "one component" of protecting customer's assets. That's like a captain saying that he wasn't going to check if there is a hole in the boat because hull integrity is just one component of a ship's voyage. And on Reddit people seem to think Kraken is very dependable.

gitfan86 4y ago
I don't expect the Coinbase CEO to secretly leave the country with gold bars. But I do expect Coinbase to either go bankrupt or to face major lawsuits for years and to have very poor stock performance.
- polygamous_bat 4y ago
  And yet I imagine people will be surprised when they find out that Coinbase insiders have only been selling (and have sold almost $4B worth of) their stocks every since the direct listing (not even IPO). [0] Chances are, Coinbase was more of your garden variety pump and dump where you hype your useless startup up, and dump it on retail at a hugely inflated "market price". [0] https://www.marketbeat.com/stocks/NASDAQ/COIN/insider-trades/ https://www.marketbeat.com/stocks/NASDAQ/COIN/insider-trades...
  - dahdum 4y ago
    Your link shows $82M of buying by insiders compared to just $47M of selling over the past 12 months, so I'm not sure I understand your point.
    - graeme 4y ago
      Interesting. 100% of buys were from two directors, Tobias Lutke of Shopify and Fred Ehrsam, former cofounder. 100% of sells have been management.

babypuncher 4y ago

Many people's critical thinking skills go out the window whenever they think there is easy money on the table. That is how scams like these thrive, and how casinos get so big.

notch656a 4y ago

but they also did that with their customers' fiat deposits which went through the traditional regulated finance network. Does that mean the point of fiat is to elude regulation too? Whatever regulations there are on fiat apparently didn't stop them from defrauding their customer's fiat. AFAIK straight up stealing customer's deposits in a way the contract specifically says you will not, whether in USD or UnicornBucks, is some form of theft/fraud/embezzlement and already illegal.

pr337h4m 4y ago

A huge chunk of SBF's lobbying was to get on-chain DeFi banned. He was the biggest promoter of regulation, OFAC, KYC, etc in the space. His downfall, which began with the leak of the draft of the anti-DeFi and pro-KYC DCCPA bill he lobbied for, was catalyzed by people (including CZ) becoming enraged at him for trying to hurt FTX's strongest competitors using his DC connections.

DennisP 4y ago
Strangely enough, on-chain defi has no issues with insiders secretly siphoning off funds for their own trading.
- cool_dude85 4y ago
  No? I thought lots of that on-chain stuff was getting "hacked" all the time.
  - redox99 4y ago
    Yep, No. On chain you can't have "insiders secretly siphoning off funds for their own trading". Hacking is a different issue (comparable to, lets say MtGox).

xnyan 4y ago

>A vocal community has been calling out the blatant scams and corruption for years. The information was readily available to anyone doing even the most basic due diligence. Successful scams are like successful cults, nobody has ever joined a harmful cult thinking that they are joining a harmful cult. A good scam will never seem like a scam to the victim. The biggest risk factor in falling for a scam is believing that it can't happen to you. The blatant scams and corruption are actually an incentive for many people who believed that they would be the beneficiaries of the scam, not the victim.

blablabla123 4y ago

> A vocal community has been calling out the blatant scams and corruption for years And not only that, even people who made fortunes in the financial markets. > and so the obvious temptations were tempting... But that is what happened. It's bad for people who've put in money they couldn't afford to lose

abxytg 4y ago

"The information was readily available to anyone doing even the most basic due diligence" This is just provably not true. if you can find 3 credible people saying that FTX was lending out customer funds to the tune of $5+bn before 10/31/2022 I'll eat my shoe. the smartest critics in the room were taken as much by surprise at the extent of the crash and contagion as the most idiot-degen-ape. and it doesn't do anyone any favors to pretend it was obvious.

cypress66 4y ago

Yes, that's the selling point of crypto. This is not about crypto however, which continues to work perfectly fine, this is about an exchange. Nobody would be opposed to have these companies audited. In fact people have been asked for tether and so on to be audited for ages. The problem is anytime regulations are mentioned, they are about hurting the user, and not preventing things like FTX from happening. I'm talking of things like the bill SBF himself proposed, which aimed to fuck defi (actual crypto, where you can't steal people's money like FTX did), to force people into these centralized exchanges where you don't actually own or hold any crypto.