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An article that omits any whiff of risk while heaping on the praise is implying that it's safe, or at least implying that there weren't any obvious red flags.

by nullc 4y ago

trompetenaccoun 4y ago
Worse he gave "grants" through one of his foundations to news outlets like Vox, Intercept, ProPublica, and others. Vox did not even put a disclaimer about them having taken money from him in the fluff pieces they put out. They have only started doing so after the implosion of FTX, probably to ward off potential controversy.
- strix_varius 4y ago
  *potential lawsuits: https://www.rollingstone.com/culture/culture-news/larry-david-tom-brady-shaq-ftx-class-action-lawsuit-1234632046/ https://www.rollingstone.com/culture/culture-news/larry-davi...
gruez 4y ago
>or at least implying that there weren't any obvious red flags. Well? Were there any credible red flags? Aside from the standard "all crypto is a scam" rhetoric, SBF/FTX looked pretty clean before the collapse.
- nullc 4y ago
  Sure, including ones that should have been apparent without any sophisticated analysis: For example, FTX was giving people 8%/yr 'yield' just for funds deposited there in spite claiming to not invest customer funds. The claim that his fund earned >$10/billion over two years on a trivial arb with Korean exchange was also an obvious red flag (and asking people with relevant experience would have got an answer that this not a credible claim). The heavy involvement with and promotion of extremely illiquid and self-made tokens was also pretty suspect, but not unique to FTX. Looking at my messages, I see that I specifically highlighted 'the ftx website lists something called a "3x leveraged shitcoin index token"' ... or the fact that they offered 100x leverage. Who knows what more would have been found if any investigation or critical questions were applied. These specific red flags were clear enough for me-- and other people I know, to yank most of their funds from LedgerX when SBF acquired it. Any journalist writing about SBF/FTX would have had access to much more information that I did. E.g. I didn't see the videos of him obviously tweaking in interviews, nor the easily visible tweets by Ellison about how boring life is when off amphetamines. But someone spending a half hour googling the involved parties would easily have found these additional red-flags.
  - psychlops 4y ago
    > The red flags were clear enough for me-- and other people I know... This seems glaringly obvious to me as well. A basic scrutiny of how the money is made reveals deep flaws. It should be clear to anyone who has money to invest that there is a reason why one investment vehicle pays 8% versus another which pays 2% (CD's). I don't believe they should lose their money without recourse, but people shouldn't have zero responsibility for their financial decisions. Some risk and educational foundation must be assumed by the individual. It would be nice if regulators and journalists gave a clear picture, but everyone should remember, they likely have no financial stake on their findings.
    - nullc 4y ago
      It's a hard situation: the relative safety of standard investments contributes to bad judgement when people end up in a red in tooth and claw unregulated market. Similar people used to theme parks going to a national park and falling to their death in a waterfall or being gored by buffalo. Not that I think the safety rails are bad... if you had to be maximally cynical you'd never even bother taking an investment with only 2% yield, it just wouldn't be worth the meta-risk (the risk you misunderstood the risk!). Probably one of the worst things about the FTX press puffery is the implication that FTX was more regulated or pro-regulation, ... probably causing people to think it was a part of the relatively safe major markets where the risks are usually reasonable and the asset returns tends to be fair relative to the risk. I filed complaints with the government over the Gemini earn program because they were heavily marketing to retail users with comparisons to savings accounts while, AFAICT, actually consisting of effectively unsecured investments in ponzi schemes ('yield programs') whos risks weren't meaningfully disclosed. Never heard back, now that it's imploded perhaps I should try FOIA-ing any communication resulting from my complaints.
  - gruez 4y ago
    >The claim that his fund earned >$10/billion over two years on a trivial arb with Korean exchange was also an obvious red flag (and asking people with relevant experience would have got an answer that this not a credible claim). Source? The numbers seems suspiciously high when you consider that the net worth of SBF (who owned most of SBF and FTX) was only $10.5 billion prior to the collapse. Maybe you got this confused with this? Wikipedia: "In January 2018, Bankman-Fried organized an arbitrage trade, moving up to $25 million per day, to take advantage of the higher price of bitcoin in Japan compared to the price in America.[9][10][2] The company earned about $20 million from the arbitrage opportunity.[11]" >The heavy involvement with and promotion of extremely illiquid and self-made tokens was also pretty suspect, but not unique to FTX. Looking at my messages, I see that I specifically highlighted 'the ftx website lists something called a "3x leveraged shitcoin index token"' >... or the fact that they offered 100x leverage. Are you making these claims from a "it's impossible to offer this product without being a scam" point of view, or "this product is gambling and shouldn't be allowed"? >I didn't see the videos of him obviously tweaking in interviews This seems like the prototypical example of stuff that you only notice after the fact because hindsight is 20/20. Can you imagine writing an article that's like "SBF is pretty sus, look at how much he's tweaking in this video"? Or telling your editor you want to investigate SBF/FTX because he looks like he's tweaking? >nor the easily visible tweets by Ellison about how boring life is when off amphetamines. If you read the whole tweet in its entirety, you'd realize that 1. she was talking about prescription amphetamines aka Adderall. it's not like she was smoking meth. 2. she was emphatically not talking about being bored, she was talking about how hard it was to get energy/motivation to do any sort of activity, all of which were symptoms of ADHD (see point 1) Sure, it's fun to dunk on her and the rest of the FTX/Alameda staff now that the whole thing crashed and burned, but if you wrote a piece on this pre-crash you'd end up getting canceled for doubting/making fun of people's mental disorders.
- jazzyjackson 4y ago
  a 28 year old billionaire running his exchange out of the bahamas was enough of a red flag for me
  - gruez 4y ago
    That sounds more along the lines of "all crypto is a scam" than something that you can write a news story about. I'm not going to deny it isn't shady (I don't use them for that reason), but at best the only thing you can write for this is something like "the exchange has drawn criticism for being domiciled in the Bahamas and not being audited" but that might be tough. To my knowledge there wasn't significant criticism around before the crash (unlike with Tether, for instance). People seemed to be largely okay with the state of affairs, or the people who weren't okay and went to Coinbase/Gemini/Kraken.
    - jefftk 4y ago
      > not being audited Except FTX did (somehow!?) pass a GAAP audit: https://blockworks.co/news/ftx-joins-coinbase-kraken-with-us-gaap-audit-pass/ https://blockworks.co/news/ftx-joins-coinbase-kraken-with-us...
- vkou 4y ago
  Running an exchange out of the Bahamas that has never been audited is a major one. Of course, neither have 90% of their competitors. 8% yield for customer deposits is another one.
  - gruez 4y ago
    >8% yield for customer deposits is another one. AFAIK that was limited to the first $10k in deposits, so it seemed plausible as a some sort of customer acquisition cost. Also, 8% was around the going rate for decentralized lending protocols, so it only seemed high in comparison to FDIC protected savings accounts.
    - vkou 4y ago
      Yes, 8% only seems high in comparison to companies that are ran by adults that don't evaporate with your money every few years. No financial company in the world that isn't a fraud is going to pay me a $800/year for parking $10,000 in their bank account, once all risks are taken into account.
      - koolba 4y ago
        The first six months of this year it was possible! All that would be needed would be a parent company that creates child LLC’s, one per customer, and then purchases $10,000 of I Series bonds using the child LLC tax ids. The rate was 9.6% so you would have been pocketing a 1.6% spread on the customer deposits.
        gruez 4y ago
        I'm pretty sure only natural persons (ie. not corporations) can buy I series bonds. From treasury direct >Is there a maximum amount I can buy? >In a calendar year, one Social Security Number or one Employer Identification Number may buy: > up to $10,000 in electronic I bonds, and > up to $5,000 in paper I bonds (with your tax refund) >For individual accounts, the limits apply to the Social Security Number of the first-named in the registration.
- sigstoat 4y ago
  he had some twitter thread two years ago where he was talking about betting five times [what the gambler’s formulation of the kelly criterion would suggest], which is bug fuck insane and would’ve had me shorting him immediately if i’d been aware of it and could’ve figured out how to short him. he was 100% going to zero and it wasn’t even going to take long. might’ve even happened at that point and he was just stealing customer money to cover it up. not that i’d expect journalists to have been able to work it out; anybody who can understand kelly’s paper is making more money some place else.
  - whatshisface 4y ago
    You don't even have to understand the derivation to apply the Kelly criterion.
  - zhoujianfu 4y ago
    Only after the collapse a friend pointed out that thread, where he’s arguing 10x Kelly makes sense because when you win such a crazy long shot bet you’ll have enough money to change the world and money doesn’t actually have a diminishing utility ever. Regardless of his other arguments, it never makes sense to bet more than Kelly, because you move into _diminishing_ expected value… while also taking on more risk! You can do less than Kelly if you want to diminish your expected value, but at least that also comes with less risk.
    - sigstoat 4y ago
      > he’s arguing 10x Kelly makes sense because when you win such a crazy long shot bet you’ll have enough money to change the world and money doesn’t actually have a diminishing utility ever. right he also had a thing in there where i think he was conflating the log utility in kelly with human’s tendency to have a logarithmic view of the utility of money. they’re not actually connected, they’re just both the words “log utility”.
  - notahacker 4y ago
    yeah, pretty much every one of the [not particularly large number of] positive pieces I read on him screamed "compulsive gambler", including the VC hagiography that talked in depth about his interpretations of utilitarianism and devoted a paragraph to wondering if there was anything in life he actually enjoyed. not to mention the Matt Levine interview where Matt tells him he's basically describing yield farming as a Ponzi scheme and he concedes that's valid and doesn't even try to construct a counterargument for where the value comes from...

An article that omits any whiff of risk while heaping on the praise is implying that it's safe, or at least implying that there weren't any obvious red flags.

by nullc 4y ago

An article that omits any whiff of risk while heaping on the praise is implying that it's safe, or at least implying that there weren't any obvious red flags.

trompetenaccoun 4y ago

Worse he gave "grants" through one of his foundations to news outlets like Vox, Intercept, ProPublica, and others. Vox did not even put a disclaimer about them having taken money from him in the fluff pieces they put out. They have only started doing so after the implosion of FTX, probably to ward off potential controversy.

strix_varius 4y ago
*potential lawsuits: https://www.rollingstone.com/culture/culture-news/larry-david-tom-brady-shaq-ftx-class-action-lawsuit-1234632046/ https://www.rollingstone.com/culture/culture-news/larry-davi...

gruez 4y ago

>or at least implying that there weren't any obvious red flags. Well? Were there any credible red flags? Aside from the standard "all crypto is a scam" rhetoric, SBF/FTX looked pretty clean before the collapse.

nullc 4y ago
Sure, including ones that should have been apparent without any sophisticated analysis: For example, FTX was giving people 8%/yr 'yield' just for funds deposited there in spite claiming to not invest customer funds. The claim that his fund earned >$10/billion over two years on a trivial arb with Korean exchange was also an obvious red flag (and asking people with relevant experience would have got an answer that this not a credible claim). The heavy involvement with and promotion of extremely illiquid and self-made tokens was also pretty suspect, but not unique to FTX. Looking at my messages, I see that I specifically highlighted 'the ftx website lists something called a "3x leveraged shitcoin index token"' ... or the fact that they offered 100x leverage. Who knows what more would have been found if any investigation or critical questions were applied. These specific red flags were clear enough for me-- and other people I know, to yank most of their funds from LedgerX when SBF acquired it. Any journalist writing about SBF/FTX would have had access to much more information that I did. E.g. I didn't see the videos of him obviously tweaking in interviews, nor the easily visible tweets by Ellison about how boring life is when off amphetamines. But someone spending a half hour googling the involved parties would easily have found these additional red-flags.
- psychlops 4y ago
  > The red flags were clear enough for me-- and other people I know... This seems glaringly obvious to me as well. A basic scrutiny of how the money is made reveals deep flaws. It should be clear to anyone who has money to invest that there is a reason why one investment vehicle pays 8% versus another which pays 2% (CD's). I don't believe they should lose their money without recourse, but people shouldn't have zero responsibility for their financial decisions. Some risk and educational foundation must be assumed by the individual. It would be nice if regulators and journalists gave a clear picture, but everyone should remember, they likely have no financial stake on their findings.
  - nullc 4y ago
    It's a hard situation: the relative safety of standard investments contributes to bad judgement when people end up in a red in tooth and claw unregulated market. Similar people used to theme parks going to a national park and falling to their death in a waterfall or being gored by buffalo. Not that I think the safety rails are bad... if you had to be maximally cynical you'd never even bother taking an investment with only 2% yield, it just wouldn't be worth the meta-risk (the risk you misunderstood the risk!). Probably one of the worst things about the FTX press puffery is the implication that FTX was more regulated or pro-regulation, ... probably causing people to think it was a part of the relatively safe major markets where the risks are usually reasonable and the asset returns tends to be fair relative to the risk. I filed complaints with the government over the Gemini earn program because they were heavily marketing to retail users with comparisons to savings accounts while, AFAICT, actually consisting of effectively unsecured investments in ponzi schemes ('yield programs') whos risks weren't meaningfully disclosed. Never heard back, now that it's imploded perhaps I should try FOIA-ing any communication resulting from my complaints.
- gruez 4y ago
  >The claim that his fund earned >$10/billion over two years on a trivial arb with Korean exchange was also an obvious red flag (and asking people with relevant experience would have got an answer that this not a credible claim). Source? The numbers seems suspiciously high when you consider that the net worth of SBF (who owned most of SBF and FTX) was only $10.5 billion prior to the collapse. Maybe you got this confused with this? Wikipedia: "In January 2018, Bankman-Fried organized an arbitrage trade, moving up to $25 million per day, to take advantage of the higher price of bitcoin in Japan compared to the price in America.[9][10][2] The company earned about $20 million from the arbitrage opportunity.[11]" >The heavy involvement with and promotion of extremely illiquid and self-made tokens was also pretty suspect, but not unique to FTX. Looking at my messages, I see that I specifically highlighted 'the ftx website lists something called a "3x leveraged shitcoin index token"' >... or the fact that they offered 100x leverage. Are you making these claims from a "it's impossible to offer this product without being a scam" point of view, or "this product is gambling and shouldn't be allowed"? >I didn't see the videos of him obviously tweaking in interviews This seems like the prototypical example of stuff that you only notice after the fact because hindsight is 20/20. Can you imagine writing an article that's like "SBF is pretty sus, look at how much he's tweaking in this video"? Or telling your editor you want to investigate SBF/FTX because he looks like he's tweaking? >nor the easily visible tweets by Ellison about how boring life is when off amphetamines. If you read the whole tweet in its entirety, you'd realize that 1. she was talking about prescription amphetamines aka Adderall. it's not like she was smoking meth. 2. she was emphatically not talking about being bored, she was talking about how hard it was to get energy/motivation to do any sort of activity, all of which were symptoms of ADHD (see point 1) Sure, it's fun to dunk on her and the rest of the FTX/Alameda staff now that the whole thing crashed and burned, but if you wrote a piece on this pre-crash you'd end up getting canceled for doubting/making fun of people's mental disorders.
jazzyjackson 4y ago
a 28 year old billionaire running his exchange out of the bahamas was enough of a red flag for me
- gruez 4y ago
  That sounds more along the lines of "all crypto is a scam" than something that you can write a news story about. I'm not going to deny it isn't shady (I don't use them for that reason), but at best the only thing you can write for this is something like "the exchange has drawn criticism for being domiciled in the Bahamas and not being audited" but that might be tough. To my knowledge there wasn't significant criticism around before the crash (unlike with Tether, for instance). People seemed to be largely okay with the state of affairs, or the people who weren't okay and went to Coinbase/Gemini/Kraken.
  - jefftk 4y ago
    > not being audited Except FTX did (somehow!?) pass a GAAP audit: https://blockworks.co/news/ftx-joins-coinbase-kraken-with-us-gaap-audit-pass/ https://blockworks.co/news/ftx-joins-coinbase-kraken-with-us...
vkou 4y ago
Running an exchange out of the Bahamas that has never been audited is a major one. Of course, neither have 90% of their competitors. 8% yield for customer deposits is another one.
- gruez 4y ago
  >8% yield for customer deposits is another one. AFAIK that was limited to the first $10k in deposits, so it seemed plausible as a some sort of customer acquisition cost. Also, 8% was around the going rate for decentralized lending protocols, so it only seemed high in comparison to FDIC protected savings accounts.
  - vkou 4y ago
    Yes, 8% only seems high in comparison to companies that are ran by adults that don't evaporate with your money every few years. No financial company in the world that isn't a fraud is going to pay me a $800/year for parking $10,000 in their bank account, once all risks are taken into account.
    - koolba 4y ago
      The first six months of this year it was possible! All that would be needed would be a parent company that creates child LLC’s, one per customer, and then purchases $10,000 of I Series bonds using the child LLC tax ids. The rate was 9.6% so you would have been pocketing a 1.6% spread on the customer deposits.
      - gruez 4y ago
        I'm pretty sure only natural persons (ie. not corporations) can buy I series bonds. From treasury direct >Is there a maximum amount I can buy? >In a calendar year, one Social Security Number or one Employer Identification Number may buy: > up to $10,000 in electronic I bonds, and > up to $5,000 in paper I bonds (with your tax refund) >For individual accounts, the limits apply to the Social Security Number of the first-named in the registration.
sigstoat 4y ago
he had some twitter thread two years ago where he was talking about betting five times [what the gambler’s formulation of the kelly criterion would suggest], which is bug fuck insane and would’ve had me shorting him immediately if i’d been aware of it and could’ve figured out how to short him. he was 100% going to zero and it wasn’t even going to take long. might’ve even happened at that point and he was just stealing customer money to cover it up. not that i’d expect journalists to have been able to work it out; anybody who can understand kelly’s paper is making more money some place else.
- whatshisface 4y ago
  You don't even have to understand the derivation to apply the Kelly criterion.
- zhoujianfu 4y ago
  Only after the collapse a friend pointed out that thread, where he’s arguing 10x Kelly makes sense because when you win such a crazy long shot bet you’ll have enough money to change the world and money doesn’t actually have a diminishing utility ever. Regardless of his other arguments, it never makes sense to bet more than Kelly, because you move into _diminishing_ expected value… while also taking on more risk! You can do less than Kelly if you want to diminish your expected value, but at least that also comes with less risk.
  - sigstoat 4y ago
    > he’s arguing 10x Kelly makes sense because when you win such a crazy long shot bet you’ll have enough money to change the world and money doesn’t actually have a diminishing utility ever. right he also had a thing in there where i think he was conflating the log utility in kelly with human’s tendency to have a logarithmic view of the utility of money. they’re not actually connected, they’re just both the words “log utility”.
- notahacker 4y ago
  yeah, pretty much every one of the [not particularly large number of] positive pieces I read on him screamed "compulsive gambler", including the VC hagiography that talked in depth about his interpretations of utilitarianism and devoted a paragraph to wondering if there was anything in life he actually enjoyed. not to mention the Matt Levine interview where Matt tells him he's basically describing yield farming as a Ponzi scheme and he concedes that's valid and doesn't even try to construct a counterargument for where the value comes from...