8 ms·

The failure of FTX and Sam Bankman-Fried will leave deep scars

42 points by axiomdata316 4y ago

troon-lover 4y ago
tester756 4y ago
- deleted 4y ago
  [deleted]
dahdum 4y ago
This article is 3 days old, before the "hack" was revealed as SBF transferring the funds (after bankruptcy and stepping down) to support Bahamas regulators in a jurisdictional fight. Which, in the Vox interview, he said winning was his only way out of the mess.
rhaway84773 4y ago
It wasn’t a failure. It was a scam. The “failure” was the revelation of the scam, which was a good thing. The fact that SBF has in the past publicly described running a Ponzi and not really recognized it as one indicates it may even be possible that the FTX guys didn’t even understand they were running a scam. But just because they did not realize they were doing so does not make the scam they were running any less of one.
- mtrycz2 4y ago
  If is, in fact, a problem with FTX, not crypto per se. It's like if "Theranos' scam will leave deep scars in USD".
  - highwaylights 4y ago
    I mean, it’s a problem insofar as it reflects badly on everything. That said there’s any number of debates you could have: Was FTX a deliberate ponzi? Was FTX a ponzi but they were too naive to understand that? Was it a ponzi within a ponzi? (I.e. has all of crypto been a single giant ponzi with nested levels all along?) Regardless of what anyone thinks, you only get confirmation either way after the fact.
    - mccorrinall 4y ago
      I would not call BTC a ponzi, but it is indeed true that BTC‘s value is not derived from debt.
      - knorker 4y ago
        It's not entirely a ponzi scheme. But what remains is crime.
      - highwaylights 4y ago
        I'd lean more on the side of calling it a Ponzi, but I think in either case it'll only be clear in retrospect. It'll either: 1) Stagnate. You'll need to wait a really long time for answer. 2) Crash or trend to zero. This would mean momentum is exhausted and money is leaving the table - it's always been a Ponzi in this case. 3) Continue until it finds a utility or it genuinely becomes a store of value. I doubt this outcome very much (I actually think it's impossible due to inherent features of bitcoin), but what do I know? I'm just one person on the internet. Not a Ponzi in this case.
- mccorrinall 4y ago
  I think it wasn’t a scam, because scamming implies intentional malicious behavior; at least for me. I think they were just… extremely incompetent. Their balance sheet with „semi liquid“ (whatever that means!) assets and trying to apply arithmetic operations on an excel cell called „Hidden, poorly internally labeled ‘fiat@’ account“ pretty much reflects this.
  - yakak 4y ago
    While I think competent scammers had better odds of not getting caught, I don't see how it is not a scam to take money, try to beat how it is currently allocated, whether or not you believe you will be able to put it back.
  - a4isms 4y ago
    Incompetence is, “I had no idea companies have standard methods of bookkeeping and accounting, or that I could have hired people skilled in these matters, like CFOs, accounting firms, or managers with any experience whatsoever working in business and/or finance.” Malice is, “I knew how businesses are supposed to be run, but I accidentally on purpose chose to run my business in a way where nobody could exercise oversight, and while nobody was exercising oversight, I engaged in a pattern of trades and deals that enriched me at the expense of people who trusted me.” SBF is a grown-ass adult. He knows that when people trust you with their money, you have a moral obligation to handle it competently, or hire people who know how to handle it competently. He and his backers know how to run a business such that the shenanigans he actually pulled would get flagged. He chose not to do so, and his backers chose to look the other way. And then he coïncidentally used the lack of oversight or standard controls to steal billions of dollars from his customers. Believe whatever you like, but don’t expect the rest of the world to nod along in agreement.
    - dboreham 4y ago
      All this is true, yet Bearings Bank managed to collapse because one of their employees hid shenanigans in an incomprehensible spreadsheet (I don't think he even needed to hide the cells). https://en.wikipedia.org/wiki/Barings_Bank#Internal_control https://en.wikipedia.org/wiki/Barings_Bank#Internal_control
the_snooze 4y ago
Outside of drugs and ransoms, what actual commercial activity does cryptocurrency enable that justifies all the hype around it? It’s been 13 years since the Satoshi whitepaper and crypto is still flailing around for legitimacy. After a certain point, it’s probably safe to assume it’s all just techno quackery.
- daveevad 4y ago
  The send money to my relatives in South America without having to pay exorbitant transfer fees still seems pretty plausible to me.
  - endisneigh 4y ago
    How much does it cost to send $1000 USD to South America using BTC and have them convert it to say, real, e.g. $1000USD to real via BTC vs other fiat methods. Using Wise you'd pay $15USD. Curious to know how much USD you'd pay with Bitcoin.
    - andrewflnr 4y ago
      The more relevant question is what it cost before people started using Bitcoin for that purpose. I think Bitcoin lit a fire under the major financial providers to be more efficient.
    - SXX 4y ago
      If you sent your USD to Argentine for insance you'll have to use official central bank exchange rate if you used Wise. With crypto you can actually convert your money using real world exchange rate which is very diffrent from official one. Official exchange rate: 1 USD = 162 Peso Real world one: 1 USD = 300 Peso
      - endisneigh 4y ago
        doesn't answer the question
willhinsa 4y ago
photochemsyn 4y ago
"It's amazing that you would build a 32 billion dollar financial firm that doesn't have an accounting department, but OK... Reading on further, FTX didn't even have 'an accurate list' of its own bank accounts, or even a complete record of the people who worked for the firm. FTX apparently used 'an unsecured group email account' to manage the security keys for its digital assets... The document discloses the secret exemption of Alameda from certain aspects of FTX.com's auto-liquidation protocol (what that means is that while other customers would have been subject to margin calls and automated liquidation, Alameda was not)..." - Patrick Boyle's review of the latest on court filings in the bankruptcy proceedings (with some snarky commentary removed): https://www.youtube.com/watch?v=mVrMpk4lGjA https://www.youtube.com/watch?v=mVrMpk4lGjA
WalterBright 4y ago
What I don't understand the value of is NFT. What is the value in digital ephemera? How would it be different from copyright?
- knorker 4y ago
  That's kind of off topic, but here's a great explanation of NFTs: https://onezero.medium.com/nfts-arent-as-stupid-as-you-think-bffab89697e3 https://onezero.medium.com/nfts-arent-as-stupid-as-you-think... Edit: to answer your question, NFTs expressed in traditional speak would be this: An exclusive transferable license to claim that you are the current holder of a string of bytes loosely associated with a work of art. No copyright is assigned to you, and you get no other rights either, such as rights to duplicate, re-license, or create derivative works.
  - ogogmad 4y ago
    Exactly, and what if you forget or lose this string of bytes? Or what if someone finds it, and transfers ownership to himself? It's impossible to get it redeemed because of how the technology works. No court on Earth would - or even should - recognise something like this.
  - WalterBright 4y ago
    What I thought. They are stupid.
- cykros 4y ago
  NFT's are fine, in that the represent a token that isn't fungible, and as such, would be a great way which, if regulated, would allow for things like selling real estate (deeds) or automobiles (titles) and other things of this nature using the blockchain to avoid the possibility of forgery, and to cut out the overhead associated with verifying chain of custody in conventional systems. Obviously, the adoption needs to happen and regulations need to be written for this to happen effectively, but it very well could. As far as trading silly gifs that you "own", well...yes, it's asinine. But not really any moreso than how much money kids these days are pumping into Fortnite skins and similar nonsense.
Nostromos 4y ago
Every time there's crypto scam and/or collapse someone writes an article about the long and lasting and deep scars. I've yet to see any. Dumb money gets taken, esp. in an unregulated market.
oxfeed65261 4y ago
https://archive.ph/xilRT https://archive.ph/xilRT

42 points by axiomdata316 4y ago

troon-lover 4y ago

tester756 4y ago

deleted 4y ago
[deleted]

dahdum 4y ago

This article is 3 days old, before the "hack" was revealed as SBF transferring the funds (after bankruptcy and stepping down) to support Bahamas regulators in a jurisdictional fight. Which, in the Vox interview, he said winning was his only way out of the mess.

rhaway84773 4y ago

It wasn’t a failure. It was a scam. The “failure” was the revelation of the scam, which was a good thing. The fact that SBF has in the past publicly described running a Ponzi and not really recognized it as one indicates it may even be possible that the FTX guys didn’t even understand they were running a scam. But just because they did not realize they were doing so does not make the scam they were running any less of one.

mtrycz2 4y ago
If is, in fact, a problem with FTX, not crypto per se. It's like if "Theranos' scam will leave deep scars in USD".
- highwaylights 4y ago
  I mean, it’s a problem insofar as it reflects badly on everything. That said there’s any number of debates you could have: Was FTX a deliberate ponzi? Was FTX a ponzi but they were too naive to understand that? Was it a ponzi within a ponzi? (I.e. has all of crypto been a single giant ponzi with nested levels all along?) Regardless of what anyone thinks, you only get confirmation either way after the fact.
  - mccorrinall 4y ago
    I would not call BTC a ponzi, but it is indeed true that BTC‘s value is not derived from debt.
    - knorker 4y ago
      It's not entirely a ponzi scheme. But what remains is crime.
    - highwaylights 4y ago
      I'd lean more on the side of calling it a Ponzi, but I think in either case it'll only be clear in retrospect. It'll either: 1) Stagnate. You'll need to wait a really long time for answer. 2) Crash or trend to zero. This would mean momentum is exhausted and money is leaving the table - it's always been a Ponzi in this case. 3) Continue until it finds a utility or it genuinely becomes a store of value. I doubt this outcome very much (I actually think it's impossible due to inherent features of bitcoin), but what do I know? I'm just one person on the internet. Not a Ponzi in this case.
mccorrinall 4y ago
I think it wasn’t a scam, because scamming implies intentional malicious behavior; at least for me. I think they were just… extremely incompetent. Their balance sheet with „semi liquid“ (whatever that means!) assets and trying to apply arithmetic operations on an excel cell called „Hidden, poorly internally labeled ‘fiat@’ account“ pretty much reflects this.
- yakak 4y ago
  While I think competent scammers had better odds of not getting caught, I don't see how it is not a scam to take money, try to beat how it is currently allocated, whether or not you believe you will be able to put it back.
- a4isms 4y ago
  Incompetence is, “I had no idea companies have standard methods of bookkeeping and accounting, or that I could have hired people skilled in these matters, like CFOs, accounting firms, or managers with any experience whatsoever working in business and/or finance.” Malice is, “I knew how businesses are supposed to be run, but I accidentally on purpose chose to run my business in a way where nobody could exercise oversight, and while nobody was exercising oversight, I engaged in a pattern of trades and deals that enriched me at the expense of people who trusted me.” SBF is a grown-ass adult. He knows that when people trust you with their money, you have a moral obligation to handle it competently, or hire people who know how to handle it competently. He and his backers know how to run a business such that the shenanigans he actually pulled would get flagged. He chose not to do so, and his backers chose to look the other way. And then he coïncidentally used the lack of oversight or standard controls to steal billions of dollars from his customers. Believe whatever you like, but don’t expect the rest of the world to nod along in agreement.
  - dboreham 4y ago
    All this is true, yet Bearings Bank managed to collapse because one of their employees hid shenanigans in an incomprehensible spreadsheet (I don't think he even needed to hide the cells). https://en.wikipedia.org/wiki/Barings_Bank#Internal_control https://en.wikipedia.org/wiki/Barings_Bank#Internal_control

the_snooze 4y ago

Outside of drugs and ransoms, what actual commercial activity does cryptocurrency enable that justifies all the hype around it? It’s been 13 years since the Satoshi whitepaper and crypto is still flailing around for legitimacy. After a certain point, it’s probably safe to assume it’s all just techno quackery.

daveevad 4y ago
The send money to my relatives in South America without having to pay exorbitant transfer fees still seems pretty plausible to me.
- endisneigh 4y ago
  How much does it cost to send $1000 USD to South America using BTC and have them convert it to say, real, e.g. $1000USD to real via BTC vs other fiat methods. Using Wise you'd pay $15USD. Curious to know how much USD you'd pay with Bitcoin.
  - andrewflnr 4y ago
    The more relevant question is what it cost before people started using Bitcoin for that purpose. I think Bitcoin lit a fire under the major financial providers to be more efficient.
  - SXX 4y ago
    If you sent your USD to Argentine for insance you'll have to use official central bank exchange rate if you used Wise. With crypto you can actually convert your money using real world exchange rate which is very diffrent from official one. Official exchange rate: 1 USD = 162 Peso Real world one: 1 USD = 300 Peso
    - endisneigh 4y ago
      doesn't answer the question

willhinsa 4y ago

photochemsyn 4y ago

"It's amazing that you would build a 32 billion dollar financial firm that doesn't have an accounting department, but OK... Reading on further, FTX didn't even have 'an accurate list' of its own bank accounts, or even a complete record of the people who worked for the firm. FTX apparently used 'an unsecured group email account' to manage the security keys for its digital assets... The document discloses the secret exemption of Alameda from certain aspects of FTX.com's auto-liquidation protocol (what that means is that while other customers would have been subject to margin calls and automated liquidation, Alameda was not)..." - Patrick Boyle's review of the latest on court filings in the bankruptcy proceedings (with some snarky commentary removed): https://www.youtube.com/watch?v=mVrMpk4lGjA https://www.youtube.com/watch?v=mVrMpk4lGjA

WalterBright 4y ago

What I don't understand the value of is NFT. What is the value in digital ephemera? How would it be different from copyright?

knorker 4y ago
That's kind of off topic, but here's a great explanation of NFTs: https://onezero.medium.com/nfts-arent-as-stupid-as-you-think-bffab89697e3 https://onezero.medium.com/nfts-arent-as-stupid-as-you-think... Edit: to answer your question, NFTs expressed in traditional speak would be this: An exclusive transferable license to claim that you are the current holder of a string of bytes loosely associated with a work of art. No copyright is assigned to you, and you get no other rights either, such as rights to duplicate, re-license, or create derivative works.
- ogogmad 4y ago
  Exactly, and what if you forget or lose this string of bytes? Or what if someone finds it, and transfers ownership to himself? It's impossible to get it redeemed because of how the technology works. No court on Earth would - or even should - recognise something like this.
- WalterBright 4y ago
  What I thought. They are stupid.
cykros 4y ago
NFT's are fine, in that the represent a token that isn't fungible, and as such, would be a great way which, if regulated, would allow for things like selling real estate (deeds) or automobiles (titles) and other things of this nature using the blockchain to avoid the possibility of forgery, and to cut out the overhead associated with verifying chain of custody in conventional systems. Obviously, the adoption needs to happen and regulations need to be written for this to happen effectively, but it very well could. As far as trading silly gifs that you "own", well...yes, it's asinine. But not really any moreso than how much money kids these days are pumping into Fortnite skins and similar nonsense.

Nostromos 4y ago

Every time there's crypto scam and/or collapse someone writes an article about the long and lasting and deep scars. I've yet to see any. Dumb money gets taken, esp. in an unregulated market.

oxfeed65261 4y ago

https://archive.ph/xilRT https://archive.ph/xilRT