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FTX and How to Lose Money
- ilrwbwrkhv 4y agoSBF didn't act alone. Sequoia was heavily involved in this massive fraud and must be investigated along with a16z and the whole nexus.
- encryptluks2 4y agoMango as well and others.. the hacks before all this went down appeared to be inside jobs to those tied to the Alameda. It goes deep.
- zeven7 4y agoKevin O'Leary's statements that he would invest in SBF again are very suspicious. He doesn't sound like someone who lost a lot of money to a crook. https://twitter.com/unusual_whales/status/1592823290111762433 https://twitter.com/unusual_whales/status/159282329011176243...
- World177 4y agoI don't really find this suspicious. It would probably be better for him legally if they found a way to raise the funds to keep FTX solvent. He has also already stated the SEC killed his attempts to save FTX. [1] [1] https://www.coindesk.com/business/2022/11/14/kevin-oleary-says-comments-from-gensler-killed-his-attempts-to-help-save-ftx/ https://www.coindesk.com/business/2022/11/14/kevin-oleary-sa...
- icelancer 4y agoWhy would a16z be involved? They didn't invest in FTX and turned them down for reasons likely related to their investment in Coinbase.
- bmitc 4y agoI agree that investors should be held more accountable. They throw out these millions to fraudsters and get to claim "oh, it was just a bad investment" and move on.
- simple-thoughts 4y agoThe question that has never been answered is how SBF made money in the first place. The arbitrage story doesn’t check out. Making as much money as claimed with arbitrage requires massive scale. At any rate, the author is absolutely correct that the ftx collapse was due to Sam and friends cashing out rather than a bank run. However, it’s becoming increasingly clear that the regulatory complex prefers the latter story as it protects the political actors complicit in receiving stolen funds.
- fasthands9 4y agoYeah. I'm surprised we haven't seen any more looks at the Japanese arbitrage story. I admit (as a non-crypto person) I had just assumed it was real until last week. My totally unfounded hypothesis is that Sam made several million betting directionally on crypto and maybe even made a million on this Japanese temporary arbitrage. While most crypto betters are pretty isolated Sam knew with his connections he would be able to get in front of investors and he knew in order to get money he needed to say something that sounded more sophisticated.
- siftrics 4y agoIt is well documented that he directly stole depositor's funds.
- fasthands9 4y agoI'm well aware of that. I'm talking about how he initially made money in crypto. The article above links to the piece below but its unclear to me now how much of this is true and how much of this was exaggerated by SBF's own story telling to raise money. This all took place before FTX. https://vegaxholdings.medium.com/kimchi-premium-crypto-arbitrage-techniques-b780a45b6e76 https://vegaxholdings.medium.com/kimchi-premium-crypto-arbit...
- elkos 4y agoWhile this seem to be the case. How he created his initial assets to create Allameda and FTX? Did he and his colleagues stole funds at the get go?
- siftrics 4y agoIt is well-documented that SBF literally stole customer deposits and lent them to Alameda. He defrauded his customers, investors and employees. He stole.
- Renaud 4y agoI want to believe you but it's a pretty damning accusation and I think here on HN people expect some citation to reliable sources.
- siftrics 4y agohttps://twitter.com/wclementeiii/status/1592289824542949376 https://twitter.com/wclementeiii/status/1592289824542949376 That is hard evidence that Alameda took FTX customers' deposits. It is easy to find the original FTX Terms of Service which state that deposits are not lent out. Additionally, SBF himself tweeted that deposits are "never invested, not even in bonds" [verbatim].
- zeven7 4y agoVox: you tweeted out some stuff like - we never invest your deposits Vox: that was bs, right? SBF: it was factually accurate Vox: huh!!! but like - their deposits were totally not there? or do you just mean, technically it was Alameda SBF: FTX SBF: correct https://www.vox.com/future-perfect/23462333/sam-bankman-fried-ftx-cryptocurrency-effective-altruism-crypto-bahamas-philanthropy https://www.vox.com/future-perfect/23462333/sam-bankman-frie...
- mudrockbestgirl 4y ago> how did they manage to lose so much money? What the article says about market making on FTX is true, but that doesn't bring in billions. The uninformed retail order flow for the crypto market is not large enough for that. It probably would've been a ~$10M/year business, or something on that order. Great, but who wants a few million? Can't even do political stuff with that. They wanted billions! And the only obvious way to get there is by making huge risky directional bets on shitcoins and other crypto ventures, which is what happened. Instead of building a sound (okay, still shady because you're front-running) business with Alameda, SBF decided to gamble away the money on VC-style bets trying to become a trillionaire.
- siftrics 4y agoYes, but he gambled depositors' money. He defrauded his customers. He stole their deposits. He stated he would not take their deposits, yet he did. He committed fraud. He committed wire fraud. He stole.
- elkos 4y agoAnd that's horrible, but I always miss the initial part of the story. My understanding of crypto and the economics of scale around it is poor, but was FTX was one of the largest exchanges. Doesn't such a thing need huge initial capital investments, sales, etc?
- siftrics 4y agoYes. It did have huge initial capital investments. In fact, in one of the rounds, $420m was raised and SBF personally took $300m for himself. He just funneled it to his own entities. I'm sure investors wouldn't be happy. I would not be surprised if he defrauded them in that situation, too.
- wonnage 4y agoI think the point is they didn't even bother with those shitcoin bets. They didn't lose the money due to poor risk management, they just....took it
- amirhirsch 4y agoIs there anyone in this forum actually facing a potential loss due to this FTX episode? I have a couple honest questions: Were you already familiar with Mt. Gox? Do you see the irony of losing your so-called decentralized cryptographic currency because you trusted it to a centralized third-party?
- benjaminwootton 4y agoI haven’t heard of anyone on this forum or any other personally exposed to FTX. And yet everyone in crypto seemed to have money in LUNA. Seems weird, as though retail wasn’t heavily exposed.
- csomar 4y agoI personally know one guy who was just using them to deposit money in his bank account (it seems they have good banking connections with Singapore). The timing was just very bad.
- ar_lan 4y agoYes-ish. Not FTX, but Celsius (very similar situation on a smaller scale). I was aware of Mt. Gox, and I do see the irony. I invested 25% of my crypto portfolio with Celsius. The rest was, and is, in an offline wallet (though after Celsius I felt burned by the crypto space so I sold all but one Bitcoin - basically I’ve broken even on my crypto investments in total, and have a single BTC left over). Crypto investing amounted to never more than 3% of my investing portfolio entirely. Basically - I view crypto with a lot of doubt, but still wanted my hand in it. In total, I have lost .75% of my portfolio from this fiasco - I’m willing to say that it was a greedy play on my part knowing it was unsustainable, and it was effectively gambling. I’m very happy I kept the amount I gambled low, but it still sucks, and I still feel like an idiot. I do hope the lawsuit brings something back, but I’m not holding my breath.
- amirhirsch 4y agoThanks for answering. It seems like everyone who lost money knew that they were acting against the raison d’etre of cryptocurrency and should have known better based on industry history. Sounds like you are properly diversified and just having fun with it and I wouldn’t have the same schaudenfreude if you lost your life savings.