4 ms·

> These controls were skipped because SBF was convinced he was doing something extremely novel and complicated and such old-school concepts would only hinder hi

by zeven7 4y ago

> These controls were skipped because SBF was convinced he was doing something extremely novel and complicated and such old-school concepts would only hinder his ability to execute on his brilliant ideas. Don't let him sell the story that it was all very complex and he made a bunch of mistakes and he should have done better. They used Snapchat for company messaging so there wound't be records. This wasn't a mistake due to complexity. He knew he was risking customer funds with an extreme Alameda margin position. He just hoped the market would go up and he'd get away with it and come out with tens of billions in profit. His bet, that he illegally made with customer funds, did not pan out, and he ended up without the money to pay everyone back. His terms of service said he would not make such a bet, yet he did it anyway. He took extreme, fraudulent risk with other people's money. He knows that, but he's playing dumb and trying to sell the narrative that it was all a big mistake.

stouset 4y ago
I agree. It wasn't very complex, he made a bunch of basic mistakes that nobody with even a passing familiarity with finance should have made, and to say that he should have done better is an understatement of almost comical proportions. I just also think that these things were (at least initially) due to absurd levels of hubris and incompetence rather than outright malicious intent. The guy thought his shit didn't stink but anyone even vaguely paying attention could smell what was up from miles away. He still doesn't think he did anything wrong other than making some justifiable mistakes in his rush to build something great and surely anyone can see that if he just explains himself for the thousandth time.
- zeven7 4y ago
  It is complex, but that doesn't mean it's not malicious. Let's use a simpler example. Sam runs a horse racing operation and allows you to place bets on horses. Before the race begins, Sam collects $1,000,000 from various people placing bets on the race. During the race, Sam runs across the street to the casino and puts the $1,000,000 he's holding on black at the roulette table. If he wins the bet, Sam plans to take the $2,000,000 back, pay off customers at his race track, and then walk away with an extra $1,000,000 in his pocket. Unfortunately, it comes up red, and Sam walks out of the casino with nothing. Realizing he won't have money to pay his customers back, he tries to find someone who can buy his race track and take on the debt, but nobody wants to inherit a $1,000,000 debt. This is malicious. Sam willfully defrauded customers. Yeah, it could have worked out, but it didn't, and nobody consented to risking their money on the roulette table. Now change $1,000,000 to $10 billion and replace "race track" and "casino" with complex finance mumbo jumbo.
  - stouset 4y ago
    Sure. This is a reasonable analogy. I simply think that he started from an a priori belief that a) he is brilliant, and therefore b) ideas he comes up with are similarly brilliant, thus c) this idea is brilliant. It wasn't. That said, I don't think it should matter whether or not he came into this plan with an intent to defraud or if he mistakenly thought this was a foolproof investment strategy. The man is guilty as all hell and ought to face consequences for the outcome regardless of intent. I just think it's amazing to watch him continually try and explain how brilliant and complicated this idea was and how a few small mistakes brought him down while it's actually pretty simple to understand at a high level what happened and this outcome was virtually guaranteed from the start.
    - lazide 4y ago
      You see the same thing with most con-men (and women) when someone finally pulls back the curtain. Most won’t admit they were doing anything wrong even once they are in prison. Near as I can tell, it’s the rationalizing part of the mind trying to protect them by trying to convince themselves and everyone else they are actually not bad. It’s why it is so important to ignore what people say, and look at what they are doing and the results of their actions over time.
    - nwienert 4y ago
      I have to add a preface of this is my opinion, but - I think it's impossible he didn't know he was committing fraud. Now he's playing dumb, but I've know at least two people in situations like this. One was doing super risky real estate stuff which blew up in a surprisingly similar way - maniacal plans for world domination, mansions, lots of cocaine and adderall, sex with the co-workers, tons of leveraging, the whole thing. He was absolutely thrilled by the schemes and knew they were illegal. Ways to increase and manipulate the leverage was the daily conversation! I know it's just an example, but this is all SBF would be doing all day besides press - talking about the funds and what they're doing with them. People imagine CEO's as being insanely busy and it's true, but there wouldn't be a day that passed that he wouldn't be making decisions with the finances - where they're going, what to do, etc. He's lying about dashboards and not knowing. Smart sociopaths will convince even themselves it didn't happen when caught. Don't buy it.
- stcredzero 4y ago
  I just also think that these things were (at least initially) due to absurd levels of hubris and incompetence rather than outright malicious intent. Is there really that much of a difference between these two in this financial context?
  - stouset 4y ago
    I don't think it matters from a justice perspective. From the perspective of someone watching the crypto world discover failure by failure why the modern banking system is the way it is this particular situation is amazing to witness. Everyone believes they're a genius when line goes up. Line goes down and everything falls apart.
  - ACow_Adonis 4y ago
    As has been said before, once you reach a certain level, the two often become empirically indistinguishable.
rPlayer6554 4y ago
Woah source needed on the Snapchat for company messaging. I gotta see this.
- zeven7 4y ago
  > Ray said that “one of the most pervasive failures” at FTX’s main international exchange was the lack of records about decision-making. He said that Bankman-Fried often used messaging platforms with an auto-delete function “and encouraged employees to do the same.” https://arstechnica.com/tech-policy/2022/11/new-ftx-chief-slams-complete-failure-of-corporate-controls-at-crypto-exchange/?comments=1&comments-page=1 https://arstechnica.com/tech-policy/2022/11/new-ftx-chief-sl... ("Snapchat" - the specific brand - may be inaccurate. I've seen it reported as messages that "auto-delete" without a specific platform mentioned.)
  - kyawzazaw 4y ago
    prob Signal
- zoklet-enjoyer 4y ago
  I heard they used Signal, which can have disappearing messages
maxbond 4y ago
I think both interpretations are true. I think he did think they were so brilliant and novel that they could ignore the rules. I think it's reasonable and probably legally correct to interpret that as fraud (with self destructing messages being strong evidence of mens rea). I think he really didn't intend for things to go wrong. I think he probably thought "we're all gunnuh make it," or "(3,3)" as Levine describes it in today's Money Stuff. I think now that everything has collapsed, he's trying to weaponize his rationalizations to maneuver himself into a better position (nonspecifically, there's no plan he's just trying to see what kind of better position is possible. I provide some admittedly sparse evidence for that here [1]). In order to lie convincingly, you must first lie to yourself. His method is a sort of "sincere bullshit." That excuses nothing but is necessary for a complete understanding of the story. SBF wasn't an exit scammer, or he would left with the money much earlier. He wasn't a Madoff character, or he wouldn't have attracted so much attention. A better comparison is Holmes. They were both looking to build an empire and probably believed they would eventually make good on all or most of their promises. This is a really dangerous form of con artist, because they can take in everyone - the greedy who want to ride the hype, the optimists who want to implement the vision, the desperate who need to believe in something, we can all fall for this sort of thing. IANAL [1] https://news.ycombinator.com/item?id=33910390 https://news.ycombinator.com/item?id=33910390

by zeven7 4y ago

stouset 4y ago

I agree. It wasn't very complex, he made a bunch of basic mistakes that nobody with even a passing familiarity with finance should have made, and to say that he should have done better is an understatement of almost comical proportions. I just also think that these things were (at least initially) due to absurd levels of hubris and incompetence rather than outright malicious intent. The guy thought his shit didn't stink but anyone even vaguely paying attention could smell what was up from miles away. He still doesn't think he did anything wrong other than making some justifiable mistakes in his rush to build something great and surely anyone can see that if he just explains himself for the thousandth time.

zeven7 4y ago
It is complex, but that doesn't mean it's not malicious. Let's use a simpler example. Sam runs a horse racing operation and allows you to place bets on horses. Before the race begins, Sam collects $1,000,000 from various people placing bets on the race. During the race, Sam runs across the street to the casino and puts the $1,000,000 he's holding on black at the roulette table. If he wins the bet, Sam plans to take the $2,000,000 back, pay off customers at his race track, and then walk away with an extra $1,000,000 in his pocket. Unfortunately, it comes up red, and Sam walks out of the casino with nothing. Realizing he won't have money to pay his customers back, he tries to find someone who can buy his race track and take on the debt, but nobody wants to inherit a $1,000,000 debt. This is malicious. Sam willfully defrauded customers. Yeah, it could have worked out, but it didn't, and nobody consented to risking their money on the roulette table. Now change $1,000,000 to $10 billion and replace "race track" and "casino" with complex finance mumbo jumbo.
- stouset 4y ago
  Sure. This is a reasonable analogy. I simply think that he started from an a priori belief that a) he is brilliant, and therefore b) ideas he comes up with are similarly brilliant, thus c) this idea is brilliant. It wasn't. That said, I don't think it should matter whether or not he came into this plan with an intent to defraud or if he mistakenly thought this was a foolproof investment strategy. The man is guilty as all hell and ought to face consequences for the outcome regardless of intent. I just think it's amazing to watch him continually try and explain how brilliant and complicated this idea was and how a few small mistakes brought him down while it's actually pretty simple to understand at a high level what happened and this outcome was virtually guaranteed from the start.
  - lazide 4y ago
    You see the same thing with most con-men (and women) when someone finally pulls back the curtain. Most won’t admit they were doing anything wrong even once they are in prison. Near as I can tell, it’s the rationalizing part of the mind trying to protect them by trying to convince themselves and everyone else they are actually not bad. It’s why it is so important to ignore what people say, and look at what they are doing and the results of their actions over time.
  - nwienert 4y ago
    I have to add a preface of this is my opinion, but - I think it's impossible he didn't know he was committing fraud. Now he's playing dumb, but I've know at least two people in situations like this. One was doing super risky real estate stuff which blew up in a surprisingly similar way - maniacal plans for world domination, mansions, lots of cocaine and adderall, sex with the co-workers, tons of leveraging, the whole thing. He was absolutely thrilled by the schemes and knew they were illegal. Ways to increase and manipulate the leverage was the daily conversation! I know it's just an example, but this is all SBF would be doing all day besides press - talking about the funds and what they're doing with them. People imagine CEO's as being insanely busy and it's true, but there wouldn't be a day that passed that he wouldn't be making decisions with the finances - where they're going, what to do, etc. He's lying about dashboards and not knowing. Smart sociopaths will convince even themselves it didn't happen when caught. Don't buy it.
stcredzero 4y ago
I just also think that these things were (at least initially) due to absurd levels of hubris and incompetence rather than outright malicious intent. Is there really that much of a difference between these two in this financial context?
- stouset 4y ago
  I don't think it matters from a justice perspective. From the perspective of someone watching the crypto world discover failure by failure why the modern banking system is the way it is this particular situation is amazing to witness. Everyone believes they're a genius when line goes up. Line goes down and everything falls apart.
- ACow_Adonis 4y ago
  As has been said before, once you reach a certain level, the two often become empirically indistinguishable.

rPlayer6554 4y ago

Woah source needed on the Snapchat for company messaging. I gotta see this.

zeven7 4y ago
> Ray said that “one of the most pervasive failures” at FTX’s main international exchange was the lack of records about decision-making. He said that Bankman-Fried often used messaging platforms with an auto-delete function “and encouraged employees to do the same.” https://arstechnica.com/tech-policy/2022/11/new-ftx-chief-slams-complete-failure-of-corporate-controls-at-crypto-exchange/?comments=1&comments-page=1 https://arstechnica.com/tech-policy/2022/11/new-ftx-chief-sl... ("Snapchat" - the specific brand - may be inaccurate. I've seen it reported as messages that "auto-delete" without a specific platform mentioned.)
- kyawzazaw 4y ago
  prob Signal
zoklet-enjoyer 4y ago
I heard they used Signal, which can have disappearing messages

maxbond 4y ago

I think both interpretations are true. I think he did think they were so brilliant and novel that they could ignore the rules. I think it's reasonable and probably legally correct to interpret that as fraud (with self destructing messages being strong evidence of mens rea). I think he really didn't intend for things to go wrong. I think he probably thought "we're all gunnuh make it," or "(3,3)" as Levine describes it in today's Money Stuff. I think now that everything has collapsed, he's trying to weaponize his rationalizations to maneuver himself into a better position (nonspecifically, there's no plan he's just trying to see what kind of better position is possible. I provide some admittedly sparse evidence for that here [1]). In order to lie convincingly, you must first lie to yourself. His method is a sort of "sincere bullshit." That excuses nothing but is necessary for a complete understanding of the story. SBF wasn't an exit scammer, or he would left with the money much earlier. He wasn't a Madoff character, or he wouldn't have attracted so much attention. A better comparison is Holmes. They were both looking to build an empire and probably believed they would eventually make good on all or most of their promises. This is a really dangerous form of con artist, because they can take in everyone - the greedy who want to ride the hype, the optimists who want to implement the vision, the desperate who need to believe in something, we can all fall for this sort of thing. IANAL [1] https://news.ycombinator.com/item?id=33910390 https://news.ycombinator.com/item?id=33910390