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> the default assumption is that there's a scam and the employee is guilty until proven innocent. To answer your real question - my guess is that this was a pl

> the default assumption is that there's a scam and the employee is guilty until proven innocent. To answer your real question - my guess is that this was a place that had a history of moving fast and breaking things. But probably more importantly - there was no way for that person to benefit from the mistake. The BTC price recovered automatically through the quick arbitrage market. The only way they could have benefited would have been if they were the counter party in the sale, which is highly unlikely. Now, why FTX was a place that operated like this is another question altogether.

noduerme 3y ago
Why do you think they didn't have a counterparty with a lot of purchases queued up at certain trigger levels on the exchange? It would have been an easy way to make a lot of money. Then blame a nameless employee for an honest mistake and come out looking as if they'd just absorbed a loss for moving too fast.
- mbreese 3y ago
  Namely because it would have been too obvious. To have this work, that person would have to have set limits well below anyone else. So low that it would have been obvious when someone just so happened to offer BTC at a much reduced price. There is nothing that says the BTC “mistake” wasn’t a fraud. But for it to have worked (and you’d only have one shot), the setup would have needed to be clear to outside observers. The other argument for it being a mistake is that if you really wanted to have exploited Alameda/FTX (not sure which, or if there was a distinction), the person could have tried to take more. The amount is small enough to be a “mistake”, but not large enough to make the higher ups question it. Maybe the gains would have been enough for a corrupt party, but something makes me doubt it.
  - noduerme 3y ago
    You wouldn't necessarily need to have those buy orders in place the day before. You could time them to go in at $10k if BTC fell below $13k, for instance. Even the exchange might not detect that if it were done carefully. Meanwhile, I just find it hard to believe that the accepted narrative - backed up by this story - is that SBF lost $10M in this little fuckup and pardoned the employee who made the error. Seriously? This article? How did he know the employee was innocent, how was that proven to be a mistake, and what happened to the employee? Seems even more plausible given this paper-thin explanation that the flash crash was deliberately triggered to move some money off book. The fat fingered employee, if they exist, gets the blame and is nobly pardoned. I certainly would hope the FBI is putting together a list of all the unrelated counterparties who profited during that event, just to rule out related ones.
    - nostrademons 3y ago
      You're thinking very small. People who actually own global businesses think in terms of billions, and SBF had billions. $10M is rounding error to them. I've lost $50M for my employer (a large, reputable, very by-the-book tech company). I've also gained $100M for my employer, on a project that was canceled because it didn't make enough money. (I half-jokingly asked "Well would you spin it out, I'd love to have $100M?", but it was too tied to corporate infrastructure.) My current project is on track to lose ~$10M/year for my employer, but it's considered strategically important, and so we've run it up the chain and every indication is that it's going to launch anyway. It just doesn't matter when you make billions. It's like how you stop clipping coupons when you start making a six-figure salary, because the time and attention needed to sweat $0.50 isn't worth it when your paycheck is $10K/month.
      - noduerme 3y ago
        my dude, my paycheck is $10k a month, and I still clip coupons. Why? Because something I learned from poker. Winning is as simple as never losing money you don't have to lose. SBF may have been "worth billions," but he sure didn't have enough escape cash on hand when he needed it. Your division, project managers, VPs may throw around 9-figures worth of investment capital on loss leaders, party on the Riviera and give everyone Christmas bonuses, but all that means squat to someone like SBF once he's under indictment. A cold hard $10 million in pocket, off the books, earned illegally, that can't be tracked back is worth a lot more than controlling a billion dollar budget or even getting a $100 million paycheck. The very fact that it's considered a rounding error would work to the benefit of whoever had set up the scam. The real scam is setting up a corporation where you can pass off a rounding error large enough to let you escape federal custody, and that's where he fell short. I'm pointing out why it would have been a worthwhile scam for him from my own experience of launching the first serious Bitcoin casino and coming to the rational, purely cost-based determination that there was no way to make enough money from opening it to Americans to let me avoid the likely consequences of that if the feds decided to treat Bitcoin as currency and go for me, which I now know they would have. I determined I could probably pull $10M in a year, but it wouldn't be nearly enough. I'd need to have at least $50M to have a chance. But this is the thought process you can probably project upon SBF running a flash crash, not the "too small to worry about" idea. $10M of misplaced money is right in the ballpark for someone a little stupid who's considering running for the islands.
  - nostrademons 3y ago
    There's usually a ton of jokers who have $0.01 bid orders in a bunch of markets, just in case of a flash crash. I certainly do - if Bitcoin hits $0.01, sure I'll buy a few thousand dollars worth. I actually looked at the order books around 2019 (this is just a simple free API call) and it was O(high hundreds to low thousands) of people. It's a bit rarer to have limit orders at say 1/4 the current price but not extremely low, but they still happen. Enough to have plausible deniability at least. Check the order books; my recollection is that this was still O(hundreds) of people.

noduerme 3y ago

Why do you think they didn't have a counterparty with a lot of purchases queued up at certain trigger levels on the exchange? It would have been an easy way to make a lot of money. Then blame a nameless employee for an honest mistake and come out looking as if they'd just absorbed a loss for moving too fast.

mbreese 3y ago
Namely because it would have been too obvious. To have this work, that person would have to have set limits well below anyone else. So low that it would have been obvious when someone just so happened to offer BTC at a much reduced price. There is nothing that says the BTC “mistake” wasn’t a fraud. But for it to have worked (and you’d only have one shot), the setup would have needed to be clear to outside observers. The other argument for it being a mistake is that if you really wanted to have exploited Alameda/FTX (not sure which, or if there was a distinction), the person could have tried to take more. The amount is small enough to be a “mistake”, but not large enough to make the higher ups question it. Maybe the gains would have been enough for a corrupt party, but something makes me doubt it.
- noduerme 3y ago
  You wouldn't necessarily need to have those buy orders in place the day before. You could time them to go in at $10k if BTC fell below $13k, for instance. Even the exchange might not detect that if it were done carefully. Meanwhile, I just find it hard to believe that the accepted narrative - backed up by this story - is that SBF lost $10M in this little fuckup and pardoned the employee who made the error. Seriously? This article? How did he know the employee was innocent, how was that proven to be a mistake, and what happened to the employee? Seems even more plausible given this paper-thin explanation that the flash crash was deliberately triggered to move some money off book. The fat fingered employee, if they exist, gets the blame and is nobly pardoned. I certainly would hope the FBI is putting together a list of all the unrelated counterparties who profited during that event, just to rule out related ones.
  - nostrademons 3y ago
    You're thinking very small. People who actually own global businesses think in terms of billions, and SBF had billions. $10M is rounding error to them. I've lost $50M for my employer (a large, reputable, very by-the-book tech company). I've also gained $100M for my employer, on a project that was canceled because it didn't make enough money. (I half-jokingly asked "Well would you spin it out, I'd love to have $100M?", but it was too tied to corporate infrastructure.) My current project is on track to lose ~$10M/year for my employer, but it's considered strategically important, and so we've run it up the chain and every indication is that it's going to launch anyway. It just doesn't matter when you make billions. It's like how you stop clipping coupons when you start making a six-figure salary, because the time and attention needed to sweat $0.50 isn't worth it when your paycheck is $10K/month.
    - noduerme 3y ago
      my dude, my paycheck is $10k a month, and I still clip coupons. Why? Because something I learned from poker. Winning is as simple as never losing money you don't have to lose. SBF may have been "worth billions," but he sure didn't have enough escape cash on hand when he needed it. Your division, project managers, VPs may throw around 9-figures worth of investment capital on loss leaders, party on the Riviera and give everyone Christmas bonuses, but all that means squat to someone like SBF once he's under indictment. A cold hard $10 million in pocket, off the books, earned illegally, that can't be tracked back is worth a lot more than controlling a billion dollar budget or even getting a $100 million paycheck. The very fact that it's considered a rounding error would work to the benefit of whoever had set up the scam. The real scam is setting up a corporation where you can pass off a rounding error large enough to let you escape federal custody, and that's where he fell short. I'm pointing out why it would have been a worthwhile scam for him from my own experience of launching the first serious Bitcoin casino and coming to the rational, purely cost-based determination that there was no way to make enough money from opening it to Americans to let me avoid the likely consequences of that if the feds decided to treat Bitcoin as currency and go for me, which I now know they would have. I determined I could probably pull $10M in a year, but it wouldn't be nearly enough. I'd need to have at least $50M to have a chance. But this is the thought process you can probably project upon SBF running a flash crash, not the "too small to worry about" idea. $10M of misplaced money is right in the ballpark for someone a little stupid who's considering running for the islands.
- nostrademons 3y ago
  There's usually a ton of jokers who have $0.01 bid orders in a bunch of markets, just in case of a flash crash. I certainly do - if Bitcoin hits $0.01, sure I'll buy a few thousand dollars worth. I actually looked at the order books around 2019 (this is just a simple free API call) and it was O(high hundreds to low thousands) of people. It's a bit rarer to have limit orders at say 1/4 the current price but not extremely low, but they still happen. Enough to have plausible deniability at least. Check the order books; my recollection is that this was still O(hundreds) of people.