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The choice is not between incompetence and fraud, much as SBF would like you to think so. A company giving money to the parents of the owner is fraud. A compa
by grey-area 3y ago
The choice is not between incompetence and fraud, much as SBF would like you to think so.
A company giving money to the parents of the owner is fraud.
A company giving money to another company owned by the owner when not in their interests to do so is fraud.
A company giving customer funds out as loans is fraud.
Incompetence is not an excuse and never has been, just as ignorance of the law is not an excuse.
- theGnuMe 3y ago"A company giving customer funds out as loans is fraud." This is what banks do though, no?
- wmf 3y agoBanks are fractional reserve but brokers like FTX are full reserve.
- shapefrog 3y ago> brokers like FTX FTX (excluding FTX USA co) were unregulated - they were not a bank or broker just a plain old LLC.
- vkou 3y agoBanks have to follow various rules when they do it, and if they don't follow them, executives go to prison.
- mvdtnz 3y agoWas FTX a bank? Can you show marketing materials or any documentation indicating that FTX was a bank?
- chollida1 3y agoMost of what you wrote, I agree with but this is wrong > A company giving customer funds out as loans is fraud. No, this alone is no where near enough for fraud. Banks do this all the time. So does anyone company that issues gift cards.
- grey-area 3y agoThey're not supposed to co-mingle client money and company money. They did that with no controls and used it for all sorts of things without the permission of their clients, who thought it was invested in very specific assets. They are an exchange letting people buy crypto assets. Not sure on the rules for banks but FTX was not a regulated bank!
- kpaxstaxes 3y agoThis is absolutely fraud. FTX was not a bank, it was an exchange. People were not giving FTX money to lend out to others in exchange for interest (as they would a bank). People were buying products (cryptocurrencies) from FTX that FTX agreed to hold on their behalf. FTX doing anything with these assets other than holding them on behalf of customers is fraud. FTX's own Terms of Service explicitly said it was not permitted to lend out customer funds. SBF himself repeatedly stated that FTX did not lend out customer funds.
- JumpCrisscross 3y ago> People were not giving FTX money to lend out to others in exchange for interest Depending on state law, if you put down a deposit for e.g. flowers, the florist is free to spend the cash however they see fit, including loaning it out to someone. Lending customer funds per se does not prove fraud. Bankman-Fried lying about it does.
- mvdtnz 3y agoSorry, was FTX a florist? I'm confused by your remark. Can you show some evidence that FTX was selling flowers, and that they had been using customer deposits for flowers on business expenses?
- JumpCrisscross 3y agoIt’s an analogy. Lending out—or even spending on working capital—customer deposits isn’t necessarily illegal. The context is what makes it fraud or business as usual.
- bumby 3y agoThe law makes a distinction between "misrepresentation of material fact" and fraud, though. Fraud means knowingly making a misrepresentation of material fact.
- grey-area 3y agoSomething like pretending your parents were employees for example?
- bumby 3y agoIt depends on the specifics. If they are listed on payroll, that might be not be neither a misrepresentation or fraud. If you had good reason to believe they were hired, but weren't, I'd imagine that would land as an honest misrepresentation. If you knowingly "pretended" they were employees but they weren't, that's probably closer to fraud. Do you know the particulars in this case? It doesn't look like the article covers that specific aspect and I'm not terribly familiar with this case.
- grey-area 3y agoI imagine what the judge will be looking at is whether they did any meaningful work for the company and whether house purchases were included in the contract and why.
- shapefrog 3y agoNone of these things are fraud - ignorance of the law is not an excuse.
- grey-area 3y agoI hope you’ll reconsider your position when his now inevitable conviction is announced.
- HeyZuess 3y ago> A company giving money to the parents of the owner is fraud. None of those points are actually fraud on their own, except potentially one. The companies use of customers funds would likely fit the definition of fraud, this is unlawful gain. A company can legally give out loans. Companies give out signing bonuses, salaries, gifts etc, the problem comes down to whether it fits the definition of fraud.