6 ms·

Accounting prof testifies about FTX's misuse of customers' money

86 points by pg_1234 3y ago

chollida1 3y ago
One of my favourite parts of this embezzlement of customer funds to spend elsewhere is that their Anthropic investment may pay off alot of the hole that FTX dug themselves. SBF could end up like Martin Shekreli where they can technically pay back the money they stole but will still end up in prison because they committed fraud to begin with. With the reports that Alemeda minted about $40B of Tether I was hoping that the government would capture that amount and then hand it to Tether to force a redemption back to USD. Saddly they don't seem to have that Tether around anymore. For a bunch of people who worked for a respected traditional trading firm in Jane street, they dont' seem to have been very good traders at all. The government's done a pretty good job with their end of the trial, by - first making it clear that SBF ordered that FTX remove the borrow constraint for Alemeda that everyone else had, - then by showing how all of Sam's purchases and political donations were done with money that he first sent to Alemeda and - then by having the head of legal at FTX go through their terms of service that make it clear that FTX could not lend out customer money for any reasons at all except for margin accounts. They are now closing by making it clear to the jury that "effective altruism" is not a valid defense for fraud and theft. Side note, the bankruptcy team has announced that individuals who pulled out less than $250,000 in the weeks leading up to the collapse will not be pursued for claw backs, which is great news for small retail investors. They also announced that FTX and FTX.US customers would precede vendors in the payback hierarchy which is good news for those of us who bought bankruptcy claims. Now seeing them valued in the 45cents on the dollar range.
- upon_drumhead 3y ago
  Entry level is still entry level, regardless of the employer.
  - chollida1 3y ago
    > Entry level is still entry level, regardless of the employer. ?? Wrong comment to reply to?
    - deleted 3y ago
      [deleted]
    - rashkov 3y ago
      SBF was an entry level employee at Jane street
      - chollida1 3y ago
        That's provable false if you read Michael Lewis' book. He was in charge of some major projects, including the election trade that turned out to be Jane Street's single largest loss to date. That seems to blow away the claim that he was a entry level employee. No fund puts "an entry level employee" in charge of betting billions of dollars that lead to a $300M loss.
        rashkov 3y ago
        Interesting, thanks for the correction
        mhh__ 3y ago
        I wasn't aware Jane Street did that kind of discretionary trading.
        upon_drumhead 3y ago
        He interned for one year and then, post-graduation, worked there three years[1]. I really have a hard time believing that he developed a mature career in such a short time. I haven’t read the book, but where did Michael Lewis get the information that SBF was in charge of all these major projects? From the known fraudster building his fraud? Or from Jane Street? [1] https://finance.yahoo.com/news/ftx-ceo-sam-bankman-fried-profile-085444366.html https://finance.yahoo.com/news/ftx-ceo-sam-bankman-fried-pro...
- matwood 3y ago
  > good news for those of us who bought bankruptcy claims Scott Galloway has talked about this a few times because he bought a bunch of claims. It's one of those ways that rich people get much richer. The Anthropic investment is likely to guarantee anyone who bought claims will do well.
personjerry 3y ago
> When Singh asked how much the company was short, SBF said this was the “wrong question,” and the better question to ask was “how can we deliver?” How can they deliver 11B? ... Get it back maybe?
dang 3y ago
Url changed from https://gizmodo.com/sbf-made-billions-disappear-forensic-accountant-found-1850942819 https://gizmodo.com/sbf-made-billions-disappear-forensic-acc..., which points to this. Submitters: "Please submit the original source. If a post reports on something found on another site, submit the latter." - https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
diamondfist25 3y ago
Does that mean customers get 0 back?
- astrodust 3y ago
  "Here's an explanation, kid. Keep the change."
chatmasta 3y ago
I'd like to see a public (or at least anonymized) accounting of how many FTX customers lost how much money. And I'm not talking about losses denominated in magical unicorn bucks converted to USD with the highest exchange rate ever traded. I want to know how much cold hard USD was actually "lost," meaning it was deposited into FTX and eventually became inaccessible, either due to exchanging it for crypto holdings that tanked, or because the funds simply couldn't be withdrawn. If we can identify the actual amount of inflowing USD, then the next question naturally becomes ... where did it go? Whereas the current obfuscation with mixing of peak altcoin valuations and actual dollars makes it impossible to understand the true scale of loss. As it stands, I remain unconvinced that FTX was not a wash trading front for a money laundering operation run by an intelligence agency that is now throwing SBF under the bus as part of the larger plan to blow it all up so it's too messy for anyone to investigate. Just keep screaming fraud as loudly as possible so nobody dares question the premise. There were a lot of red flags with FTX. It popped up out of nowhere. SBF was a relative unknown amongst his peergroup, eg MIT'14 Bitcoiners. I guess that's because he came from the econ side? I'm not MIT, but I am '14 and I was more involved than your average person with cryptocurrency back then. The first I ever heard of SBF was when he was put in front of congress in ~2019 and labeled the CEO of a massive crypto exchange I'd never heard of. Call me crazy but that set off alarm bells for me at the time, and I'm not sure it ever added up. But by far the weirdest red flag about FTX was the dearth of Reddit posts from people asking how to get their money back when it finally crashed. There were hardly any subscribers to the FTX subreddit (~5k), and there was only a tiny trickle of posts from real users looking for refunds. Maybe this is attributable to FTX having more sophisticated "investors" (?) than other crypto scams, but the 5k subscribers made it a clear outlier. Compare the Reddit activity (both volume and sentiment) around any remotely similar crypto crash and the difference is stark. Where are all the victims?
- refulgentis 3y ago
  It was well-known in the precursor to the /r/WSB subculture. In 2019 I remember being disgusted by gamification UX and non-existent verification turning people on to options in Robinhood. I literally could not believe FTX when I found it because it was like Robinhood except had capture most of zoomer crypto heads by 2019. It was very, very, popular but you would have heard about it from finance people, not computer science people. They had little interest in the coin lore.
xchip 3y ago
Why is this not off-topic? It is not related to tech. All post about Palestine are being taken down under the premise that they are off-topic. Why is this post ok?
- injeolmi_love 3y ago
  Media blackout
- Projectiboga 3y ago
  This is tech adjacent in that he used tech and crypto to basically evade America's security laws.

86 points by pg_1234 3y ago

One of my favourite parts of this embezzlement of customer funds to spend elsewhere is that their Anthropic investment may pay off alot of the hole that FTX dug themselves. SBF could end up like Martin Shekreli where they can technically pay back the money they stole but will still end up in prison because they committed fraud to begin with. With the reports that Alemeda minted about $40B of Tether I was hoping that the government would capture that amount and then hand it to Tether to force a redemption back to USD. Saddly they don't seem to have that Tether around anymore. For a bunch of people who worked for a respected traditional trading firm in Jane street, they dont' seem to have been very good traders at all. The government's done a pretty good job with their end of the trial, by - first making it clear that SBF ordered that FTX remove the borrow constraint for Alemeda that everyone else had, - then by showing how all of Sam's purchases and political donations were done with money that he first sent to Alemeda and - then by having the head of legal at FTX go through their terms of service that make it clear that FTX could not lend out customer money for any reasons at all except for margin accounts. They are now closing by making it clear to the jury that "effective altruism" is not a valid defense for fraud and theft. Side note, the bankruptcy team has announced that individuals who pulled out less than $250,000 in the weeks leading up to the collapse will not be pursued for claw backs, which is great news for small retail investors. They also announced that FTX and FTX.US customers would precede vendors in the payback hierarchy which is good news for those of us who bought bankruptcy claims. Now seeing them valued in the 45cents on the dollar range.

upon_drumhead 3y ago
Entry level is still entry level, regardless of the employer.
- chollida1 3y ago
  > Entry level is still entry level, regardless of the employer. ?? Wrong comment to reply to?
  - deleted 3y ago
    [deleted]
  - rashkov 3y ago
    SBF was an entry level employee at Jane street
    - chollida1 3y ago
      That's provable false if you read Michael Lewis' book. He was in charge of some major projects, including the election trade that turned out to be Jane Street's single largest loss to date. That seems to blow away the claim that he was a entry level employee. No fund puts "an entry level employee" in charge of betting billions of dollars that lead to a $300M loss.
      - rashkov 3y ago
        Interesting, thanks for the correction
      - mhh__ 3y ago
        I wasn't aware Jane Street did that kind of discretionary trading.
      - upon_drumhead 3y ago
        He interned for one year and then, post-graduation, worked there three years[1]. I really have a hard time believing that he developed a mature career in such a short time. I haven’t read the book, but where did Michael Lewis get the information that SBF was in charge of all these major projects? From the known fraudster building his fraud? Or from Jane Street? [1] https://finance.yahoo.com/news/ftx-ceo-sam-bankman-fried-profile-085444366.html https://finance.yahoo.com/news/ftx-ceo-sam-bankman-fried-pro...
matwood 3y ago
> good news for those of us who bought bankruptcy claims Scott Galloway has talked about this a few times because he bought a bunch of claims. It's one of those ways that rich people get much richer. The Anthropic investment is likely to guarantee anyone who bought claims will do well.

personjerry 3y ago

> When Singh asked how much the company was short, SBF said this was the “wrong question,” and the better question to ask was “how can we deliver?” How can they deliver 11B? ... Get it back maybe?

dang 3y ago

Url changed from https://gizmodo.com/sbf-made-billions-disappear-forensic-accountant-found-1850942819 https://gizmodo.com/sbf-made-billions-disappear-forensic-acc..., which points to this. Submitters: "Please submit the original source. If a post reports on something found on another site, submit the latter." - https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html

diamondfist25 3y ago

Does that mean customers get 0 back?

astrodust 3y ago
"Here's an explanation, kid. Keep the change."

chatmasta 3y ago

I'd like to see a public (or at least anonymized) accounting of how many FTX customers lost how much money. And I'm not talking about losses denominated in magical unicorn bucks converted to USD with the highest exchange rate ever traded. I want to know how much cold hard USD was actually "lost," meaning it was deposited into FTX and eventually became inaccessible, either due to exchanging it for crypto holdings that tanked, or because the funds simply couldn't be withdrawn. If we can identify the actual amount of inflowing USD, then the next question naturally becomes ... where did it go? Whereas the current obfuscation with mixing of peak altcoin valuations and actual dollars makes it impossible to understand the true scale of loss. As it stands, I remain unconvinced that FTX was not a wash trading front for a money laundering operation run by an intelligence agency that is now throwing SBF under the bus as part of the larger plan to blow it all up so it's too messy for anyone to investigate. Just keep screaming fraud as loudly as possible so nobody dares question the premise. There were a lot of red flags with FTX. It popped up out of nowhere. SBF was a relative unknown amongst his peergroup, eg MIT'14 Bitcoiners. I guess that's because he came from the econ side? I'm not MIT, but I am '14 and I was more involved than your average person with cryptocurrency back then. The first I ever heard of SBF was when he was put in front of congress in ~2019 and labeled the CEO of a massive crypto exchange I'd never heard of. Call me crazy but that set off alarm bells for me at the time, and I'm not sure it ever added up. But by far the weirdest red flag about FTX was the dearth of Reddit posts from people asking how to get their money back when it finally crashed. There were hardly any subscribers to the FTX subreddit (~5k), and there was only a tiny trickle of posts from real users looking for refunds. Maybe this is attributable to FTX having more sophisticated "investors" (?) than other crypto scams, but the 5k subscribers made it a clear outlier. Compare the Reddit activity (both volume and sentiment) around any remotely similar crypto crash and the difference is stark. Where are all the victims?

refulgentis 3y ago
It was well-known in the precursor to the /r/WSB subculture. In 2019 I remember being disgusted by gamification UX and non-existent verification turning people on to options in Robinhood. I literally could not believe FTX when I found it because it was like Robinhood except had capture most of zoomer crypto heads by 2019. It was very, very, popular but you would have heard about it from finance people, not computer science people. They had little interest in the coin lore.

xchip 3y ago

Why is this not off-topic? It is not related to tech. All post about Palestine are being taken down under the premise that they are off-topic. Why is this post ok?

injeolmi_love 3y ago
Media blackout
Projectiboga 3y ago
This is tech adjacent in that he used tech and crypto to basically evade America's security laws.