5 ms·

I imagine SBF's charges are more serious than a front-running charge. The prosecution also may not have had sufficient evidence of front-running to get the char

I imagine SBF's charges are more serious than a front-running charge. The prosecution also may not have had sufficient evidence of front-running to get the charges to stick. But any exchange in such close company with a hedge fund should always be suspected of front-running. There's an inherent conflict of interest between those two entity types. And I would be surprised if Alameda wasn't front-running FTX customers, given both firm's obvious ethical shortcomings.

muldvarp 3y ago
Is front-running something you could/would do manually? The prosecution had access to the source code and git history of FTX.
- acaloiar 3y ago
  Front-running efficacy can be measured in milliseconds. It's a world where microwave towers sometimes replace fiber lines, to gain a few milliseconds of advantage. That is, when the front-runner isn't "in-house", which Alameda had ample opportunity to be. Alameda and FTX were separate legal entities, but Sam largely headed both. Alameda front-running servers, in theory, could have been running right along side FTX servers, with only inches of network-induced latency. You can of course front-run manually, depending on the degree of automation in the systems one is front-running, but front-runners will generally want to automate. And to scale the scheme for a realtime system of FTX's volume, Alameda would certainly want to automate it. I wasn't following the case closely enough, but did the prosecution have access to Alameda source code, or was it only FTX? As long as Alameda had access to FTX order records, any front-running code would likely have resided in Alameda repositories.
  - muldvarp 3y ago
    > I wasn't following the case closely enough, but did the prosecution have access to Alameda source code, or was it only FTX? This blog post [0] contains screenshots of git commits that were used as evidence in the trial. It only shows commits to FTX's source code, so I don't know if the prosecution also had access to Alameda's source code. Given how obviously incriminating those snippets are, I don't think SBF really tried to hide his crimes. I'm not sure then why they would architecture FTX such there are no signs of front-running in their code. Personally, my guess is that either A) the prosecution found evidence of front-running but thought that the case was air-tight enough already and they didn't want to confuse the jurors or B) Alameda didn't actually do any front-running. [0]: https://newsletter.mollywhite.net/p/the-fraud-was-in-the-code https://newsletter.mollywhite.net/p/the-fraud-was-in-the-cod...
  - pcl 3y ago
    I'm not in the industry. That said, it's my understanding that "front-running" as a term of art necessarily implies some sort of illegal behavior (at least in the US and European markets), but being clever with physics (microwave towers, bouncing signals off the ionosphere, etc.) is fair game, and if you can pull off some profitable arbitrage trades with that sort of setup, you're in the clear.
    - acaloiar 3y ago
      No doubt, though plausible deniability often begins with physical and legal separation, bringing the physics into play :)
verteu 3y ago
> any exchange in such close company with a hedge fund should always be suspected of front-running Indeed -- I knew several professional traders who used FTX. At the time, their consensus was: 1) "Probably Alameda has an unfair latency advantage, because they are the designated market-maker, and owned+operated by the same people who run the exchange." This could be called 'front-running' depending on how you define the term. 2) "However, SBF probably won't steal all our money because he is well-known, extraditable by USA, and would go to prison." Needless to say, assumption 2) was incorrect.
- newswasboring 3y ago
  The premise of 2) is entirely correct, they just underestimated how irrational people can be.
  - toss1 3y ago
    Exactly. SBF was a sociopath who would (acdg to sworn testimony of his GF) actually go ahead and toss the coin if the outcome was one side results in the world getting twice as good and the other side causes the world to be destroyed, and he DGAF that he was also making the bet for everyone on the planet. They didn't count on the fact that this mentality would also mean that in real life, he would also do all kinds of risky crimes, and even go to trial instead of taking a plea deal, because there's a non-zero!! chance he could get away with it. Bad bets all around
    - _bkyr 3y ago
      > SBF was a sociopath who would (acdg to sworn testimony of his GF) actually go ahead and toss the coin if the outcome was one side results in the world getting twice as good and the other side causes the world to be destroyed, and he DGAF that he was also making the bet for everyone on the planet. It could be true he's probably a sociopath, but having an edgy philosophical talk with your girlfriend is just that. It could say something about his character but it's nothing more than a fantasy. Much more damning is stealing all those billions to become rich and famous.

muldvarp 3y ago

Is front-running something you could/would do manually? The prosecution had access to the source code and git history of FTX.

acaloiar 3y ago
Front-running efficacy can be measured in milliseconds. It's a world where microwave towers sometimes replace fiber lines, to gain a few milliseconds of advantage. That is, when the front-runner isn't "in-house", which Alameda had ample opportunity to be. Alameda and FTX were separate legal entities, but Sam largely headed both. Alameda front-running servers, in theory, could have been running right along side FTX servers, with only inches of network-induced latency. You can of course front-run manually, depending on the degree of automation in the systems one is front-running, but front-runners will generally want to automate. And to scale the scheme for a realtime system of FTX's volume, Alameda would certainly want to automate it. I wasn't following the case closely enough, but did the prosecution have access to Alameda source code, or was it only FTX? As long as Alameda had access to FTX order records, any front-running code would likely have resided in Alameda repositories.
- muldvarp 3y ago
  > I wasn't following the case closely enough, but did the prosecution have access to Alameda source code, or was it only FTX? This blog post [0] contains screenshots of git commits that were used as evidence in the trial. It only shows commits to FTX's source code, so I don't know if the prosecution also had access to Alameda's source code. Given how obviously incriminating those snippets are, I don't think SBF really tried to hide his crimes. I'm not sure then why they would architecture FTX such there are no signs of front-running in their code. Personally, my guess is that either A) the prosecution found evidence of front-running but thought that the case was air-tight enough already and they didn't want to confuse the jurors or B) Alameda didn't actually do any front-running. [0]: https://newsletter.mollywhite.net/p/the-fraud-was-in-the-code https://newsletter.mollywhite.net/p/the-fraud-was-in-the-cod...
- pcl 3y ago
  I'm not in the industry. That said, it's my understanding that "front-running" as a term of art necessarily implies some sort of illegal behavior (at least in the US and European markets), but being clever with physics (microwave towers, bouncing signals off the ionosphere, etc.) is fair game, and if you can pull off some profitable arbitrage trades with that sort of setup, you're in the clear.
  - acaloiar 3y ago
    No doubt, though plausible deniability often begins with physical and legal separation, bringing the physics into play :)

verteu 3y ago

> any exchange in such close company with a hedge fund should always be suspected of front-running Indeed -- I knew several professional traders who used FTX. At the time, their consensus was: 1) "Probably Alameda has an unfair latency advantage, because they are the designated market-maker, and owned+operated by the same people who run the exchange." This could be called 'front-running' depending on how you define the term. 2) "However, SBF probably won't steal all our money because he is well-known, extraditable by USA, and would go to prison." Needless to say, assumption 2) was incorrect.

newswasboring 3y ago
The premise of 2) is entirely correct, they just underestimated how irrational people can be.
- toss1 3y ago
  Exactly. SBF was a sociopath who would (acdg to sworn testimony of his GF) actually go ahead and toss the coin if the outcome was one side results in the world getting twice as good and the other side causes the world to be destroyed, and he DGAF that he was also making the bet for everyone on the planet. They didn't count on the fact that this mentality would also mean that in real life, he would also do all kinds of risky crimes, and even go to trial instead of taking a plea deal, because there's a non-zero!! chance he could get away with it. Bad bets all around
  - _bkyr 3y ago
    > SBF was a sociopath who would (acdg to sworn testimony of his GF) actually go ahead and toss the coin if the outcome was one side results in the world getting twice as good and the other side causes the world to be destroyed, and he DGAF that he was also making the bet for everyone on the planet. It could be true he's probably a sociopath, but having an edgy philosophical talk with your girlfriend is just that. It could say something about his character but it's nothing more than a fantasy. Much more damning is stealing all those billions to become rich and famous.