6 ms·

The SBF case was easy

54 points by feross 3y ago

smithcoin 3y ago
Matt Levine is a treasure. You can get past the paywall by signing up for the newsletter, it’s the same as the column.
- function_seven 3y ago
  Indeed, whenever I see a snappy headline here, and the domain name is "bloomberg.com", I just go to my inbox and 9 out of 10 times, it's his column sitting there waiting for me.
- FireBeyond 3y ago
  Eh, to me, he lost credit when he patronizes us about the Texas Two Step bankruptcy process. I don't even care if he thinks it's a "valid" approach to take. I do care that he, and the law firm that basically handles every one so far, condescends to tell us that "really, this is in the best interests of the plaintiffs suing these companies", and that it "makes their lives easier, and is fairer to them", and why can't we just understand that and believe them? 1. Why are these defendants so willing to bend over backwards to "assist the plaintiffs and make their lawsuits go more easily", when the potential downside to them is liability judgments in the tens of billions? Oh, because they'll never actually pay that. They'll "pledge" to fund their little spin off to the full value of liabilities, but will generally throw a couple of hundred million in, shut up shop and say "So sad, too bad", as happened in effectively each of the largest Texas Two Step bankruptcies. Don't treat your readership like they're idiots, Matt. We know that these companies are not "choosing" to make it easier for them to be sued into oblivion for decades of lies and injuries - we're not naive. They're choosing to do it because they've already donned their parachute and slashed the lines on everyone else's.
  - Lazare 3y ago
    I mean...the 3rd circuit ruled that J&J did fully fund the spin off's liabilities - or rather, that the spin off had access not to "a couple of hundred million", but to at least $61.5b. In that specific case, are you suggesting that the 3rd circuit got it wrong, and that the spin off didn't have access to that money?
    - FireBeyond 3y ago
      Thus far, it remains undetermined, as things are still in progress. > On January 30, 2023 the 3rd Circuit Court of Appeals ruled after an appeal that LTL's bankruptcy should be dismissed on the grounds that LTL was not in financial distress, reversing a previous ruling by the Bankruptcy Court. On April 4, 2023, LTL filed for a second bankruptcy. On July 28, 2023, Chief Judge Michael Kaplan of the U.S. Bankruptcy Court in New Jersey dismissed the second bankruptcy. This is common to how it has played out before. Promises of funding, pledges, that then evaporate. The entity that J&J spun off has attempted multiple times to declare bankruptcy, only to be thwarted some. When the Third Circuit made their ruling, they stated that "the time was not right" and questioned the amount of funding. LTL re-filed for bankruptcy three hours after this ruling. (Why, was the time right, in the afternoon?) Georgia Pacific did the same with Best Wall. Stood there in court and said they'd "fully fund" the liabilities into Best Wall, and that they'd put an initial $1B into seeding that entity. Court ruled, and things moved forward. At which point GP said "Actually, we meant $175M. And we meant that's all we'll ever fund." St Gobain did the same thing. Faced with an estimated $50B+ in liabilities, they spun off another company, and promised to fully fund it. They ended up putting less than $100M in. So audacious was St Gobain that they were laid into by the court: > Gross testified that Saint-Gobain repeatedly misrepresented its intent in creating the subsidiary that eventually filed for bankruptcy, calling executives’ testimony and other statements “misleading” and “not truthful.” U.S. Bankruptcy Judge Craig Whitley followed Gross’s testimony last August with factual findings that included his own blistering critique of the executives’ statements as “contrary to the evidence,” saying the company’s story “strains credibility.” When only four firms have tried this, and three of them have had the same outcome (which drastically protected those companies), and the fourth is using the same playbook (because all four used the same law firm), we (and Matt) need to forgive a healthy skepticism over "fully funded, for reals this time" when it comes to the Texas Two Step.
frankfrank13 3y ago
obligatory paywall-free: https://archive.ph/3XJ4u https://archive.ph/3XJ4u
- tapeloop 3y ago
  many thanks
- musicale 3y ago
  I always click on these and then give up after the 13th CAPTCHA...
  - saghm 3y ago
    Yeah, this is absurd...I thought you were kidding, but I've never had so many captchas in a row before, and I just gave up also
    - JauntTrooper 3y ago
      That's interesting... I don't get any captchas.
    - camgunz 3y ago
      There's a disagreement between archive's owner and Cloudflare's DNS. If you use a different DNS server (maybe tether w/ your phone) it works.
      - saghm 3y ago
        Switching to 8.8.8.8 and restarting my network doesn't seem to change anything. I'm sure they have their reasons for doing things the way they do, but if a website is requiring me to use my ISP's DNS, I'm honestly just not going to bother going to that site; I already hate my ISP enough and resent that I have no other option where I currently live, and I want to continue resisting against their dumb monopoly any way I can, even if it's mostly symbolic.
gizmo 3y ago
The big underreported story here is how involved the Stanford Law School professor parents of SBF were and still are. They had the connections to VCs, they helped set up shell companies, they even picked the perfect FTX compliance officer: the crooked and disgraced lawyer Daniel Friedberg. And the parents were richly rewarded for their involvement.
- CSMastermind 3y ago
  It really seems like there's something deeply culturally wrong at Stanford. SBF, Elizabeth Holmes, Do Kwon, Stan Cohen, Marc Tessier-Lavigne, and more. They seem to produce or attract people for whom truth is an inconvenience and to whom the ends justify the means. Entitled people taught to "fake it til you make it" with some weird hyper-capitalistic/accelerationist philosophy. For whom a moral compass is only for the kids at state schools who don't have the right connections.
  - baggy_trough 3y ago
    Nothing unique about Stanford, sadly.
    - jjtheblunt 3y ago
      examples? I don't know of any, but they sure could exist.
      - BigRedDog1669 3y ago
        the history of the world. This is just one specific example of corruption and 'fuck you i got mine' mentality.
    - BlackjackCF 3y ago
      Yeah, I think this might just be the case when you have rich and powerful people involved at historically rich and powerful institutions. Nepotism and all.
    - 3y ago
Animats 3y ago
"But all that you actually need to tell a jury is: 1. Customers deposited billions of dollars at FTX. 2. Bankman-Fried spent a whole lot of it on baubles like Bahamas beachfront real estate, political donations, Tom Brady, etc. 3. The customers asked for their money back and it wasn’t there." Yes. That's pretty much what the prosecutor said in summation.
- kzrdude 3y ago
  All kinds of illegal stuff would have been unprosecuted if (3) had never happened.
vkou 3y ago
The money quote: > Ordinarily, when you run a highly leveraged financial institution, and it collapses, and you say “ah well that’s the way things sometimes go at highly leveraged financial institutions,” you were running a regulated financial institution. > The thing you were running — a bank, a commodities futures exchange — served some social purpose, and the leverage you provided was an essential part of that purpose. So regulators allow it, but uneasily: They keep an eye on you, they monitor your risks, they don’t let you lend all of your depositors’ money to one affiliated hedge fund, etc. > There are rules to keep the customer money safe, and they also serve to keep you safe: Sometimes banks blow up, but if you ran your bank according to the rules, you don’t generally go to jail for its failure. > Running a crypto futures exchange in the Bahamas is not like that. The takeaway? If you're going to be losing a lot of other people's money, follow the rules, and try to do something useful with it. You might not get the book thrown at you.
- JumpCrisscross 3y ago
  > If you're going to be losing a lot of other people's money, follow the rules, and try to do something useful with it If you’re going to be risking other peoples’ money. If you follow the rules they shouldn’t be losing it.
  - zie 3y ago
    That's not how investing works. People lose money in the stock market all the time, without breaking any rules.
    - JumpCrisscross 3y ago
      > People lose money in the stock market all the time, without breaking any rules Seldom at a “highly leveraged financial institution.” When they do, we consider it a failure and refactor the rules. Levine isn’t saying investing is lossless, he’s talking about financial institutions. Intermediaries.
      - zie 3y ago

54 points by feross 3y ago

smithcoin 3y ago

Matt Levine is a treasure. You can get past the paywall by signing up for the newsletter, it’s the same as the column.

function_seven 3y ago
Indeed, whenever I see a snappy headline here, and the domain name is "bloomberg.com", I just go to my inbox and 9 out of 10 times, it's his column sitting there waiting for me.
FireBeyond 3y ago
Eh, to me, he lost credit when he patronizes us about the Texas Two Step bankruptcy process. I don't even care if he thinks it's a "valid" approach to take. I do care that he, and the law firm that basically handles every one so far, condescends to tell us that "really, this is in the best interests of the plaintiffs suing these companies", and that it "makes their lives easier, and is fairer to them", and why can't we just understand that and believe them? 1. Why are these defendants so willing to bend over backwards to "assist the plaintiffs and make their lawsuits go more easily", when the potential downside to them is liability judgments in the tens of billions? Oh, because they'll never actually pay that. They'll "pledge" to fund their little spin off to the full value of liabilities, but will generally throw a couple of hundred million in, shut up shop and say "So sad, too bad", as happened in effectively each of the largest Texas Two Step bankruptcies. Don't treat your readership like they're idiots, Matt. We know that these companies are not "choosing" to make it easier for them to be sued into oblivion for decades of lies and injuries - we're not naive. They're choosing to do it because they've already donned their parachute and slashed the lines on everyone else's.
- Lazare 3y ago
  I mean...the 3rd circuit ruled that J&J did fully fund the spin off's liabilities - or rather, that the spin off had access not to "a couple of hundred million", but to at least $61.5b. In that specific case, are you suggesting that the 3rd circuit got it wrong, and that the spin off didn't have access to that money?
  - FireBeyond 3y ago
    Thus far, it remains undetermined, as things are still in progress. > On January 30, 2023 the 3rd Circuit Court of Appeals ruled after an appeal that LTL's bankruptcy should be dismissed on the grounds that LTL was not in financial distress, reversing a previous ruling by the Bankruptcy Court. On April 4, 2023, LTL filed for a second bankruptcy. On July 28, 2023, Chief Judge Michael Kaplan of the U.S. Bankruptcy Court in New Jersey dismissed the second bankruptcy. This is common to how it has played out before. Promises of funding, pledges, that then evaporate. The entity that J&J spun off has attempted multiple times to declare bankruptcy, only to be thwarted some. When the Third Circuit made their ruling, they stated that "the time was not right" and questioned the amount of funding. LTL re-filed for bankruptcy three hours after this ruling. (Why, was the time right, in the afternoon?) Georgia Pacific did the same with Best Wall. Stood there in court and said they'd "fully fund" the liabilities into Best Wall, and that they'd put an initial $1B into seeding that entity. Court ruled, and things moved forward. At which point GP said "Actually, we meant $175M. And we meant that's all we'll ever fund." St Gobain did the same thing. Faced with an estimated $50B+ in liabilities, they spun off another company, and promised to fully fund it. They ended up putting less than $100M in. So audacious was St Gobain that they were laid into by the court: > Gross testified that Saint-Gobain repeatedly misrepresented its intent in creating the subsidiary that eventually filed for bankruptcy, calling executives’ testimony and other statements “misleading” and “not truthful.” U.S. Bankruptcy Judge Craig Whitley followed Gross’s testimony last August with factual findings that included his own blistering critique of the executives’ statements as “contrary to the evidence,” saying the company’s story “strains credibility.” When only four firms have tried this, and three of them have had the same outcome (which drastically protected those companies), and the fourth is using the same playbook (because all four used the same law firm), we (and Matt) need to forgive a healthy skepticism over "fully funded, for reals this time" when it comes to the Texas Two Step.

frankfrank13 3y ago

obligatory paywall-free: https://archive.ph/3XJ4u https://archive.ph/3XJ4u

tapeloop 3y ago
many thanks
musicale 3y ago
I always click on these and then give up after the 13th CAPTCHA...
- saghm 3y ago
  Yeah, this is absurd...I thought you were kidding, but I've never had so many captchas in a row before, and I just gave up also
  - JauntTrooper 3y ago
    That's interesting... I don't get any captchas.
  - camgunz 3y ago
    There's a disagreement between archive's owner and Cloudflare's DNS. If you use a different DNS server (maybe tether w/ your phone) it works.
    - saghm 3y ago
      Switching to 8.8.8.8 and restarting my network doesn't seem to change anything. I'm sure they have their reasons for doing things the way they do, but if a website is requiring me to use my ISP's DNS, I'm honestly just not going to bother going to that site; I already hate my ISP enough and resent that I have no other option where I currently live, and I want to continue resisting against their dumb monopoly any way I can, even if it's mostly symbolic.

gizmo 3y ago

The big underreported story here is how involved the Stanford Law School professor parents of SBF were and still are. They had the connections to VCs, they helped set up shell companies, they even picked the perfect FTX compliance officer: the crooked and disgraced lawyer Daniel Friedberg. And the parents were richly rewarded for their involvement.

CSMastermind 3y ago
It really seems like there's something deeply culturally wrong at Stanford. SBF, Elizabeth Holmes, Do Kwon, Stan Cohen, Marc Tessier-Lavigne, and more. They seem to produce or attract people for whom truth is an inconvenience and to whom the ends justify the means. Entitled people taught to "fake it til you make it" with some weird hyper-capitalistic/accelerationist philosophy. For whom a moral compass is only for the kids at state schools who don't have the right connections.
- baggy_trough 3y ago
  Nothing unique about Stanford, sadly.
  - jjtheblunt 3y ago
    examples? I don't know of any, but they sure could exist.
    - BigRedDog1669 3y ago
      the history of the world. This is just one specific example of corruption and 'fuck you i got mine' mentality.
  - BlackjackCF 3y ago
    Yeah, I think this might just be the case when you have rich and powerful people involved at historically rich and powerful institutions. Nepotism and all.
  - 3y ago

Animats 3y ago

"But all that you actually need to tell a jury is: 1. Customers deposited billions of dollars at FTX. 2. Bankman-Fried spent a whole lot of it on baubles like Bahamas beachfront real estate, political donations, Tom Brady, etc. 3. The customers asked for their money back and it wasn’t there." Yes. That's pretty much what the prosecutor said in summation.

kzrdude 3y ago
All kinds of illegal stuff would have been unprosecuted if (3) had never happened.

vkou 3y ago

The money quote: > Ordinarily, when you run a highly leveraged financial institution, and it collapses, and you say “ah well that’s the way things sometimes go at highly leveraged financial institutions,” you were running a regulated financial institution. > The thing you were running — a bank, a commodities futures exchange — served some social purpose, and the leverage you provided was an essential part of that purpose. So regulators allow it, but uneasily: They keep an eye on you, they monitor your risks, they don’t let you lend all of your depositors’ money to one affiliated hedge fund, etc. > There are rules to keep the customer money safe, and they also serve to keep you safe: Sometimes banks blow up, but if you ran your bank according to the rules, you don’t generally go to jail for its failure. > Running a crypto futures exchange in the Bahamas is not like that. The takeaway? If you're going to be losing a lot of other people's money, follow the rules, and try to do something useful with it. You might not get the book thrown at you.

JumpCrisscross 3y ago
> If you're going to be losing a lot of other people's money, follow the rules, and try to do something useful with it If you’re going to be risking other peoples’ money. If you follow the rules they shouldn’t be losing it.
- zie 3y ago
  That's not how investing works. People lose money in the stock market all the time, without breaking any rules.
  - JumpCrisscross 3y ago
    > People lose money in the stock market all the time, without breaking any rules Seldom at a “highly leveraged financial institution.” When they do, we consider it a failure and refactor the rules. Levine isn’t saying investing is lossless, he’s talking about financial institutions. Intermediaries.
    - zie 3y ago