I like how the article acknowledged, ...FTX operated a highly complex corporate structure with dozens of companies... without pointing out that one of the reasons for the complex structure was to make the fraud harder to track down.
Are you sure? FTX was collecting deposits in many countries, so I think they had to have local subsidiaries to enable that...The corporate structure seems orthogonal to their fraud
There was a breakdown recently that I can't find that showed that FTX's corporate structure was at least an order of magnitude more complex than Lehman Bro's at the time of it's collapse.
Note that for LB, like most normal companies, it has subsidiaries where it makes sense to operate under different tax laws, etc. So they have a Japanese company, and Australian company... For FTX there is no such rhyme or reason. Most of the entities outside of DE are in Antigua, Seychelles, Cayman Islands, Switzerland. I don't know enough about finance to understand if this is a red flag, but given the circumstances the intent behind such a structure is certainly suspiscious.
For example FTX was able to claim, with a vague semblance of honesty, that it had assets to cover liabilities. But in fact what it did was transfer money to other companies that were part of the network, like Alameda, and get back tokens with a book value but no real market value, like Serum. On paper both companies had engaged in a fair transaction. In reality customer money got moved to another company that was then free to do with it what it wanted, all hidden behind the corporate structure.
Sorry to be contrary but... Is that actually true in this case? It seems to me that the fraud was very very simple no? The CEO "lent" money from this business (which was really client money) to another business he controlled. That's not exactly complex or novel. I don't even think there was deception within the company was there, he just told people to do it and they did. It isn't like he played a careful, decade long shell game like Enron. This was the digital equivalent of someone putting their hand in the till...
Everyone is making a big fuss over the complex corporate structure, and while suspicious, it's also not totally out of the norm. If you've ever seen real-estate syndication deals (another activity with many investors over varying classes), those regularly have a web of dozens of entities just to wrap around a single property.
It's also extremely common for totally legit purposes as well.
I have some money in fundrise(RE investing crowdfunding), and they have a number of subsidiaries for various reasons invisible to the end user until tax time.
Not FTX - but I know Coinbase has stated in their earnings report that they will use user deposits to pay debtors back first in the case of bankruptcy.
Edit - better explanations below this
Also a friendly reminder to everyone not to trust any exchange at all with crypto unless you're actively trading it, keep it in a wallet!
Celsius argued that depositors were actually lenders. I wonder if FTX will try the same angle. It's gonna be harder to justify because while Celsius was all about yield, FTX was a traditional exchange doing custody on behalf of its clients.
What about institutions that owe FTX and Alameda Research money? Didn't FTX and Alameda invest in companies as well.. and will those companies still owe a percentage of those investments in order to liquidate money?
Isn't that the point of dealing with unregulated businesses? To cut through the red tape of protective regulation and responsibility? Huge risk, but potentially huge rewards.
The bankruptcy will divide whatever value is still left to be divided. Some of the missing value may be obtained from the malicious people behind the company through lawsuits, and some people may go to jail for knowingly scamming people.
In the end, this is not a bank, and the regulations protecting people from scummy banks, even the new legislations written after the 2008 crisis, don't apply.
This isn't the first business with millions of customers to go bankrupt. When such a company fails, getting your money back is your problem. Large-scale mismanagement and uneducated customer bases like this is the reason banks and other finance companies are under so much regulatory pressure.
I really don't understand how NYTimes, Vox, Vice are all seemingly refusing to accurately tear down how evil Sam and associates were for screwing over so many people.
The NYTimes was quick to destroy owners of other exchanges (whom I also do not view favorably) but is mysteriously lenient, deflecting criticism, outright censoring themselves.
How does this happen? Just what is the relationship with these media outlets, Sam?
The party mantra from the Democrats and their supporting media outlets seem to be to remove Sam as much as possible and downplay the role he played in causing havoc.
Already a handful of people have committed suicide as a result of this FTX fiasco, Sequoia, WEF, have all deleted their praising words for Sam and playing dumb.
I have this feeling that something is going to break. It's going to get really ugly for this country and other entities will fully utilize the chaos to seize whatever they can.
When MtGox collapsed I held .01 BTC there worth about $1 at the time, about $170 today. I'd transferred just enough for me to play around with.
The sheer number of letters I have gotten in the mail about the bankruptcy from the Japanese government easily cost a pretty penny more than my initial $1 in postage alone. I was honestly a little impressed they managed to hunt me down.
The Times should be deeply embarrassed by that article.
SBF is equal parts Bernie Madoff and Elizabeth Holmes but the Times is trying to paint him as an unlucky entrepreneur, down on his luck. The author doesn't even seem to understand that he stole billions from his customers to try and paper over losses from his trading.
The sudden collapse of the cryptocurrency exchange has left the crypto industry stunned.
Crackdown Begins: Regulators are moving to freeze parts of FTX’s business, while other divisions file for insolvency or prepare to halt operations. Here’s what’s next for the company. https://www.nytimes.com/2022/11/11/business/dealbook/ftx-sbf...
Sports Sponsorships: From the naming rights for an N.B.A. arena to patches on M.L.B. umpires’ uniforms, FTX’s collapse puts sponsorship deals worth hundreds of millions of dollars in doubt. https://www.nytimes.com/2022/11/10/business/ftx-sports-spons...
Tons of comments, here and elsewhere, that say that NYT should be really embarrassed by this piece. I thought the same after reading snippets posted by others, but after reading the full piece end-to-end, I disagree.
I think the article is a fairly straightforward account of what happened. I think there are places that it could have emphasized the fact that "borrowing customer funds" is accurately called theft, but it didn't come across to me as a "puff piece" that people are calling it.
For example, I thought this paragraph was pretty informative and actually extremely damning to the people involved - what is described here is clear theft, plain and simple:
> Around the time the crypto market crashed this spring, Ms. Ellison explained, lenders moved to recall those loans, the person familiar with the meeting said. But the funds that Alameda had spent were no longer easily available, so the company used FTX customer funds to make the payments. Besides her and Mr. Bankman-Fried, she said, two other people knew about the arrangement: Mr. Singh and Mr. Wang.
With that one statement I don't see in any way how SBF, Ellison, Singh and Wang avoid lengthy prison terms.
It's not a particularly good story, but I wish people would stop with the conspiratorial thinking. There is no evidence that the NYT is "in bed" with the guy or trying to help him -- and no reason to believe it would be in their interest to do that for him.
Why would they want to help him? Do you think he is bribing them with his worthless imaginary money? How does the NYT benefit from defending someone who has destroyed his own reputation and lost billions of dollars of customer money?
Is it possible the entire thing was a Madoff-style fraud from the beginning? Yes, but that is not the only possibility. No charges have been filed, and all the people who think he should be thrown in jail never mention what laws they think he broke. It's not illegal to be an incompetent failure, and fraud has a specific definition that requires intent and does not cover all instances of simply lying.
If the NYT had written an article accusing the guy of crimes, they wouldn't have a basis for doing so. Not yet, anyway. Maybe actual criminal lawbreaking will be discovered, but right now, there is no proof. Should newspapers be accusing people of crimes without proof?
People need to put down the pitchforks and torches and wait for the full truth to come out. It's going to take a while.
Cal-Berkeley is removing the FTX logo from their football field. They had a ten year naming rights deal to call it 'FTX Field' and the company paid in crypto. I wonder if Cal got the full amount up front and converted it into cash or not.
I wish there was more focus on the “buying political influence with dark money” angle, and less on “young tech guy gets rich and destroys the economy” angle of the story.
As a group of mostly young tech guys and girls, we should be concerned about the narrative society, especially Wall Street and their media outlets, convey about us. Recall when redditors buying GME stock was being blamed for the many ills of capitalism. The whole robbinhood saga. The scapegoat is always a smart, wealthy young technologists.
SBF is more of a Soros than an Aaron Swartz. Wall Street loves to blame Silicon Valley, but it’s bs.
They did this whole piece about him donating to effective altruism, but they didn't even mention that he's a top political donor, let alone investigate it.
FTX’s Collapse Casts a Pall on a Philanthropy Movement
Sam Bankman-Fried, the chief executive of the embattled cryptocurrency exchange, was a proponent and donor of the “effective altruism” movement.
You can't mention that he's the #2 political donor without mentioning that those donations went to the Democratic party and that the #1 political donor is George Soros. Any kind of negative reporting against either is absolutely forbidden.
You also get into the possibility that there was a cycle of money that went: US Taxpayer Dollars -> Ukraine -> FTX -> Democratic Party -> Further Money to Ukraine. That's influence buying of the absolute ugliest sort and the NY Times is unlikely to even hint at it.
But NYT is soooooo often faulted for being a source of Democratic Party propaganda, enough so that they announced they were replacing editors within the last several months.
Isn't buying political influence with money what most people with absurd amounts of money do? I don't like it one bit either, but it's hardly unique to SBF.
With SBF, there seems to be this attempt at drawing guilt-by-association because of his donations to the Democratic Party. I don't think this makes a lot of sense.
For an example on the other end of the parliamentary spectrum, say, if Musk's future Twitter profits (good luck with that) were to come from the savings from firing half of the company's employees, and he then donated those to the Republican Party, it would be absurd to blame the Republican Party for the loss of jobs that it indirectly benefited from.
Obviously firing employees is not equivalent to fraud, and donating illicit profits could be part of a scheme to launder them. But unless a causal link can be proven, it all looks like speculation to me.
>As a group of mostly young tech guys and girls, we should be concerned about the narrative society, especially Wall Street and their media outlets, convey about us. Recall when redditors buying GME stock was being blamed for the many ills of capitalism. The whole robbinhood saga.
Source? I hate statements like these because it sounds like there's a central blame committee out there handing down blames (or at least some sort of consensus), when in reality in all likelihood it's a hot take by some Bloomberg columnist.
Readit News
EDIT: here's the diagrams (thanks HN!)
https://www.manchesteropenhive.com/view/9781526100580/figure...
https://i.redd.it/078p4g7m6cz91.jpg
Note that for LB, like most normal companies, it has subsidiaries where it makes sense to operate under different tax laws, etc. So they have a Japanese company, and Australian company... For FTX there is no such rhyme or reason. Most of the entities outside of DE are in Antigua, Seychelles, Cayman Islands, Switzerland. I don't know enough about finance to understand if this is a red flag, but given the circumstances the intent behind such a structure is certainly suspiscious.
For example FTX was able to claim, with a vague semblance of honesty, that it had assets to cover liabilities. But in fact what it did was transfer money to other companies that were part of the network, like Alameda, and get back tokens with a book value but no real market value, like Serum. On paper both companies had engaged in a fair transaction. In reality customer money got moved to another company that was then free to do with it what it wanted, all hidden behind the corporate structure.
Read https://archive.ph/TOgjK for Matt Levine explaining exactly how this actually worked.
Tracing the actual on the ground transactions and seeing where each dollar went, and figuring out the mechanisms used to actually lift said dollars?
That’s what this discussion is about, and it’s not as clearly understood right now.
I have some money in fundrise(RE investing crowdfunding), and they have a number of subsidiaries for various reasons invisible to the end user until tax time.
When you owe the bank several billion, the bank has a problem.
When the unregulated-bank owes billions to millions of people, I guess the people have a problem?
https://twitter.com/molly0xFFF/status/1550160830762782724
I think when massive scams like FTX start airing Super Bowl ads, we all have a problem.
Edit - better explanations below this
Also a friendly reminder to everyone not to trust any exchange at all with crypto unless you're actively trading it, keep it in a wallet!
The bankruptcy will divide whatever value is still left to be divided. Some of the missing value may be obtained from the malicious people behind the company through lawsuits, and some people may go to jail for knowingly scamming people.
In the end, this is not a bank, and the regulations protecting people from scummy banks, even the new legislations written after the 2008 crisis, don't apply.
This isn't the first business with millions of customers to go bankrupt. When such a company fails, getting your money back is your problem. Large-scale mismanagement and uneducated customer bases like this is the reason banks and other finance companies are under so much regulatory pressure.
the people are the problem
That should definitely be the case. The moral risk of anyone else covering this would be catastrophic.
Dead Comment
The NYTimes was quick to destroy owners of other exchanges (whom I also do not view favorably) but is mysteriously lenient, deflecting criticism, outright censoring themselves.
How does this happen? Just what is the relationship with these media outlets, Sam?
The party mantra from the Democrats and their supporting media outlets seem to be to remove Sam as much as possible and downplay the role he played in causing havoc.
Already a handful of people have committed suicide as a result of this FTX fiasco, Sequoia, WEF, have all deleted their praising words for Sam and playing dumb.
I have this feeling that something is going to break. It's going to get really ugly for this country and other entities will fully utilize the chaos to seize whatever they can.
Dead Comment
The sheer number of letters I have gotten in the mail about the bankruptcy from the Japanese government easily cost a pretty penny more than my initial $1 in postage alone. I was honestly a little impressed they managed to hunt me down.
I made zero attempts at getting that money back.
https://www.nytimes.com/2022/11/14/technology/ftx-sam-bankma...
SBF is equal parts Bernie Madoff and Elizabeth Holmes but the Times is trying to paint him as an unlucky entrepreneur, down on his luck. The author doesn't even seem to understand that he stole billions from his customers to try and paper over losses from his trading.
From their "Here’s What to Know" page https://www.nytimes.com/2022/11/10/technology/ftx-binance-cr...
The Aftermath of FTX’s Downfall
The sudden collapse of the cryptocurrency exchange has left the crypto industry stunned. Crackdown Begins: Regulators are moving to freeze parts of FTX’s business, while other divisions file for insolvency or prepare to halt operations. Here’s what’s next for the company. https://www.nytimes.com/2022/11/11/business/dealbook/ftx-sbf...
Investors Under Scrutiny: Venture capital firms and investment funds showered nearly $2 billion on FTX with few strings attached. Now, they are facing questions, too. https://www.nytimes.com/2022/11/11/technology/ftx-investors-...
‘Effective Altruism’: The fall of FTX dealt a significant blow to the philanthropy movement that is deeply tied to the company’s founder, Sam Bankman-Fried. https://www.nytimes.com/2022/11/13/business/ftx-effective-al...
Sports Sponsorships: From the naming rights for an N.B.A. arena to patches on M.L.B. umpires’ uniforms, FTX’s collapse puts sponsorship deals worth hundreds of millions of dollars in doubt. https://www.nytimes.com/2022/11/10/business/ftx-sports-spons...
https://archive.ph/B2t1F
I think the article is a fairly straightforward account of what happened. I think there are places that it could have emphasized the fact that "borrowing customer funds" is accurately called theft, but it didn't come across to me as a "puff piece" that people are calling it.
For example, I thought this paragraph was pretty informative and actually extremely damning to the people involved - what is described here is clear theft, plain and simple:
> Around the time the crypto market crashed this spring, Ms. Ellison explained, lenders moved to recall those loans, the person familiar with the meeting said. But the funds that Alameda had spent were no longer easily available, so the company used FTX customer funds to make the payments. Besides her and Mr. Bankman-Fried, she said, two other people knew about the arrangement: Mr. Singh and Mr. Wang.
With that one statement I don't see in any way how SBF, Ellison, Singh and Wang avoid lengthy prison terms.
Why would they want to help him? Do you think he is bribing them with his worthless imaginary money? How does the NYT benefit from defending someone who has destroyed his own reputation and lost billions of dollars of customer money?
Is it possible the entire thing was a Madoff-style fraud from the beginning? Yes, but that is not the only possibility. No charges have been filed, and all the people who think he should be thrown in jail never mention what laws they think he broke. It's not illegal to be an incompetent failure, and fraud has a specific definition that requires intent and does not cover all instances of simply lying.
If the NYT had written an article accusing the guy of crimes, they wouldn't have a basis for doing so. Not yet, anyway. Maybe actual criminal lawbreaking will be discovered, but right now, there is no proof. Should newspapers be accusing people of crimes without proof?
People need to put down the pitchforks and torches and wait for the full truth to come out. It's going to take a while.
I don't get it. What do you think this story says? I read it and it just can't be characterized the way you are saying.
[0] https://www.reuters.com/lifestyle/sports/mercedes-f1-team-su...
As a group of mostly young tech guys and girls, we should be concerned about the narrative society, especially Wall Street and their media outlets, convey about us. Recall when redditors buying GME stock was being blamed for the many ills of capitalism. The whole robbinhood saga. The scapegoat is always a smart, wealthy young technologists.
SBF is more of a Soros than an Aaron Swartz. Wall Street loves to blame Silicon Valley, but it’s bs.
FTX’s Collapse Casts a Pall on a Philanthropy Movement
Sam Bankman-Fried, the chief executive of the embattled cryptocurrency exchange, was a proponent and donor of the “effective altruism” movement.
https://www.nytimes.com/2022/11/13/business/ftx-effective-al...
You also get into the possibility that there was a cycle of money that went: US Taxpayer Dollars -> Ukraine -> FTX -> Democratic Party -> Further Money to Ukraine. That's influence buying of the absolute ugliest sort and the NY Times is unlikely to even hint at it.
Perhaps what you notice is NOT coincidence?
With SBF, there seems to be this attempt at drawing guilt-by-association because of his donations to the Democratic Party. I don't think this makes a lot of sense.
For an example on the other end of the parliamentary spectrum, say, if Musk's future Twitter profits (good luck with that) were to come from the savings from firing half of the company's employees, and he then donated those to the Republican Party, it would be absurd to blame the Republican Party for the loss of jobs that it indirectly benefited from.
Obviously firing employees is not equivalent to fraud, and donating illicit profits could be part of a scheme to launder them. But unless a causal link can be proven, it all looks like speculation to me.
And it seems like the ROI on politicians is amazing.
Source? I hate statements like these because it sounds like there's a central blame committee out there handing down blames (or at least some sort of consensus), when in reality in all likelihood it's a hot take by some Bloomberg columnist.
Just a few recent examples in the news:
https://www.axios.com/2022/11/15/ftz-crypto-bankman-fried-de...https://fortune.com/crypto/2022/11/15/politicians-sam-bankma...
https://fortune.com/crypto/2022/11/15/politicians-sam-bankma...
https://cointelegraph.com/news/sbf-has-been-a-significant-do...
https://nypost.com/2022/11/14/sam-bankman-fried-broke-crypto...
Dead Comment
Dead Comment
Lol. I guess he won't be giving