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Marc Cohodes has been sounding the alarm about FTX for a while. Here's a snippet (from last month, before the FTX crash) where he calls out the shady background of said compliance officer:

https://youtu.be/VbDiWXFxqr8?t=2348

The whole conversation is fascinating.

⬐ rlt

It always struck me as odd that this guy came out of nowhere to become one of the wealthiest people in crypto in a few years.

I don’t know if his adherence to effective altruism had anything to do with this outcome, but taken to an extreme I could see someone rationalizing fraud to redistribute wealth in a way that maximizes benefit to others. Basically Robin Hood.

⬐ factsarelolz

Tens of millions of dollars to political campaigns?

⬐ ummonk

Buy off politicians to keep the fraud going so you can funnel more money to your charity causes!

⬐ foogazi

Or a front to launder money via crypto into “causes”

⬐ anm89

Not trying to defend SBF or FTX but honestly wasn't that impressed with this critic either.

His criticism seems to break down to:

1) Look at him, he's ugly

2) He doesn't have the proper lineage of insider mentors to be allowed to be a billionaire

3) We don't have the full story on the original arbitrage mixed in with some political pandering

4) The compliance officer was sketchy

4 seems to be the only valid point. 3 is worth further research but not really anything in itself. The other 2 reflect more poorly on this guy than SBF. Overall, I don't think this guy really had anything, I think he just didn't like the smell and ended up getting lucky on the timing.

But he 100% did not call out any meaningful elements of what ended up happening in any detail.

⬐ propter_hoc

As an entrepreneur in finance for 10 years, I think the guy's perspective is actually pretty understandable. When you've been in finance for a while and have learned how many footguns and ways to go to jail there are to get major regulatory projects licensed and functional, you start to think of projects like "launch a bond offering and get it rated" or "launch an exchange" as so incredibly complex as to be impossible. There's a certain cynicism that comes up in the industry where people think something just can't be done because they know it's so complex to do right.

Now I actually think that although this take is realistic, it is actually overly cynical and actually underestimates the possibility of disruption in finance. In actuality, not knowing the complexity allows a young entrepreneur to develop a simplistic plan and pitch it with conviction to VCs who also don't know any better. The mistake experienced people are making is that their experience tells them it is only reasonable to do a thing "correctly" or "scalably" when in fact the incorrect, illegal, unscalable way wins you valuable proof points. And with enough proof points and follow-on VC rounds the simplistic plan can mature enough to actually become functional.

In the specific case of SBF and FTX, I do think the critic's seemingly superficial cynicism was actually both well-founded and ultimately correct. Launching an exchange functionally, legally and scalably was in fact too much for the inexperienced leadership of the business. They tried really hard to make a business model that worked and scaled fast. But in doing so, they ended up with effectively designing a circular reference (trading their own token) which made a lot of money for a while, but ended up crashing their business. I think they were well-intentioned, but it is true that more experienced leadership would not have tried the self-referential growth strategies FTX/Alameda engaged in. And in retrospect the critic's spidey sense was right; the pace of growth of FTX was bizarrely unsustainable and likely pointed to an underlying system that didn't make sense.

⬐ jmmoses

Marc Identified several indicia of fraud: 1) He acknowledged SBF and the CTO, Gary Wang, are worth billions, however the money materialized out of nowhere.

This is highly irregular and a potential indicator of a scam on the backs of retail investors.

2) He noted the chief regulatory officer of FTX, Dan Friedberg, was the general counsel for a poker site that defrauded its players.

A big red flag for anyone thinking of interacting with FTX in any way.

3) SBF has a record of deploying capital poorly (making losing investments and falling for scams) and he provided no good rationale for making these bad bets

A clear sign he isn't a good businessman and it creates even more skepticism that FTX could be viable.

4) He sees through their obvious attempts to paint a rosy picture of SBF and FTX with their very vague but positive marketing, but no ability to explain concretely what is positive about FTX, what their business model is (why the founders are getting so rich!)

These things are "smelly". They are like "code smells". On their own, they don't necessarily indicate anything, but taken together they could be an indication of much deeper problems with the codebase.

Marc was saying that the microscope needed to be put on FTX, SBF, and Gary Wang ASAP, because things stunk to high heaven. He was saying questions needed to be answered and the fact they were seemingly purposely being evaded was a big red flag to him.

⬐ anm89

>1

He simply said he doesn't know where it came from. That doesn't mean it didn't come from anywhere. If he'd actually taken the time to flesh any of this out then it could have been useful but as it stands, it wasn't

⬐ dottrap

I agree, this video is a nothing-burger. There are much better people who have been detailed in both their criticisms of SBF and the types of things he has been just exposed of doing for years. Crypto Critics' Corner and Molly White are the first two off the top of my head.

Molly White's most recent article on the collapse was posted on HN just yesterday.

https://news.ycombinator.com/item?id=33547102

⬐ aaron695

None

⬐ eigenvalue

Ok, what about the observation that FTX’s regulatory relations person was guilty of orchestrating and covering up a notorious online poker cheating scandal? There are recordings of him doing this btw. And that he further lied about this history and left it out of his LinkedIn. That alone is enough of a red flag to make you run in the other direction.

⬐ anm89

That's point 4 which I admit is the one valid point.

⬐ ralph84

3 is SBF's equivalent of Madoff's split-strike conversion. A strategy that can make a little bit of money that a fraudster uses to claim to be making a lot of money. And just like Madoff nobody questioned it until it all came crashing down.

⬐ bmitc

Those were not his primary complaints. Yes, he took some shots at his appearance, but let’s be honest. The financial and VC world has a stick up it’s butt, but this nobody (Sam Bankman-Fried) shows up to interviews and meetings in a three day old t-shirt and shorts and can’t keep his leg still and talks like he’s been up for 24 hours straight on Red Bull. It’s strange. Why does that work for him, who has nothing to explain it away, and no one else? Where did he come from? Where did he get all his money? Why were major VC funds fawning over him?

The short seller also mentions that this is only “3%” of what he has and is working with an investigative journalist to blow this up. And that was weeks ago, and they were probably working on it before that.

It’s not about credentials. It’s that you have 20 year olds out of nowhere suddenly managing tens of billions of dollars. Like the guy says, it doesn’t make any sense.

In interviews, FTX never gave reasons of why they moved to the Bahamas from Hong Kong. He really doesn’t ever explain anything.

⬐ anm89

> only “3%” of what he has

Ok, sure, when he's ready to present that let's discuss it. Until then it's nothing. But what's the point of doing an interview and saying "I've got good info but I'm not going to share it until later"

⬐ bmitc

I think most of his points stand. The questions should be answerable. However, you’re right that we’re taking it at face value that he has more that he supposedly wants to publish later. It isn’t clear he has more, but certainly there are huge amount of questions surrounding FTX and Alameda that are not answerable, even prior to this whole debacle.

I think one searches for darker answers because the likely answer, that everyone was duped by these people in normal ways and there’s not some deeper connection, is a far more disturbing prospect.

⬐ totalZero

> Why does that work for him

It works for him the same way it works for Neil Gershenfeld. Be palatably erratic, assume the mad scientist role, make your credentials known, and people will eventually start to treat you as though you are brilliant.

That schtick hits more than one of Cialdini's six principles of persuasion.

(NB this is not a comparison of Gershenfeld and Bankman-Fried, just an observation of what seems like one shared attribute.)

⬐ subroutine

Larry David also predicted this in an ftx super bowl ad:

https://youtu.be/BH5-rSxilxo

⬐ rootsudo

Hilarious and Ouch.

⬐ paxys

The problem is that everyone is always saying that everything is fraud. How do you know who to believe?

⬐ willnonya

If it's politics the odds are they're wrong. Anything else the odds are in their favor.

⬐ roncesvalles

Easy heuristic: every billionaire in crypto except Satoshi is a fraudster. Maybe it's overfitted maybe not but historically you'd be correct 100% of the time.

⬐ tim333

Vitalik seems ok but yeah.

⬐ eigenvalue

Go to 34 minutes in. Amazing how many red flags there were. This guy has a good track record of exposing fraud, going back to the Lernout & Hauspie days, which the old timers around here will remember.

⬐ None

None

⬐ naikrovek

all crypto is rife with red flags.

⬐ mitchdoogle

Crypto is nothing special in this respect.. These red flags you speak are not an issue with crypto, they are an issue with people.

Humans have been looking for ways to screw each other over since the dawn of time. If you mint some brass coins and say they are gold, that just makes you a loar. It doesn't mean there's anything wrong with gold.

⬐ bogwog

> If you mint some brass coins and say they are gold, that just makes you a loar. It doesn't mean there's anything wrong with gold.

If the fraud is rampant enough, then it is a problem with gold: it's too risky to invest in.

⬐ mupuff1234

It's special in the amount of concentrated fraud. I can't think of another legal field with such fraud per sqm density.

⬐ bmitc

Is there another industry that has had such consistent fraud, scams, failed companies, stolen money, etc. over a period of several years?

⬐ claudedopplr

The finance sector, in the first four decades of the 20th century. Finance and faith-based debt has fueled the USA dream, and the term "penny stock" and "blue chip" come from an age where everything was blurry and scammy.

⬐ claudedopplr

The finance sector, in the first four decades of the 20th century. Finance and faith-based debt has fueled the USA dream, and the term "penny stock" and "blue chip" come from an age where everything was blurry and scammy.

⬐ monkeydreams

> Crypto is nothing special in this respect..

Crypto is nothing special in any respect except crime. Web 3.0 is basically blockchain re-discovering how finance works and why financial regulation is a thing.

Coins leveraging coins and pegged to other coins and hedged by yet another coin... None of it reflects a solid foundation and the fact that, for a time, enough people were fooled does not a revolution make.

⬐ doorman2

This is fascinating analysis. Not just the specific details about SBF and FTX, but the insight into the short seller’s process of company analysis.

One thing became apparent to me. Our industry (tech) is rife with so many snake oil salesman. During the decade-long bull run, it was easy to look like a genius. But the water is going out and we’re going to see who is swimming naked.

It’s time for the tech business cycle to end. The waste needs to be purged. A Fed pivot is just a pipe dream.

⬐ foogazi

Is this an Iran/Contra type operation? They got the money out - mixed it with legit knife holders - and now they pull out and burn the evidence

⬐ ethotool

Every so often I would come across articles on CNBC written about this crypto genius (SBF) and they always reminded me of the media buzz around Elizabeth Holmes back in the day.

⬐ andrewstuart

So is everyone assuming the remaining big players in crypto are straight, or crooked as question marks?

⬐ zen21

SBF had the reputation of being the most honest person in crypto.

⬐ PretzelPirate

SBF was marketed by his investors who helped him gain people's trust. That's hard to replicate.

It was pretty clear to me that SBF wasn't a good actor in this space because he didn't care about decentralization, just about making as much money as he could however he could in the name of effective altruism.

I wasn't the only one suggesting that people stay away from anything SBF had touched.

⬐ throwup

Speaking as someone tangential to the space, I have to disagree. SBF always been kind of loathed by people in the know. I think the reason was because of his political involvement and how he pushed for regulation, while many in crypto are against the government getting involved. "Scam Bankman Fraud," they called him--the memes write themselves.

⬐ thepasswordis

Absolutely ridiculous take. No he was not.

⬐ JamesianP

so you're saying that still might be true?

⬐ rippercushions

There's a legendary interview between SBF and Matt "Money Stuff" Levine, where he straight up admits to crypto being a Ponzi scheme.

So you've got this boxes and it’s kind of dumb, but like what's the end game, right? This box is worth zero obviously. And like that, you know, you can't like keep this smart cap or something. But on the other hand, if everyone kind of now thinks that this box token is worth about a billion dollar market cap, that's what people are pricing it at and sort of has that market cap. Everyone's gonna mark to market. In fact, you can even finance this, right? You put X token in a borrow lending protocol and borrow dollars with it. If you think it's worth like less than two thirds of that, you could even just like put some in there, take the dollars out. Never, you know, give the dollars back. You just get liquidated eventually.

https://www.bloomberg.com/news/articles/2022-04-25/sam-bankm...

⬐ None

None

⬐ bagels

The safer bet given the history of exchanges, scam coins, and NFT is that they are crooked. This is why Coinbase sent out an email this morning pleading with people not to withdraw because they aren't crooked.

⬐ AustinDev

Coinbase charges enough fees and has held crypto for me through 2 crashes, I think they're fine. Although 95% of my coins are in wallets that I control so I don't trust them with that much.

⬐ the__alchemist

Saw that email; dumped half my account val into a hardware wallet. Probably will dump the rest in soon.

⬐ bagels

I moved my very modest half a bitcoin out of Coinbase in Jan when it was clear that bitcoin was going to follow stocks down the tubes.

⬐ ralph84

Somehow Coinbase's email didn't include what they include in their SEC filings: “the crypto assets we hold in custody on behalf of our customers could be subject to bankruptcy proceedings and such customers could be treated as our general unsecured creditors"

⬐ throwup

https://fortune.com/2022/06/01/crypto-billionaire-sam-bankma...

> Giant crypto exchange founder Sam Bankman-Fried promises to give away most of his $21 billion fortune

Sounds like he kept his promise in a way!

⬐ None

None

⬐ memish

How many people trusted SBF_FTX because of his celebrity supporters, his appearances with politicians, his Stanford professor parents?

"I'm a big advocate for Sam because he has 2 parents that are compliance lawyers. If there's ever a place I can be where I'm not going to get in trouble, it's gonna be FTX" https://twitter.com/Guruleaks1/status/1591086077489844224

We outsourced trust to people in his proximity and because he was one of the main crypto advisors to congress.

⬐ None

None

⬐ googlryas

I see this logic all over the place(parents did X, so kids raised by parents will be super Xers). But it completely misses one of the key elements - the parents doing X may have done X because they believed in it, whereas the kid might do X simply because it's the family business. So the motivation is entirely missing, and it's seen as a birthright rather than a calling.

Maybe his parents became compliance officers because they are assiduously moral law and order types. That's not necessarily a trait that gets passed down to your offspring.

⬐ notlukesky

Here is the Video starting at that moment around minute 35:

https://youtu.be/VbDiWXFxqr8?t=2140

Here is an interesting tweet on this worth reading after watching the video:

https://twitter.com/RudyHavenstein/status/159116117646521139...

⬐ cavisne

Yep Epstein and him have CIA written all over them.

⬐ arminiusreturns

Epstein was likely "shared" by multiple intelligence agencies, but all indications are of Mossad running that particular network primarily. See Whitney Webb's great new book(s), One Nation Under Blackmail. (vol 1 and 2)

It is likely Epstein was just a front man and Ghislane Maxwell was actually his handler. Now look at who her dad was. Who she grew up with also.

Her sisters are one of the hidden threads those on HN might be interested in. Hints of Danny Casalaro's research keep popping up on this topic...

edit: I find how quickly stories like these drop off front page suspiciously artificial.

⬐ Nathanael_M

It has 87 points and it’s 18 hours old, it dropped off because it didn’t generate interest.

Also, a bit of advice, finding conspiracy everywhere, weakens your arguments for potentially true conspiracy theories. It could be that your thoughts presented in this comment are completely accurate. However, then accusing the staff of HackerNews of sabotaging and covering up this small, barely-news story makes you look like you see boogeymen everywhere. It removes credence from your more important thoughts.

⬐ arminiusreturns

At the time it was above the fold and was only 2 hours old, and a refresh <5m later it was off. Is the algorithm documented somewhere?

I understand your point and generally agree, but this is repeated pattern I have largely been quiet about for those reasons, but over time it seems... like there might be something there. Not saying there is, just that after enough coincidences it makes one start to consider the possibility.

⬐ memish

That photo looks familiar

https://ideastream-production.s3.amazonaws.com/images/news/n...

background on the FTX leadership here https://www.youtube.com/watch?v=VbDiWXFxqr8&t=2144s