HN Theater @HNTheaterMonth

She also posted a second interview with SBF about an hour ago:

Second Interview with SBF: FTX User Funds on Alameda, $8 billion hole, CZ, Run on the Bank, Remorse -https://youtu.be/watch?v=xP54LZB3WRw

⬐ SilverBirch

I think it's pretty clear now we've heard the line from Sam. He's going to claim messiness, 'liquidity' and 'mistakes were made'. A line he's only willing to hold in front of very friendly interviewers. I don't think we'll get anything more out of him unless (1) he falls into the trap of taking an interview with someone numerate, or (2) he slips up and reveals some details that are going to be important later. But it's very clear he's decided to take a line that is clearly untrue, but is unprovable for an outsider. It'll only be as the evidence from the bankruptcy unfolds that we'll get the real story.

The thing I would push for today, would be an audit of all of his associates, including family, and yearly audits of his accounts by the IRS for the rest of his life. The risk that he has squirrelled away some crypto nest egg is too high, regulators should be vigilant to ensure not a penny of customer funds ever enrich SBF or his family.

⬐ memish

There's another part of the interview where SBF says he donated about the same to Democrats and Republicans, contrary to the public record. https://youtu.be/6DezodR9hNI?t=775

His explanation and reasoning is that Democrat donations would be treated favorably by the media so those were done publicly, while "reporters would freak the fuck out" about Republican donations. So he made those in the dark.

⬐ jeffbee

The party breakdown doesn't seem very interesting to me. A huge chunk of the money went to one pro-crypto long-shot candidate who got trounced 2-to-1 in the primary election. That one block of money distorts any aggregate analysis.

⬐ eachro

I'm not sure how accurate that is: https://www.opensecrets.org/elections-overview/biggest-donor...

⬐ swores

I read that it was even from FTX but leaning D in his name specifically (though I don't trust the numbers in your link at al).

It makes sense that you might get more influence if a handful of people in your company can go to meetings with a party and be treated as people who donated almost entirely to the people they're meeting - and have another handful of people who can do the same to the other side. As opposed to every politician knowing the people they're meeting are 50/50 donors even on an individual basis. If you're going to spend tens of millions on donations and have multiple people you trust to do lobbying, I can't think of a reason not to split it like that, but I'm not an expert so maybe someone can give one?

I believe the highest donor from FTX was a little over $20M, but I've not seen any numbers for exact total contributions from the company and from key people involved are.

⬐ lolc

Too smart by half, this guy just doesn't shut up. Sure plays into the narrative that he's a naive kid. But painful to listen to all the scheming in the pauses of speech.

⬐ dehrmann

IANAL, but you can bet a lawyer would have told him to STFU so he doesn't incriminate himself further.

⬐ iudqnolq

Both his parents are (good!) law professors, ironically

⬐ timmytokyo

He's clearly playing the "I made a stupid mistake" angle to avoid being accused of deliberate fraud. He's trying to minimize the length of his jail sentence.

⬐ pqdbr

I didn't lose a penny in the FTX debacle but even so it's infuriating to hear this crook giving this interview with the Bahamas waves as background noise.

⬐ smcl

I’m the same, I’ve been a suspicious of crypto and openly questioned it so I’ve no doubt a few of the people who said “stay poor” to me lost money on these recent crypto collapses. But I can’t gloat, mostly because it’s not in my nature but it’s also just frustrating seeing such an obvious needless, empty boom and bust

⬐ NovemberWhiskey

From my perspective, the problem here is no-one (including SBF) appears to know what kind of an enterprise FTX was supposed to be.

Everyone seems to agree that Alameda is a hedge fund, but looking at the facts, FTX also appears to have been operated as one as well; but without the qualification of investors or others kinds of things. There's no just a really good correlate in traditional finance for "I'm going to act as a broker-dealer but actually I'm allowed to just invest your funds however the hell I like". Which is probably a good thing.

I'm not necessarily saying that everything in defi has to be regulated exactly like something in traditional finance, but there are some pretty deep unanswered questions on basic stuff like "did your customers know they were actually your investors?" and "what exactly was your business model?" and "what was your risk management approach?"

⬐ SilverBirch

Woah woah woah. Don't buy into the bullshit. We know exactly what FTX was meant to be. FTX US was meant to be a US based crypto exchange regulated in the US, FTX International was meant to be a Bahamas based crypto exchange with less regulation. Alameda was meant to be a hedge fund.

FTX made very clear promises about what it was - and that all customer deposits were safe, which we know is a lie because at the point SBF said that we knew the liabilities of Alameda and FTX was denominated in an imaginary currency.

⬐ ilrwbwrkhv

Also Coffeezilla's take on the interview with more context: https://www.youtube.com/watch?v=0rL35_WV3lE

⬐ skippyboxedhero

That video was remarkable. Apparently the guy couldn't code but worked as a trader at JS for three years. In my own head, that almost reflected worse on JS than SBF.

I think everyone assumed Alameda were doing something clever. In reality, they were just idiots stealing from and front-running their customers. Lol.

These moments when you see the man behind the curtain, it is just ludicrous and shakes your faith in the "system" (I worked in finance, I remember meeting a fund manager, had made 9 digits selling his company...the guy was an idiot, he had got lucky with some distribution relationships and one stock pick, the company he was trying to hire me for has had absolutely terrible performance since I met him near on ten years ago now...life is really like this sometimes, people making billions doing work they have no business doing, everyone thinking they are genius despite that obviously not being the case).

⬐ dehrmann

We're watching something similar possibly play out with Twitter. Musk bought it at its peak price and scared away a lot of big advertisers. In the near-term, it's not clear if he cut headcount enough to offset the loss in revenue. In the mid-term, we'll see if he can maintain its relevance. The long-term bet is he can find something to bring Twitter to 1-2B users that Twitter overlooked for 10+ years.

For someone who many see as a business genius, he's made a very questionable bet, and it's a reminder a lot of these people are more lucky than good.

Or maybe I'll be using the TwitterPay in five years to buy a Feather tablet so I can watch Vines.

⬐ nightski

Why would a trader at JS need to know how to code?

⬐ dibt

> couldn't code but worked as a trader at JS for three years

That doesn't seem odd. They need people good at math and/or creative problem solvers. The platform they execute on doesn't need to be rebuilt for each new strategy.

> I think everyone assumed Alameda were doing something clever.

Everyone knew the strategy they ran was to list a perpeptual futures contract for a Solana shitcoin on FTX, and short it into the ground. Their initial capital was an arb between Japan and US exchanges. That arb later disappeared. There are some rumors that the initial profits were wasted long ago, and they got new capital from investors hearing about the Japan/US arb.

⬐ skippyboxedhero

It does seem odd. Almost everyone who they hire (in these roles) can code. If you are just hiring traders, why not hire guys who can...you know...trade? Rather than some random person from MIT. The precise competitive advantage of JS is their tech.

I will say this another way...back in the early 2000s, investment banks used to hire people to do index arbs, the strat was literally press sell/buy button on Excel that will execute basket cash trades against an index, call our broker up on the floor and sell/buy futures...that was it. The strong implication is that JS is hiring people to do that kind of thing...investment banks stopped hiring these guys by the mid-2000s. The idea of the "maverick trader" who is just very creative doesn't really exist...almost all of those people who do that at hedge funds spent decades at investment banks where they had access to flow...and most of those people never graduated to hedge funds in the 2000s and just became execution traders. Again, JS is hiring these people out of college...that is weird. That is exceptionally weird. No hedge fund does this. No investment bank does this. No-one does this. A few trading houses do this (not many, Optiver is the only one left afaik...there used to be more, most went bust) but it is counter to the image that JS presents. As someone who knows a little about trading, this struck me immediately as extremely odd. Looking at their job listings...yes, it is odd (they have a job listing for traders: it says you should know how to program in at least one language).

Okay, the guy from Wintermute (who presumably knows something about trading) said he assumed they were doing something clever and was shocked when they failed. Also, they did a YouTube video which explained what some of the stuff they were doing was, that wasn't exactly surprising but I think people assumed (reasonably) they had more edge than they did (the reason they didn't was because they were cheating, nothing else).

Right, I think the current view is: they probably went bust in June/July (or whenever the earlier crash was), and some of the numbers they told other people about how much they made may have been fictional (I have read that they were losing money before they went bust but other people have said, again the Wintermute CEO, that they assumed FTX were making money because of what they were seeing in markets...again though, they were doing things that were obviously illegal so they were clearly making money from other things after Japan).

⬐ dibt

> If you are just hiring traders

I didn't say he was hired for his trading ability. I only suggested coding isn't a perquisite.

> random person from MIT

I didn't suggest that was the qualifier for them being hired. They do hire from universities like MIT, though, and I'm sure there are many alumni that stay connected to faculty for the purpose of finding candidates.

Only 23 of 123 open jobs for students/new grads on their site are for software engineers.

https://www.janestreet.com/join-jane-street/open-roles/?type...

They say on the site: "We look for smart people with curious minds from any background."

⬐ skippyboxedhero

Again, it still makes no sense. If you aren't hiring traders (and btw, JS is hiring real traders) then why you hire someone who couldn't code into a grad program.

I will say this another way: I know fundamental hedge funds that have stopped hiring people who can't code into roles IF they have no trading experience. That is how important the skill set has become. I don't know you have any function at a QUANT hedge fund if you can't trade and can't code...like what do you all day?

Right, and click on quant trader. And look at Power Trading, Options Trading, "coding skills are a plus"...I am not saying they don't hire them, what I am saying is that this is odd when you consider anything else about JS and that the rules are probably different for someone like SBF.

⬐ smcl

Coffeezilla remarked that he's deflecting - rather than saying "there was no backdoor" he seized on a slightly clumsily worded question and replied with "I didn't implement a backdoor" then padded it out with the fluff about how he isn't a coder. The guy is flailing around saying whatever he can to try to rescue himself (and not succeeding). He also said they got $4bn minutes after declaring bankruptcy ... but that the bankruptcy lawyers are too embarrassed to use it so they're burning the company to the ground? Absolute nonsense, everything he says in these little interviews should be taken with an enormous helping of salt.

⬐ skippyboxedhero

Which isn't the same thing as saying he can't code. Everyone knows he is deflecting, the truth of what occurred is already largely public.

⬐ ipython

But the real question is unanswered: was he actively playing league of legends during the interview?

⬐ bluelightning2k

The crazy thing: he still has a very valuable brand.

There's many many people like us quietly trying to bootstrap enough traction to maybe get into YC one day... But if SBF ever wants to start another company it will be another record setting a12z seed valuation.

Irrelevant if he goes to jail ofc.

⬐ strikelaserclaw

well all these crooks are in cahoots, he probably stole money off some people but made the "big fish" more money than they invested.

⬐ hackrnusr

https://www.themarshallproject.org/

Would prison time be too harsh a sentence for him?

⬐ supermatt

Where did the assets for him to be a billionaire come from? Were they actually client funds he "loaned" himself?

⬐ neonate

He sounds anxious to me. In fact he sounds terrified. I never heard him speak before so this may be an illusion but it's so uncomfortable I had to turn it off.

⬐ tibbydudeza

What an utter BS artist - hope they extradite him and put him in jail for a long time.

⬐ sgammon

The idea that a "bank run" caused this is just silly. FTX is not a bank.

⬐ Melting_Harps

> The idea that a "bank run" caused this is just silly. FTX is not a bank.

Are you familiar with the adage: The easiest way to rob a bank is to own one?

Here is the thing, FTX may not ave been a registered bank, but it definitely functioned as a fractional reserve bank: and in the end that is what matters most! SBF is so screwed, and a part of me makes me think he wanted to implode all along: despite being born on 3rd base he is still an immense failure, furthermore his perverted notions of effective altruism were revealed to be just another misguided cult like any other used by your run of the mill conman to maximize is ROI from the woke-mob gatekeepers in SV.

SBF is bankrupt in every sense of te word, financially as well as morally. What I can’t tell if it's affluenza or suicidal ideation/depression making him do these interviews.

⬐ MrMan

FTX was not a bank it was a hole for money to go into.

⬐ pram

Tbh I think he’s talking to this specific person because he thinks she’s hot. I’m totally serious about this lol

He’s not trying to convince the world he’s not a bad guy, just her.

⬐ Melting_Harps

> Tbh I think he’s talking to this specific person because he thinks she’s hot. I’m totally serious about this lol

I didn't bother listening to it, and honestly if it is the reason it goes to show just how inept he really is considering how incriminating this all is and will be used against him; honestly, if this goes long as Theranos trial I will be extremely upset.

He and his gf at Alameda should be thrown in prison as fast as Charlie Schrem was, but because he is an insider they will make a show of it and expensive lawyers will get them short sentences in a light security jail at worst.

Hell, they should already be sitting in a cell next to Razzlekhan and her BF while being interrogated to hand over the funds while they sort all this out, that's the State's MO when it comes to these matters-- for them to sign a plea deal under duress and indefinite detainment like they have done to so many others. The fact that he is doing this podcast from the Bahamas shows the hypocrisy of the legal system entirely.

Edit: I didn't know who she was so I looked at her playlist and this came up [0], she personally got scammed for 200k on Celsius with the yield farming rugpull. I think it's just another youtuber making content trying to get more traffic/ratings: it's totally transactional for her and it seems since he has the social graces of a lamp post doesn't realize he has no chance.

0: https://www.youtube.com/watch?v=F3AWve7QYIQ

⬐ fabian2k

As far as I've followed this there seem to be many billions simply missing. That is different from money that they can't get to quickly enough to pay out their customers, it's money that is not there. A large part of their "balance sheet" were their own tokens, which is not real money.

⬐ dpiers

It's like he's too privileged to realize he's a criminal.

⬐ janmo

SBF is literally adding one year more year to his sentence in every interview he gives. He should just shut up.

(Not legal advice)

⬐ bmelton

Incompetence is a defense against fraud, so if you reconsider his actions through the lens of an attempt to bolster an incompetence-based defense, would it look any different to what he's done?

⬐ memish

He should keep talking. The more the better for everyone except him and his accomplices.

⬐ planetsprite

He knows nothing bad will happen to him.

⬐ swader999

Naw, he paid a lot of politicians, he fine.

⬐ chasd00

> he fine.

given how crypto attracts illegal activity i wonder if he cheated people who prefer to not get their justice through the legal system...

⬐ maxbond

It's not clear to me that donating to politicians necessarily buys you clemency (in the absence of explicit quid pro quo), but accepting the premise, I think at a certain point, when your crimes and donations are widely publicized, there's a phase transition where it's more likely to work against you. The politicians can't bare the perception of having been bought, and whatever influence they're able to muster is directed against you.

But it's not clear to me that donating to campaigns in a handful of election cycles buys you very much influence within the DoJ. Influencing politicians in order to impact the nomination of judges or other appointees, or to pass certain laws - those are clear mechanisms, but they take many election cycles to implement. It seems to me like SBF's influence campaign was successfully building good will for the crypto legislation he supported, but that FTX/Alameda blew up before that could come to fruition.

I expect his donations to be largely neutral to his potential prosecution but am open to reporting surfacing facts to the contrary.

⬐ SilasX

Right, I would think that bribing politicians only gets you favors if both a) the favors have sufficient political cover, and b) there is the prospect of further bribes. Neither of those seem true here.

For a), SBF has become a dirty name and politicians don't have cover to do anything blatantly favorable to him.

For b), any money he might have touched is under intense scrutiny, especially if it makes its way to a politician. Ironically, his best hope might be if he had untraceably moved money into cryptocurrency, especially stablecoins.

⬐ ryanSrich

At this point, I'm very surprised he hasn't been extradited to the US. I suppose these things take time, but he's been given the opportunity to rub salt in the wounds of thousands of people that lost billions. He shows absolutely zero remorse for his actions that have led to several suicides.

⬐ blamazon

"Never interrupt your enemy when he is making a mistake"

-- commonly attributed to Napoleon

⬐ shkkmo

That is incredibly bad advice to generalize. Not all mistakes one's "enemy" makes are to one's benefit. Your enemy might make a huge mistake by killing your family in front of a lot of witnesses, doesn't mean you should let him because you want to see him go to jail.

⬐ blamazon

I kinda thought the Napoleon attribution was enough to show I don't think it's a universal truism across all time and scenarios :)

⬐ maxbond

Fair, but from the perspective of a prosecutor, it makes sense to let him dig his hole deeper. Every time he lies to the public he further establishes mens rhea.

But of course it would take much longer than a month to extradite him anyhow, so the most likely explanation is that they haven't had time to decide if they have enough evidence to extradite him, let alone to do it.

(IANAL)

⬐ notch656a

Doesn't take a month to cancel his passport. Wouldn't his stay be illegal at that point and he could easily be deported?

⬐ maxbond

This is total speculation but I think the Bahamian authorities are significantly more friendly to him then US authorities, and whether or not he could continue to stay without a passport would presumably be their call. If they grant him asylum they might refuse to extradite him.

Let him keep his passport and there's every chance he'll just turn up of his own volition to speak at a conference, give an interview, or pitch a new venture.

I don't think a jury would look kindly on playing so dirty with someone who posed no clear threat and didn't even seem to be on the run. And I don't think it would be right to either, until there's enough evidence to bring charges, he's presumed to be an innocent man in the eyes of the law. (We are of course free to come to our own judgement as individuals.)

All he's doing is giving interviews. Even if he's lying through his teeth (as I believe he is) - it's still his 1A right to do so.

⬐ RC_ITR

A very important nuance for everyone following this.

SBF keeps saying there was a liquidity crisis at FTX, which is 100% not true. A liquidity crisis implies that he took deposits, flipped them into good, but illiquid investments, and ran into trouble because people asked for more cash than FTX had on hand.

FTX actually had a solvency crisis, where he took deposits, put them in completely inappropriate investments (many of which are now worthless, all of which were speculative nonsense) and is now revealed to have done that.

He's using the concepts of "bank runs" and "liquidity crises" because that's sort of an "aww shucks, got caught in an unfortunate circumstance" situation when what he actually did was one of the stupidest and most malicious things anyone in "finance" has ever done.

⬐ TacticalCoder

> FTX actually had a solvency crisis, where he took deposits, put them in completely inappropriate investments (many of which are now worthless, all of which were speculative nonsense) and is now revealed to have done that.

Who was on the other side of these losing trades? People need to follow the money trail. Where did the money go?

There are people who called the Alameda / FTX scam from day one, before FTX was even created (Alameda already existed). Then there are others, like Marc Cohodes, who realized SBF / FTX was a fraud when they looked into it. It's these people we should listen to. They knew SBF was full of shit back then and he's still full of shit now.

I do not buy the "inappropriate investments" angle. To me it was defrauding both users and investors by any means possible and funneling the money into the Bahamian blackhole. While putting the blame on "leveraged trades without stop-losses gone wrong".

There are just way too many things that do not add up: SBF/FTX bought a bank which belonged to the owners of Deltec in the Bahamas (the bank behind the whole iFinex (tether+Bitfinex) fraud, except that one hasn't blown yet).

And the latest amazing development: the current Bahamas attorney general used to work for... Deltec.

There's only one thing to say: you cannot make that shit up.

I don't think any movie or book writer could ever come up with something that insane.

⬐ divbzero

> Who was on the other side of these losing trades? People need to follow the money trail. Where did the money go?

There doesn’t have to be another side to the losses. If Alameda / FTX was holding assets that depreciate in value, they would book losses along with everyone else holding the same assets.

⬐ medvezhenok

Any time someone loses value, someone else gains it (in the short term), short of destruction of physical or knowledge capital (i.e. WWII bombing raids). We mark things in dollars but real value is measured in resources, physical capital, and intangible capital (rather than USD). Unless any of that was lost, the $ value losses just re-accrue to someone else instead.

This is different from imaginary value inflating and disappearing (i.e. tokens that never had liquidity - where mark to market never made sense, etc). In that case the whole thing is a mirage.

But if $8 billion dollars went into FTX, that money does not just "disappear" from depreciation - someone else's (or many people's) purchasing power increased in relative terms proportional to the losses suffered by FTX's creditors/depositors.

⬐ SV_BubbleTime

Incorrect.

Value can be created and sent back to ether. It’s not a zero sum closed system.

Let’s look at NFTs, they weren’t ever worth anything but some people thought they were, and counted them like they were, and convinced dumb people to pay for them at these prices, but it was all imaginary. The ones that never sold are just as worthless as the ones that did. The entire market collapsed, the “value” is really just gone, no one “has it”.

⬐ helloworld11

But no. Those NFTs never had anything but subjective bubble value to begin with and cost next to nothing to create too. The money transferred in exchange for changing ownership of them passed to other hands but didn't disappear. Its much more concrete value wasn't lost and nothing was destroyed in the process except the wispy perceived value of the digital NFT tokens that had (again) cost nothing to create in the first place.

⬐ kaashif

The point they're making, I think, is that FTX bought various shitcoins from other people in exchange for USD. Value can disappear, but that's not what happened to the actual dollars they spent.

I'm not positive this whole thing was some kind of planned conspiracy, it just seems like idiocy and fraud catching up with them. I don't think any competent fraudster would get caught in such an embarrassing way.

⬐ iudqnolq

One theory is that it was their users. That is, Alameda lost huge amounts taking the other side of trades on FTX, and then FTX stole customer money and gave it to Alameda to compensate

⬐ remarkEon

Given this all happened on the "block chain", wouldn't it be possible to confirm this theory?

Btw, I find this explanation compelling - I'm not challenging it necessarily.

⬐ cykros

The block chain shows the bitcoin moving from one address to another. That's about it. It doesn't say what was exchanged for it, be that USD, FTT, or any other token, good, or service.

And those addresses are potentially pseudonymous to boot, at least if the BTC is withdrawn. If it ISN'T withdrawn, it's entirely plausible that the transactions took place off chain in the first place -- simply moving numbers around in an internal database while staying right in the same, FTX owned wallet. What you'd call in the trad fi space "holding assets in street name."

⬐ jacquesc

What is the significance of Deltec? Never heard of it

⬐ RC_ITR

I mean it's always easy to look for a conspiracy, but is it really so crazy to think that in a market that lost $2tn of "value" (I know crypto market caps are fake, but bear with me) that the most aggressive trader out there lost $8bn?

When I say investments, I don't mean VC investments, I mean Crypto trades.

⬐ yakak

The default in finance is conspiracy, this is why it has so much regulation. There's not a managed fund on earth that doesn't have a few fund managers that go around winking at 3rd parties and discussing ways to leverage their position and the limits of what they are allowed to accept.

⬐ divbzero

Long Term Capital Management [1] is a good example of a company with “good, but illiquid investments” that failed because they made trades that went the wrong way temporarily, ran out of margin, and had to be rescued with a bailout before the trades recovered. Market prices stabilized after the bailout and the rescuers eventually exited the trades with a small profit.

I agree with your assessment that Alameda / FTX put customer deposits into “completely inappropriate investments” but there is a bit of a judgment call involved. Crypto fanatics could argue that the market will bounce back and those investments will be successful in the end.

[1]: https://en.wikipedia.org/wiki/Long-Term_Capital_Management

⬐ TacticalCoder

> I agree with your assessment that Alameda / FTX put customer deposits into “completely inappropriate investments”

And what about customers deposits that ended up in $300m+ real-estate in the Bahamas (including some for SBF's parents, which they now said they'd be giving back to FTX: how generous once caught with the hand in the cookie jar)?

And what about the $100m or maybe more in political donation? ($40m from SBF to dems, now he says he gave the same account to reps but kept it shadow for it'd ruin his woke image and there's one of his accomplice who gave at least $12m to reps too)

That's already $400m right there that haven't been wiped out due to a market downturn.

And then the naming rights, insane ads, etc.

"Oops sorry we fucked up, we used your funds to gamble with 100x leverage like degens and lost it all (but don't pay too much attention to all the money we actually siphoned out of the system)".

I don't think you can compare LTCM to FTX/Alameda (I'm not saying you explicitely did but it's dubious). We're talking about SBF guy describing his magic ponzi box and Matt Levine answering him (april 2022 I think):

"I think of myself as like a fairly cynical person. And that was so much more cynical than how I would've described farming. You're just like, well, I'm in the Ponzi business and it's pretty good.".

FTX/Alameda is more Enron than LTCM.

⬐ zarzavat

> FTX/Alameda is more Enron than LTCM.

FTX makes even Enron look like saints. FTX took money that wasn’t theirs and spent it. Theft on a massive scale. There’s not even a veneer of legality or deniability.

⬐ rsj_hn

counterpoint: FTX only robbed people doing business with FTX. Enron robbed all of California. Tens of millions of households had to pay sky high electricity bills because of Enron manipulating the electricity market in California. The damage was about $40-50 Billion dollars. FTX owes less than a tenth of that.

⬐ c7b

Exactly, shameful framing. But it should be noted that he veered onto the clearly wrong path even sooner than you suggest: by taking user deposits and putting them into anything other than what the users had instructed them to hold with it. In regulated stock brokers, the stocks that are held on behalf of users are put into segregated accounts, meaning that they belong to users even if the broker becomes insolvent. By breaking this 1:1 link between users' funds and the corresponding assets, he's already creating mayhem, even if the investments had turned out to be successful. A broker simply has no business whatsoever to speculate with users' funds.

⬐ hef19898

Based on what we know how FTX was run internally, it might well be the case SBF simoly doesn't know the difference between liquidity and solvency. Which doesn't mean that FTX wasn't a scam, more than thing can be true at the same tike after all.

⬐ SilverBirch

The problem with claiming SBF doesn't know the difference between solvency and liquidity, then how come he's figured out which one he needs to claim for his legal defence. If he doesn't know the difference, he wouldn't be so deliberate about claiming one happened not the other.

⬐ bena

Turtles all the way down. Or in this case, stupidity. He knows one is a thing bad people do and the other isn't. He believes he is not a bad person. Not-bad people don't do bad things. So obviously he couldn't have done the bad thing, because he's not a bad person.

⬐ hef19898

Maybe he's smart enough to listen to his lawyers. Or maybe he knows the difference. He still seems to be a criminal fraudster and crook, the other questions are secondery concerns mostly driven by curiosity.

We'll have to wait for any verdicts and court rulings so to onow what exactly went down, this thing is far from having reaching the end of the beginning.

⬐ greenyoda

> Maybe he's smart enough to listen to his lawyers.

I doubt that his lawyers would be happy with him making public statements about his business dealings right now.

⬐ smcl

100% re the "aww shucks" thing - his only way out of this is to convince everyone he was just a naive little guy with a heart of gold who got too successful for his own good, so we're going to see a lot of this and the "I can't actually code" stuff as the final few chapters of the FTX story play out.

⬐ SV_BubbleTime

He said something about altruism and funded Democrats for like the entire midterm season… I mean, how can this be a bad guy?

⬐ eftychis

Well technically it is a liquidity crisis, as being insolvent is a liquidity crisis. (If you have no assets, you have no liquid, class 1 assets by definition.) It is similar to the extreme example of "bombing a building to the ground and then saying we lacked a roof."

⬐ wyldfire

Is it at all possible that SBF is "merely" inept (yet still culpable)? Or is there any way to know whether SBF knew what he was doing was making FTX insolvent?

⬐ SilverBirch

The problem with claiming he was just inept is that he was actively doing things to hide the insolvency - pumping the value of assets in which he controlled the market, doing deals with other insolvent entities to hide any defaults, and conditioning deals on collateral being held on FTX. It was very clear many months back that Alameda was underwater, and that whoever was their lender was going to face a massive default. SBF was both the issuer, borrower and lender of the FTT tokens - and none of that money was meant to be associated with customer assets. There are some simple questions of "Why did SBF do a load of deals in the spring which were clearly money losing?" and the answer is "The only possible reason to do those deals is to hide the massive losses he'd incurred".

⬐ RC_ITR

No. His resume shows he's smart enough to understand how market-making and trading works, he just bought into his own mythos and thought he could out-trade the world.

If he was actually as skilled as he thought, his strategy could have made him unimaginably wealthy, but he wasn't.

I'd compare it to a magician throwing swords at an assistant on stage. You better be sure that you know what you're doing before you do it.

⬐ wyldfire

So that bonkers "magic box" interview he gave - was he deliberately planning a naivety defense while executing theft of the deposits?

⬐ MrMan

no he was bragging - a lot of the "trading" alameda did was participating and orchestrating "boxes" like what he so smugly described in the interview, which was horrifying to listen to.

⬐ trident5000

I have no idea how this plays out.

One question is what was in the agreement for FTX users? Can FTX use deposits for investments and to fund his other businesses?

In my view the path to prison for SBF is likely to come in the form of misleading investors rather than customers, but I dont know what the pitch deck told them at the time of funding. It might not even be against the law regarding what he did to customers despite the immense destruction.

⬐ cykros

Some of that will ultimately be determined by whether or not it's against Bahamian law, rather than US law, which opens up a whole 'nother can of worms. The fact that he had over 100 companies he was operating makes this a dizzying case to speculate on the specifics of from a legality standpoint. I don't envy anyone who gets tapped for jury duty for this case.

⬐ tpxl

> One question is what was in the agreement for FTX users? Can FTX use deposits for investments and to fund his other businesses?

I doubt you can just put that in the ToS and EULA.

> In my view the path to prison for SBF is likely to come in the form of misleading investors rather than customers

This isn't like Theranos, there is clear and provable monetary harm that was done.

⬐ trident5000

"monetary harm" isnt a broken law. Im wondering what the specific rules are that he broke that could land him in jail for mismanaging customer funds. Its an odd case because the space has little regulation.

⬐ dibt

> took deposits, put them in completely inappropriate investments (many of which are now worthless, all of which were speculative nonsense)

I think it's naive to think this is the case. It's reasonable to assume he knows those tokens couldn't have been worth what he claims they're worth, before or after the FTX collapse. The tokens didn't suddenly drop in value. He has experience as a market maker and remaining delta-neutral. We must assume all of what he claims is deception and/or preparation for the court battle.

Remember that there was a pamphlet for Alameda investors that promised something like "15% return with no risk." FTX also had an "earn" product that was paid out from a marketing budget. These were deliberate actions. They knew what they were doing.

⬐ RC_ITR

> The tokens didn't suddenly drop in value.

May I point you to a chart showing the price of Solana (SBF's preferred token)? Down 80% in four months is a pretty sudden drop in value. To be clear, I think the fraud started then, but that was after the damage had been done.

>He has experience as a market maker and remaining delta-neutral

Yeah, but market makers in unexpectedly lopsided markets lose all the time. It's the risk that enables them to 'earn' a take rate.

⬐ dibt

These were the top tokens they held in order of how they marked them on their balance sheet:

FTT $5.9B

SRM $5.4B

SOL $2.2B

MAPS $865M

Found here:

https://images.squarespace-cdn.com/content/v1/596a07c029687f...

>May I point you to a chart showing the price of Solana (SBF's preferred token)? Down 80% in four months is a pretty sudden drop in value.

FTT, SRM, and MAPS are the garbage tokens they claimed were worth more than they actually were. They each had major drawdowns more than 4 months ago. SOL even had a 60% drawdown by March. None of this was sudden. My point is they knew they were in trouble long before any of the solvency/liquidity issues.

It's thought that their trouble started in May during the Luna/Terra collapse. Alameda's loans were pulled when 3AC blew up. That's when they minted more FTT. SRM also had similar supply increases out of nowhere. They weren't investments as you said. They were tokens they could mint at any time to collateralize new loans.

Maybe they thought the same could be done with SOL? It is known to be highly centralized. There are also known issues with the Solana ecosystem where TVL for layer 2 tokens were double counted, making it seem more valuable.

⬐ remarkEon

>That's when they minted more FTT.

Can you explain how exactly they did this? I want to understand, on a technical level, how they "minted" more of these tokens.

⬐ RC_ITR

I'm not sure what point you're trying to make by showing me they held $2bn of Solana in Nov-22 (itself, like all crypto, a made up and useless/worthless thing) that was worth $10bn in Nov-21.

Like sure, to make themselves feel better when they stared at Excel, they minted FTT to fill the gap, but so what?

To your point, just because I mint 1bn coins and sell one to my roommate for $1, it doesn't actually change the fact that I lost $700mn on $TSLA (the true problem).

EDIT: Maybe to make my point more clear - the one good thing about finance is that if I sell a Orange juice futures contract, I need to get the oranges from somewhere, or I can go to jail.

Crypto's innovation is eliminating the need for oranges, but turns out that's not an innovation at all

⬐ dibt

> (itself, like all crypto, a made up and useless/worthless thing)

oh... I see what's happening here. Good luck on your crusade.

⬐ MrMan

maybe its hard to be delta neutral in crypto where all the coins are like 95% correlated.

⬐ cykros

I think it's likely he initially was using other investments that were similarly worthless, but which may not have been quite so obviously worthless to him at the time. Don't forget about the Luna/Terra debacle back in May, and the fact that he was running around buying up failing firms in the crypto space. The house of cards was already crumbling, and he was sitting on top in a panic trying to prop up the base before his pinnacle fell. The results were what we'd expect in that situation.

⬐ krosaen

> where he took deposits, put them in completely inappropriate investments

It's not just that they were inappropriate, taking assets from FTX to prop up Alameda is fraudulent and should never have happened right? He claimed there was a firewall between the organizations.

⬐ RC_ITR

I mean, this is all trickle out from an unrealizable narrator (himself), but he claims they intermingled bank accounts and didn't have good controls around that, then everyone "forgot" whose cash was whose? Regardless of what the actual forensic cashflow accounting ends up telling us, the mere fact that two distinct organizations had comingled accounts is insane.

I agree with you that alone would be one of the worst things a company did, but then they also did what I said in regards to the investments, so honestly who knows?

I'm sure something crazy will come out like the amphetamines they were on were made by a factory that Alameda bought with FTX deposits made through Iran at this rate.

⬐ humanlion87

Well he accidentally breached the firewall /s

⬐ smcl

This part of the story is where we are starting to see the MIT grad and former Jane Street trader claim to be actually quite stupid and naive. His excuse is that they took customers' account deposits to FTX via an account Alameda held, then credited the FTX accounts with balances without ringfencing those funds in that Alameda account (or I guess opening an FTX one and moving them there, not sure why they didn't do that in the first place...) so they got double-spent, so to speak. Which would be kinda funny for a crypto-firm, but I don't buy it.