> ? It was public that FTX money came from running a crypto exchange, but that FTX's CEO (SBF) secretly diverted customer funds to his hedge fund (Alameda) doesn't seem like something people would have discovered in due diligence.
I'm guessing algebra is difficult for journalists.
> Major investors, with lots of money on the line, also didn't catch this.
Major investors had all the incentives to keep the scam going as they stood to make big money from the scam.
Journalists should have the incentives to expose the scams, except they were not in this ( and probably some other ) case because they were either getting money from the scam or were trying to be the best cheerleaders possible in hope of getting money from the scam.
No, stop trying to spin this. It's a stereotypical crypto story.
> Sam, Caroline, and everyone at the top of FTX and Alameda have very close family ties to key power brokers on Wall Street, which is how they were able to run this scam.
Who was Do Kwon's wall street family tie?
> FTX has also lobbied extensively for harsh regulations on DeFi, which is a key reason that he was hated by people in the cryptocurrency space, and adored by Wall Street.
Centralized exchange lobbies against decentralized exchange, isn't that just business?
> The only reason FTX got caught is because of evidence they left on-chain.
Really? Source? From what I know it was just good old balance sheet (probably an Excel file, even) that got leaked.
> Any other investment fund might have been able to sweep it all under the rug, but since the massive payout from FTX to Alameda was visible for the world to see, the corruption was obvious, and the whole thing collapsed
Utter bull. FTX paid Alameda a long time ago. No one knew this story until 2 days ago because none of this works the way you are talking about.
> fact that FTX was selling coins without delivering them
I think you missed the point parent was making about the fraud of accepting money for $crypto_thing and not actually buying $crypto_thing and just moving the money to the Alameda hedge fund. All of that purchasing never impacted the prices of $crypto_thing.
The other thing that will be interesting is if they uncover fraud around $crypto_things that were supposedly tracking actual SEC regulated securities as a derivative and if any Wall Street finance firms were using those FTX derivatives as part of their business.
> who were told their money was theirs was in fact lent to Alameda.
Even if we assume for a second that this wasn’t some sort of overt theft scheme and not only just an accounting failure with double counted deposits, what was the least bad scenario here?
That SBF et al were so obsessed with their altruistic charity stuff that they thought they could gamble their billions and turn it into 100 billion and become neo-Bill Gates?
Some kids who had no rules making crazy high risk bets on other crypto stuff, blindly believing in their ability and leveraging their parent company’s name to over extend themselves… Then FTX came to the rescue with customer deposits and hoping growth would cover the downside, while not telling anyone or changing controls as far back as April 2021?
A better comparison would be a stock brokerage that took your money to buy specific stocks on your behalf but then did something totally different, including “investing” in illiquid assets.
If they had just bought the stock you requested, then they could just liquidate your stock at market price when you said you want to sell.
This was not the situation that FTX was/is in.
Instead, the way FTX allocated money/assets was suspicious (at best) if not flat out irresponsible and deceptive.
Also, FTX was not and is not a bank, and the idea that this is levering in the same way regulated banks lever is laughable.
> compare the earnings of NASDAQ with the "earnings" of FTX
Yes? Everyone knew that volume in crypto was too high and likely irrational. But that wasn't much indication that FTX was behaving fraudulently: they seemed to be just doing the straightforward work of helping match buyers and sellers and taking a cut.
> if he has that much time to be a clown what are the odds of him actually running a company
Lots of CEOs seem to do things like this; again that's not a strong signal. Also doesn't have anything to do with algebra.
It absolutely is a media failure. It exposed how corrupt some outlets are, in insidious ways. The media built a positive image of SBF and FTX without ever doing serious investigative job because he was giving to the right people... and still, when FTX scam scramble, instead of apologizing the same media continued to be lenient toward the fraudster trying to spin the scammer as some idealist who just made bad bets, when he was already deep into his scam.
> Journalists don't have the privilege of looking deeply inside books and how company conducts it's business, but auditors have.
Many people in Crypto and finance had already figured out FTX business model was some sort of scam, the media and their glowing reviews of SBF weren't interested in hearing them, because SBF was being too generous about donations...
>> an organization such as FTX comprises a complex interaction of financial, technological and legal issues.
>It is unclear if this complexity was designed specifically to hide blatant acts of fraud or just cover up incompetence. Either way, the lack of transparency does not look good for him.
I would strongly suggest neither. I did not intend to imply that this complexity was specific to FTX but rather all organizations in that field. The complexity is a unavoidable result of combining the demands of financial, technological and most significantly legal aspects.
What the article says about market making on FTX is true, but that doesn't bring in billions. The uninformed retail order flow for the crypto market is not large enough for that. It probably would've been a ~$10M/year business, or something on that order. Great, but who wants a few million? Can't even do political stuff with that. They wanted billions! And the only obvious way to get there is by making huge risky directional bets on shitcoins and other crypto ventures, which is what happened. Instead of building a sound (okay, still shady because you're front-running) business with Alameda, SBF decided to gamble away the money on VC-style bets trying to become a trillionaire.
>2. It went as described in the article - for the capital I allocated to Didact, I beat the market (SPY) by ~20% since inception.
This seems extremely hard to believe. You should be running a multi-billion $ Quant fund if this is the case. The idea that you would try to push this as a newsletter rather than just taking investor money and becoming a billionaire literally makes the story seem farcical.
> We are literally hearing only one side of the story
Which side of the story do you think is missing? SBF has been on a huge media tour.
> maybe there is a 1% chance that the books were not cooked, that the rapid crypto crash combined with bad accounting practices (not fraud) did actually lead to losing billions of dollars.
How do you factor in the alleged backdoor coded into FTX or the fact they hired someone who had previously helped cover up criminal activity as a regulatory/compliance officer?
If Alameda really lost billions or tens in billions in trades, who was on the other side to collect the money? To random people who sold BTC at $64K and then all the way down?
Or were the losing trades a way to syphon billions somewhere else?
Seen the amount involved, the policital donations, the articles in the media portraying the guy as an altruistic genius and seen that tether/USDT/Bitfinex/Deltec are also in the Bahamas, it looks like, maybe, fucking maybe, it's time for actual journalism, actual research, actual congress hearings (at least one is coming in december btw), etc. about what's going on.
Do you really believe it's just a few trades gone wrong?
> Its actually quite a simple story here. FTX lent the money to someone else (even if Alameda Research is also owned by SBF), and that other group lost the money.
For a start you're forgetting the part where FTX was also pumping and then dumping tokens on their customers. Some tokens they created themselves. They're also somehow tied to hundreds of million of USDs getting frozen by authorities, where FTX then quickly raised money. That's fraud, too.
It's much more than "simple". There's serious shit going on.
When Alameda, before FTX existed, gave investors leaflets saying Alameda had guaranteed 20% returns and it could sustain 20% profits on as many billions as they would get. This was a lie and criminally defrauding investors already.
SBF never did the Kimchi trade (i.e. arbitraging the US/Asia Bitcoin price differences) at scale (it's not even clear if he even managed to do it at all: he claims he did, but he's a pathological liar who kept lying in court).
So Alameda was already a scam. Then FTX was a bigger scam, to keep the Alameda scam going.
> Hmm her fund has gotten totally clobbered since early 2021. If she were truly privy to insider info, why would her fund do so bad?
The claim is she knew about this information based off the timing of the trade. It’s not evidence but it’s certainly suspicious.
It does not follow that she would necessarily know enough other information to perform well. That’s a much higher bar, especially when tech has been pretty deep in the red.
>MAYBE you can feel some emotion for the investors whose money was essentially stolen, by a scam artist?
Please explain what the scam was, and how money was forcefully or fraudulent taken from the investors. Was the scam the public knowledge of a CEO using private jets to smoke weed and vacation with company money and speaking in cultish phrases? Was it the lack of cash flow? Was it the obvious lack of any moat?
I'm guessing algebra is difficult for journalists.
> Major investors, with lots of money on the line, also didn't catch this.
Major investors had all the incentives to keep the scam going as they stood to make big money from the scam.
Journalists should have the incentives to expose the scams, except they were not in this ( and probably some other ) case because they were either getting money from the scam or were trying to be the best cheerleaders possible in hope of getting money from the scam.
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