BITCOIN, Heists, Thefts, Hacks, Scams, and Losses

[Office_Shredder]

It appears Brady may have invested in FTX. Did he own a stake? Was he a board member? Or was he simply hired to market the company?

He owned a stake. The terms are not at all public (some places say 600 million, but that is like all his money so he probably didn't put that much in the company)

 

[russ_watters]

Many cryptos are a scam, yes, but not all of them.

It depends on how you define "scam". Were beanie babies a scam or just a cleverly orchestrated but honest bubble that got out of hand? I'm not sure if any of the people who run the exchanges are honest believers, but I'm also not sure it matters. I'm not a person who believes that well-meaning ignorance is a viable excuse for wrongdoing.

 

[Office_Shredder]

I'm not a person who believes that well-meaning ignorance is a viable excuse for wrongdoing.

Isn't Tom brady at best funneling money into a ponzi scheme by ignorance? This post makes it sound like you do think he is to blame on some level.

 

[russ_watters]

Isn't Tom brady at best funneling money into a ponzi scheme by ignorance? This post makes it sound like you do think he is to blame on some level.

No. He's a talking billboard, and that's it. The fact that he's a human with a brain is not relevant because it isn't being used - that's just not his role. His responsibility for the company is the same as the Geico Gecko's.

 

[gmax137]

No. He's a talking billboard, and that's it. The fact that he's a human with a brain is not relevant because it isn't being used - that's just not his role. His responsibility for the company is the same as the Geico Gecko's.

I can't disagree with this, but... There is a reason celebrities are used as spokesmen; they apparently do have a convincing effect on at least some viewers. So, while we can agree that "the viewers should be aware that Tom Brady is not an investment advisor," we should also recognize that many viewers will be swayed by his endorsement. And so, it seems that endorsing a criminal (?) enterprise should really have some consequences. In other words, we "wish" Brady would be penalized somehow.

This got me thinking, have you seen the advertisement where Police Commissioner Reagan is endorsing reverse mortgage loans? He even says something like "If I thought this is a scam I wouldn't do this commercial." So, should we really really believe him?

 

[russ_watters]

I can't disagree with this, but... There is a reason celebrities are used as spokesmen; they apparently do have a convincing effect on at least some viewers. So, while we can agree that "the viewers should be aware that Tom Brady is not an investment advisor," we should also recognize that many viewers will be swayed by his endorsement.

Oh, absolutely. Because this talking billboard is a licensed representation of an actual person, it holds more sway with some people than a cartoon reptile voiced by an unknown person. It's something I don't get, but I'm aware it exists. Branded clothing makes sense to me because you are wearing the actual licensed image/logo. Other celebrity endorsements don't. No, Tiger, I'm not buying a Buick. I don't care that they lent you one.

And so, it seems that endorsing a criminal (?) enterprise should really have some consequences. In other words, we "wish" Brady would be penalized somehow.

Yes, I can totally see why it makes some people mad at him. I have bigger beef with him though.

This got me thinking, have you seen the advertisement where Police Commissioner Reagan is endorsing reverse mortgage loans? He even says something like "If I thought this is a scam I wouldn't do this commercial." So, should we really really believe him?

No, I haven't, but while that's sleazy wording it doesn't actually say anything of value. It's not inconsistent with "I haven't put any thought into this."

 

[Office_Shredder]

It's not a licensed representation of a person
It *is* a person. They have to have some modicum of responsibility for what they say. (This is not saying that Brady has any legal liability in this case)

 

[Vanadium 50]

This would be a fascinating topic for another thread.

OK, so a CGI gecko is at one end of the spectrum, and Tom Brady i(or maybe William Shatner) is at the other. Where does one put Progressive Flo? AT&T Lily? The Geico Cavemen? Life Cereal Mikey? Clara "Where's The Beef" Peller?

 

[Astronuc]

It's astounding how FTX continued to operate without a sound financial structure or even standard accounting practices. Sloppy spreadsheets with erroneous labels should have been red flags.

Fortune on Yahoo - How to raise $2 billion with a sloppy Excel spreadsheet (How is that even possible?!)
https://finance.yahoo.com/news/raise-2-billion-sloppy-excel-113045531.html

Luisa Beltran obtained documents that showcase SBF's style. “With each round FTX raised, Bankman-Fried sent a spreadsheet to potential investors displaying items like revenue, profit and losses, daily users, and expenses for FTX, according to an executive who received the documents,” Beltran writes. “Fortune was sent two sets of spreadsheets on the condition that we could review but not publish the original documents, which were dated December 2021 and June 2022.”

She continued, “Taken together, the documents show an early picture of an outrageously fast-growing enterprise run by a founder who eschewed traditional management structures, board oversight, teams of accountants and lawyers, and other standard practices of businesses that grow to this size. The spreadsheets are a far cry from audited financials; rather, they appear to be homespun Excel files, which are at times confusing and have inaccurate labels."

"They are sales documents and do not provide a clear accounting of how FTX was valuing its various tokens or liabilities when calculating figures such as 'net profits,'" Beltran writes.

Edit/update - Investor Who Pumped Millions Into Bankrupt Crypto Exchange Says There Was ‘Nothing’ They Could Have Done Differently
https://www.msn.com/en-us/news/poli...-they-could-have-done-differently/ar-AA14hqAC

Doug Leone, billionaire venture capitalist at investment firm Sequoia Capital, said his firm had done “careful due diligence” when investing in now-bankrupt crypto exchange FTX, according to CNBC Friday.

Really?! Actual 'due diligence' is what they could have done!

 

[russ_watters]

It's not a licensed representation of a person
It *is* a person.

I'm aware that Brady is a real person of course. What I mean by what I'm saying is that what we get from celebrity endorsements is exactly what you see/hear on the screen and absolutely nothing more. The reason they work is that people infer more than what they see based on what they know or think about the history of the person even though that has absolutely no bearing on what you are seeing on the screen. From that perspective, it's fake, not unlike an actor endorsing a product who you only know from his movies/TV (Wilfred Brimley).

And not for nothing, but Brady is famous for throwing a football. His relevance to a financial company is absolute zero.

This is very much different from, say, Dr. Oz hawking weight loss pills.

They have to have some modicum of responsibility for what they say.

Why/based on what?

 

[Office_Shredder]

Why/based on what?

Your argument is as long as someone pays you to say something and you aren't regarded as an expert in that thing, then you have no moral or legal responsibility to decide whether to take that money?

Like, if someone blames blonde people for all the world's problems and runs a commercial where Brady gets on TV and says "scalp a blond to help the world get along" while encouraging people to commit genocide, like yeah, I'm going to say that's messed up, and I'm not going to think "well nobody should regard him as an expert on who to genocide anyway so it's their fault for listening to him"

 

[russ_watters]

Your argument is as long as someone pays you to say something and you aren't regarded as an expert in that thing, then you have no moral or legal responsibility to decide whether to take that money?

I'm not talking about moral responsibility at all. If anything, I agreed with gmax that under certain circumstances it can be sleazy. This is about legal responsibility only. And I'd like to hear your actual logic please.

Note, I'm of course not a lawyer. I've just started researching the actual legalities. And I'm also aware that laws are a matter of choice by the people who are writing them, and aren't required to make sense.
See: https://www.ftc.gov/sites/default/f...stimonials/091005revisedendorsementguides.pdf

What I've found so far is that when the celebrity is a known expert in what they are advertising, then they have clear responsibility over what they are saying because the viewing public will assume they are using their expertise. Clearly, Brady has no known expertise in this area.

When the celebrity is not an expert it becomes less clear, because they may be a known user of the product. The link above mentions infomercials, where celebrities demonstrate the product they are hawking. That's actual use and even if they aren't an expert, their opinions will sound like their own because you can see them using the product (so worded because maybe they are reading from a script, but that's irrelevant). So a lot comes down to whether the audience should be able to reasonably conclude that they are getting a real opinion from the actual person, who is actually using and knows about the product, and not just hearing a mindless talking billboard read a script talking about a subject about which they know nothing.

That's how I view Brady here, though I haven't actually heard any of Brady's work (except that one vid you just posted, which said nothing of substance). The Matt Damon crypto. com add is just fluff. "don't be left out" type stuff.

If anything, I think Brady might want to sue FTX.

Like, if someone blames blonde people for all the world's problems and runs a commercial where Brady gets on TV and says "scalp a blond to help the world get along" while encouraging people to commit genocide, like yeah, I'm going to say that's messed up, and I'm not going to think "well nobody should regard him as an expert on who to genocide anyway so it's their fault for listening to him"

What? I can't even...

[sorry, but I'm going to have limited keyboard time for the next couple of days...]

 

[russ_watters]

One more piece to this issue I want to point out before I go. I think most of us are expecting that FTX will be found to be fraudulent. That is different than just a shoddy product. It takes a lot more than just knowledge of the product to know that something is wrong when it's fraud by the Inner Circle management of the company. Now it is true that I basically think all crypto is a scam but that is with a lowercase s not a capital S. I do not expect a court will rule that all crypto is inherently fraudulent. As a result I don't think anybody is going to go to jail or be successfully sued over running a modern Beanie Baby marketplace, as long as it is an honest one.

 

[kyphysics]

Hypothetically, if you're a crypto supporter, how should the industry respond to this?
It seems weird, b/c part of the "appeal" of BTC/crypto is decentralization and lack of regulations. . . .Yet, those same selling points make it a target of heists and/or other "attacks," right?
Not saying the FTX Ponzi-gambling scheme was a heist/attack, since it was more about leadership's abuse of client funds, but just saying. . . .the industry as a whole just is constantly under attack.

You don't see hackers/thieves making off with Vanguard, Fidelity, Schwab accounts' money every other month to the tune of hundreds of billions. You don't see Bank of America, Wells Fargo, Truist, etc. getting robbed of hundreds of billions every month.

This this seems the story of crypto recently. What's the solution?

 

[Rive]

This this seems the story of crypto recently. What's the solution?

Well, money (and any regular stock) has those regulations (which crypto meant to circumvent, at least partially) around themselves (mostly) to prevent these kind of cases.
Those regulations are the results of hundreds of years of evolution and learning (and they are still not complete).
So the solution is - making crypto real (regulated) money/stock/market.
It's just ... will that be still crypto?

 

[Office_Shredder]

A lot of people, somewhat reasonably, say the real problem is that crypto was designed for you to keep your money in your wallet, not on an exchange. Crypto's one big advantage is you don't need this central clearing place to hold all your money. Whereas it's basically(?) Impossible for you to own a share of apple by yourself.

The flip side is holding the coin in your own wallet means you can't transact in anything other than your coin, and as we know crypto currency is fairly useless as a currency on its own right now. So you have to keep moving money back and forth with the exchange as you want to do trades.

 

[BWV]

Hypothetically, if you're a crypto supporter, how should the industry respond to this?
It seems weird, b/c part of the "appeal" of BTC/crypto is decentralization and lack of regulations. . . .Yet, those same selling points make it a target of heists and/or other "attacks," right?
Not saying the FTX Ponzi-gambling scheme was a heist/attack, since it was more about leadership's abuse of client funds, but just saying. . . .the industry as a whole just is constantly under attack.

You don't see hackers/thieves making off with Vanguard, Fidelity, Schwab accounts' money every other month to the tune of hundreds of billions. You don't see Bank of America, Wells Fargo, Truist, etc. getting robbed of hundreds of billions every month.

This this seems the story of crypto recently. What's the solution?

This is whats so f—-ing dumb, to fix the problem you need to recreate the government regulated financial system - banking regs, deposit insurance etc. that crypto was supposed to replace

which is why the crypto scam is dead - a government regulated crypto banking system runs counter to the original value proposition, but the existing grifter ecosystem and failures means the end of institutional capital in the space.

the whole moronic system just needs to die

 

[artis]

Well the idea of a decentralized monetary system outside the dirty hands of politicians and big government sounds good, but the problem always is this - you deregulate the system but the "players" of that system are the same old humans with their ego centered nature and all it's flaws, so it's just a matter of time someone, or more like many, will use this deregulated space to their advantage.

Money, fame and power corrupts , there is no way around that unless you fundamentally change human nature, which well , you can't.
Therefore we are back to square 1 - need oversight...As for celebrities getting involved in branding shady products , well maybe I'm wrong but if your net worth is about 600 million and you are 40+ of age , maybe you should be responsible for hiring people to check whether the billion dollar company that pays you cash for ads is the right thing.
Fame does lend influence, and lately it has been the trend for people of all kinds of unrelated areas of expertise to have a big and public stand in other areas which they know little about , so even though I believe everyone is allowed to have an opinion but we have to be careful where that opinion turns into an active brainwashing campaign.

I mean there is a reason why I can't just go public and shout I want to kill someone, yeah it might be my opinion but it;s dangerous.
There is also a reason why men in uniform can't just go "out and about" however they like , it's not that every police officer has to be a know all expert, it;'s just that the uniform just like fame gives you a larger platform and some public standing and therefore it allows you to influence other people.
Seeing a police officer drink while on duty would show the wrong signal to society therefore we don't allow that , but how about famous athletes going public and convincing people to make risky economic decisions?...
Isn't that somewhat similar to a chemistry teacher making an ad that recommends injecting bleach as a safe recipe for a certain problem?
Oh wait , I think I recall someone who already said that publicly

In the end it's all a question of how much you can prove.

There's folks like Dr. Oz who sell fake crap for years and get away with it, but should they?

 

[artis]

By the way,

Sam Bankman Fried now more like Sam BANKRUPT Fried

Either way his "fried" now for sure.

 

[Astronuc]

WSJ on MSNBC - https://www.msn.com/en-us/video/news/ftx-s-workers-are-angry-and-financially-ruined/vi-AA14hh9r
Discussion of how employees were blind-sided and some wiped out financially. Most were in the dark because SBF and his management team didn't discuss matters among the general staff.

I'm still puzzled about tokens. Are they effectively derivatives, i.e.,. they derive value from some underlying crypto-currency. Why would one need to create tokens if one has crypto-currency, e.g., Bitcoin or Ethereum.

While I understand investing, I'm puzzled by trading - crypto-currency or tokens. Trading for what?

SBF didn't seem concerned about 'cash-flow' or the equivalent in crypto-currency. Certainly, Alameda needs to be investigated, as to how it (the principals) managed the investments (or mismanaged).

The misappropriation of customer (and employee) funds should be investigated. I would suspect there is some criminal liability there, but is it under Bahamian Law? Where does US law apply?

 

[artis]

I'm still puzzled about tokens. Are they effectively derivatives, i.e.,. they derive value from some underlying crypto-currency. Why would one need to create tokens if one has crypto-currency, e.g., Bitcoin or Ethereum.

From what i understand your correct. Even a digital token needs to be tied to some more fundamental underlying structure in order for it to have any real power.
Well the way I see it one reason might be to "cover up" the losses in your actual assets. Because when people started to run from FTX , SBF couldn't even cover their funds.

The misappropriation of customer (and employee) funds should be investigated. I would suspect there is some criminal liability there, but is it under Bahamian Law? Where does US law apply?

Well I might be stereotypical but it seems to me people who make their business in one of the minimally regulated tax havens are up to no good from the start.

 

[artis]

I think this is a good take on the whole affair

 

[Astronuc]

FTT was created out of thin air?! And then funds (investment capital) were secured to capitalize FTT, but then those funds got spent?!

It's stunning that no one questioned the FTT (FTX token) and it's underlying assets, which were mostly nonexistent. How do financial institutions hand over $100s to another institution without some kind of assurance (or due diligence)? This is stunningly unbelievable.Edit/update: What concerns about SBF and FTX looked like a year ago
https://finance.yahoo.com/news/a-mu...and-ftx-looked-like-a-year-ago-115535791.html

Roger (Parloff) noted that the whole notion of FTX being an overseas entity which allowed for more leveraged and esoteric crypto trading, but not for U.S. customers, was fraught.
. . .
Parloff also pointed out that the relationship between https://www.alameda-research.com/, the now bankrupt trading company which SBF co-founded, and FTX was problematic.

Apparently a significant conflict of interest!

August 12, 2021 - Portrait of a 29-year-old billionaire: Can Sam Bankman-Fried make his risky crypto business work?
https://finance.yahoo.com/ftx-ceo-sam-bankman-fried-profile-085444366.html

Last month, FTX—of which Bankman-Fried owns nearly 60%—completed an industry-record $900 million fundraising at an $18 billion valuation. That valuation was 18 times higher than it had been 17 months earlier, at FTX’s first-round fundraising in February 2020.

I'm puzzled how $0.9 billion becomes $18 billion other than arbitrarily multiplying by a factor 20, or offering some kind of token collateral.

Bankman-Fried also still owns 90% of Alameda Research, he says. Alameda’s digital wallet at FTX (which is not its only store of assets) contained over $10 billion in digital coins in mid-July, according to a screengrab he sent me. (More than $5 billion of that was “locked,” however—not yet eligible for conversion to conventional money—and another $4 billion was in FTT, a digital coin issued by FTX.)

Basically, we’ve seen two approaches to cryptocurrency exchanges so far. One category of operation—companies like Coinbase Global (COIN), which went public in April, and Gemini, founded by Cameron and Tyler Winklevoss in 2014—have set up U.S.-based operations that attempt to comply scrupulously with U.S. regulatory frameworks, even though those are cumbersome and ill-suited to the nascent asset-class. As a result, these companies offer a relatively limited set of offerings—mainly spot-market sales of a select list of cryptocurrencies. (In June 2020, FTX launched a U.S. subsidiary, FTX.US—with offices in Berkeley, Chicago, and Miami—which also takes that conservative approach.)

But were the funds in FTX.us safe from FTX (Bahamas)?

The second approach to cryptocurrency exchanges -

a set of much more lucrative companies—like BitMEX, Binance, Bitfinex, and FTX’s international exchange—have taken a much riskier approach. They have set up offshore, and have offered a wide array of innovative products, including crypto futures, swaps, other derivatives, and “tokenized stock” (digital assets said to be tethered to actual stock holdings held by a custodian somewhere, like, in FTX’s case, a German bank). The offshore exchanges have also let traders—including unsophisticated retail traders—buy many of these volatile instruments on margin. Until last month, for instance, several exchanges, including FTX, spotted their customers margin ratios as high as 100:1; that is, you could buy a $100,000 position in a crypto derivative with just a $1,000 deposit!

Big returns or Big (or Bigger) Losses.

 

[fluidistic]

I'm still puzzled about tokens. Are they effectively derivatives, i.e.,. they derive value from some underlying crypto-currency. Why would one need to create tokens if one has crypto-currency, e.g., Bitcoin or Ethereum.

I am not sure these terms are clear for you. Let's take a cryptocurrency, such as Bitcoin, or Ethereum. (Notice the capital letters). Their respective "tokens" are called bitcoins and ethers (no capital letter here), and these are the ones that are traded, and have some price in USD in exchanges, such as Binance/FTX, etc.
Now, Bitcoin and Ethereum "work" in very different ways. This alone should hint at an answer to your questioning. One wants to create a new cryptocurrency to make one that works "better" than the previous ones, for example. However this isn't the only reason. In the case of FFT, it is a token that "lives" in Ethereum's blockchain (it is a so-called ERC20 token, like many others), and FTX decided that whoever owned a certain amount of such a token would be granted a reduction in trading fees. That incentivizes some people to possess a certain amount of this token.

Things can get more complex if you want more information or more details.

While I understand investing, I'm puzzled by trading - crypto-currency or tokens. Trading for what?

1) Buy a certain amount of a particular cryptocurrency by spending X USD. Wait some years and sell it at Y, where Y > X.
2) Buy a certain amount of a particular cryptocurrency by spending X USD. Wait some years with the hopes you can buy a desired product (i.e. a house, or whatever), with the cryptocurrency, obviously with the goal of making a "cheap deal".
3) Get those like FTT, or BNB with the goal to get a reduced fees while trading other cryptocurrencies.

Note that I am not telling anyone to do this. These are just reasons I can think about about why to buy/trade cryptocurrencies.

 

[Astronuc]

The problem was that nothing of what he did was successful so he lost alot of money along the way but since he told no one then nobody knew, meanwhile he kept transferring real investment money into his own company, the news of which eventually got out + the value of his own FTT dropped dramatically because of general crypto lowering in value, then his rival Binance CEO decided to "dump" their own assets of FTT.
Sure other traders got scared dumped theirs too, until what do you know, Sam can't turn those dumped FTT's into real money any more to give back to the traders, because Sam had taken his real assets and plundered them and siphoned off to who knows where.

That is my understanding. Such activity seems criminal to me.

Interesting analogy to the dot.com blowup.

Between 1995 and 2000, the tech-heavy Nasdaq jumped 400% as internet usage surged, with investors piling into any stock with ".com" in its name.

But the Federal Reserve started raising interest rates in June 1999, which eroded those companies' cash flows and burst the tech bubble.

The Nasdaq had tumbled almost 80% from its peak by October 2002, with share prices of tech stocks including Amazon, Cisco, and current bitcoin bull Michael Saylor's MicroStrategy all plummeting.

https://www.msn.com/en-us/money/mar...ng-to-ever-regain-investors-trust/ar-AA14insB

Bitcoin has plunged by 76% since hitting a record close to $69,000 last November, and smaller tokens solana and polkadot are trading 90% off their highs.

The market started going south when the Fed (and central banks) started raising interest rates. Ostensibly, that was predictable, and Alameda should have been unwinding positions (bad loans?), but perhaps they couldn't if they were losing value.

I'm also wondering, why someone purportedly worth $billions ($16 billion) needs a loan for $1 billion, unless of course the alleged $16 billion is in iliquid assets, or simply counterfeit.

 

[kyphysics]

The flip side is holding the coin in your own wallet means you can't transact in anything other than your coin, and as we know crypto currency is fairly useless as a currency on its own right now. So you have to keep moving money back and forth with the exchange as you want to do trades.

Wait, so when I hear stories of businesses saying they accept bitcoin as payment, that's from an exchange? Sorry if this sounds ignorant, as I genuinely am not sure how this stuff works.

I was under the impression if Joe Blow owns, say, 2 bitcoins and stores it himself (not with a third party), then he can just offer that to the merchant he wants something from, no? Are you saying at the point of payment, Joe Blow needs to still interact with a third party?

 

[Office_Shredder]

Wait, so when I hear stories of businesses saying they accept bitcoin as payment, that's from an exchange? Sorry if this sounds ignorant, as I genuinely am not sure how this stuff works.

I was under the impression if Joe Blow owns, say, 2 bitcoins and stores it himself (not with a third party), then he can just offer that to the merchant he wants something from, no? Are you saying at the point of payment, Joe Blow needs to still interact with a third party?

No, this is mostly correct. If I have bitcoin in a wallet I can give it to you. This requires you to accept bitcoin as a payment (which isn't that common). The store owner probably wants to convert that back into dollars at some point, which also requires an exchange.

but let's suppose we're fully crypto. This is still weirdly tricky
. I still have to access my money
Your bitcoin (to take one example) is accessed by knowing a really long random string, like AefjkGU76ggGyjjFH678

Then from this string you generate a signature that people can verify you created, but nobody can easily fake. And then you send this signature off to the internet.

So like, how do you remember this key, and how do you generate new signatures? The answer of course is you don't, you have an app do it for you. This app is probably not made by you, so you're still trusting someone in this process.

 

[fluidistic]

No, this is mostly correct. If I have bitcoin in a wallet I can give it to you. This requires you to accept bitcoin as a payment (which isn't that common). The store owner probably wants to convert that back into dollars at some point, which also requires an exchange.

but let's suppose we're fully crypto. This is still weirdly tricky
. I still have to access my money
Your bitcoin (to take one example) is accessed by knowing a really long random string, like AefjkGU76ggGyjjFH678

Then from this string you generate a signature that people can verify you created, but nobody can easily fake. And then you send this signature off to the internet.

So like, how do you remember this key, and how do you generate new signatures? The answer of course is you don't, you have an app do it for you. This app is probably not made by you, so you're still trusting someone in this process.

The last part is done with QR codes. I am 99.99999% sure open source QR code scanner exist. You don't have to "trust" anything, since you can compile the code and use for yourself if you're really paranoid.
Note that there are also, apparently, P2P solutions on the Internet, without passing by an exchange.

 

[Office_Shredder]

The last part is done with QR codes. I am 99.99999% sure open source QR code scanner exist. You don't have to "trust" anything, since you can compile the code and use for yourself if you're really paranoid.
Note that there are also, apparently, P2P solutions on the Internet, without passing by an exchange.

Defi exchanges and dao's in theory are open code, but people still find exploits. The point is all of this requires more trust than holding a dollar bill in your hand, or even a credit card, for which you aren't liable for unapproved charges. Instead you have to hope an open source app doesn't have a sneaky backdoor, or else someone can steal all your money.

 

[morrobay]

I'm puzzled how $0.9 billion becomes $18 billion other than arbitrarily multiplying by a factor 20, or offering some kind of token collateral.

The explanation from some link that I do not have now: sbf/ftx would produce a cryptocurrency and only release a small quantity on the market, this resulted in a high valuation. While simultaneously producing a very large quantity of this same cryptocurrency and holding it away from the market. Now he assigns the same artificial high valuation from the limited open market to the massive quantities that he is holding.

 

[kyphysics]

The explanation from some link that I do not have now: sbf/ftx would produce a cryptocurrency and only release a small quantity on the market, this resulted in a high valuation. While simultaneously producing a very large quantity of this same cryptocurrency and holding it away from the market. Now he assigns the same artificial high valuation from the limited open market to the massive quantities that he is holding.

Did SBF/FTX disclose they were doing this and people STILL bought...b/c they genuinely valued those tokens that high? Or, did he hide it and that's why people bought what they thought was a much more limited item?

 

[morrobay]

I believe the latter. A restricted market supply that they manipulated to produce high artificial value. Then they assigned this valuation to a massive quantity that they just produced and held in their accounts to show $ Billions. The link was from some reply on r/cryptocurrency. reddit

 

[artis]

And then Binance sold all their FTX FTT all in once and that pushed the value of it down and now Sam had to pay out those who also wanted to sell but he couldn't because his total assets in terms of actual dollars were not in the billions but rather millions and that in turn was because he had taken the billions invested in his FTX and transferred some of that money to his personal firm Alameda and done who knows what with that money.

So much for his pledge to give most of his money away to philanthropy during his life, instead he plundered other people's money away against their will and lied in the process.

I guess the facade of driving a cheap toyota and eating vegan is not going to help much in court.

This is much like Theranos all over again, only Elizabeth Holmes actually probably believed she would do good eventually but her huge arrogance and personal mental problems fooled her and eventually she fooled everyone else ... for a while, but Sam simply tried to make money out of money with fraudulent practices and eventually failed doing so and now lost.

 

[fluidistic]

Defi exchanges and dao's in theory are open code, but people still find exploits. The point is all of this requires more trust than holding a dollar bill in your hand, or even a credit card, for which you aren't liable for unapproved charges. Instead you have to hope an open source app doesn't have a sneaky backdoor, or else someone can steal all your money.

The enormous difference between a qr code source code and a defi one is that one can be understood by noobs in programming (high level language) whereas the other is horrendously obscure, decompiled version of a program, usually on par with assembly and requieres a mastery in defi programming itself. There is a huge diff.

 

[Astronuc]

The explanation from some link that I do not have now: sbf/ftx would produce a cryptocurrency and only release a small quantity on the market, this resulted in a high valuation. While simultaneously producing a very large quantity of this same cryptocurrency and holding it away from the market. Now he assigns the same artificial high valuation from the limited open market to the massive quantities that he is holding.

I found an example of 'serum', one of their (FTX) tokens.

Bankman-Fried helped incubate the creation of serum, which was released in 2020. Serum has a low circulating supply of coins–initially, only 10% of it was freely tradeable, while the other 90% was locked up for years. But technically, he could extrapolate and assume that, if the circulating supply of serum was worth $1 billion, then the market value of all the coins in existence was $10 billion. Then he could get loans based on that higher valuation. Bankman-Fried ran this playbook with other digital assets too, which became known as “Sam coins” to industry insiders, crypto investor Jason Choi has written.

Choi concluded recently in a tweet, “This is likely how Alameda/FTX incurred the multi-billion-dollar hole: Alameda pledging illiquid collateral to borrow money to finance bets, which got margin called as markets went down this year.”

Investing Borrowed Money in Other Crypto Players

Another capital drain was venture investments. According to PitchBook, Alameda made more than 150 investments across the crypto industry, including in bitcoin miner Genesis Digital Mining and now-bankrupt crypto broker Voyager Digital. Alameda apparently took out loans to fund those bets. As the crypto market crashed, lenders reportedly attempted to recall those funds that were tied up in these illiquid investments. FTX’s and Alameda’s executives then took the questionable step of trying to pay back some of those Alameda loans using FTX customer funds, the Wall Street Journal has reported.

https://www.msn.com/en-us/money/per...ameda-research-lose-so-much-money/ar-AA14iAot

Borrowing for Other Big Spending

The finances of Bankman-Fried’s cluster of companies are so complex and entangled that huge chunks of it remain a mystery–even to the lawyers, financial investigators and bankruptcy veterans who have taken charge. But according to bankruptcy court filings, FTX executives also took out billions of dollars in loans from Alameda to fund everything from political contributions to Bankman-Fried’s purchase for $650 million of a 7.6% stake in Robinhood. It’s unclear how these loans may have also added to Alameda’s losses on top of everything else. Alameda itself has outstanding liabilities of $5.1 billion according to a filing Thursday in the Chapter 11 bankruptcy case in Delaware.

And then there was sloppy accounting, or incomplete accounting, and given the long period of time (going back to the creation Alameda) that this practice continued, it would appear to be intentional.

FTX customer deposits were not tracked, according to a bankruptcy filing, leaving it unclear in the bankruptcy proceedings what’s owed to customers. An example of this confusion: the leaked FTX balance sheet shows $8.8 billion in liabilities, while the Thursday filing in the Delaware bankruptcy case shows only $6.4 billion.

I guess it would be up to customers to produce records of their accounts at FTX. I'm sure some customers did not realize until their accounts were frozen that they were so vulnerable. The coup de grâce for FTX came when rival Changpeng "CZ" Zhao (Binance) publicly announced that Binance would dump FTX's FTT token. The story broke on Nov. 6.
https://www.coindesk.com/business/2...lameda-ceo-defends-firms-financial-condition/ (see video)
https://www.coindesk.com/markets/2022/11/07/first-mover-americas-binance-dumps-ftt-tokens/

Even on Nov 6. (before the revelations about FTX's and Alameda's precarious situations were known, some seem to minimize the situation. An online reporter, Wendy O, makes comments about not leaving one's cryptocurrency on an exchange, i.e., maintain custody. Adam B. Levine and Wendy O make some prescient comments.

Another commentary from Nov 7.
https://cryptopotato.com/ftt-drops-10-after-binance-dumps-its-entire-stash-of-23-million-ftx-tokens/