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

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In summary: I don't know if this actually happened, but...?In summary, the website of major bitcoin exchange MtGox was offline Tuesday amid reports it suffered a debilitating theft. Around midmorning in the U.S., the company released a statement saying it had closed off transactions "to protect the site and our users." It offered no further details.
  • #491
Astronuc said:
The Chief Regulatory Officer, FTX, was apparently previously involved in an online gaming/gambling company based in Toronto, CA, which was eventually bought by a company based in Malta. That company was involved in a cheating scandal. A LinkedIn profile, which has apparently disappeared (after the FTX crash) did not include the involvement with online gaming/gambling.
 
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  • #492
Astronuc said:
Cryptocurrency is not exclusive to America - it's global/international, and the markets are transnational. It would appear the legal issues are found in each nation, and nations may have different regulations and financial structures.
I think you misunderstood my analogy, I meant to say that reinventing America as in "reinventing the wheel"

Wrote my post too early in the morning , my bad anyways
 
  • #493
Casablanca

One of Claude Rains best. Sure, he's famous for The Invisible Man, but I dunno. I just could never see him in that part.

o0)
 
  • #495
Business Insider - FTX owned an $11.5 million stake in a tiny rural bank in Washington state with just 3 employees, bankruptcy hearing shows. The bank was initially valued at $5.7 million, and it specializes in agricultural loans to farmers.
https://www.msn.com/en-us/money/com...mployees-bankruptcy-hearing-shows/ar-AA14uG3x

Ties between the farmers' bank and the crypto exchange began in March this year, when FTX's sister company, Alameda Research, invested in Farmington's parent company, FBH. The purchase was led by Ramnik Arora, one of Sam Bankman-Fried's inner circle, who was often responsible for much larger deals.

For a decade, Farmington's bank held around $10 million in deposits. In the third quarter this year, deposits jumped to $84 million – 85% of which came from just four accounts, according to FDIC data cited by the Times.

Online, the bank now appears as "Moonstone Bank," a name which was trademarked a few days before FTX's investment. Moonstone doesn't mention cryptocurrency, but does say it wants to "support the evolution of next generation finance."

Farmington, Washington (pop. 146) touches the border with Idaho in a fairly remote area.

Some folks are wondering how FTX/Alameda got federal approval to buy its stake in Farmington. Some banking veterans believe that regulators would have not have knowingly allowed the crypto firm to make such a purchase. I guess that will be part the governments probe into how Alameda and FTX made deals.
 
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  • #496
Astronuc said:
Some folks are wondering how FTX/Alameda got federal approval to buy its stake in Farmington. Some banking veterans believe that regulators would have not have knowingly allowed the crypto firm to make such a purchase. I guess that will be part the governments probe into how Alameda and FTX made deals.
Is there any implication SBF used/influenced the bank to process illicit transactions for FTX/Alameda-related stuff?
 
  • #498
Chapter 11 seems optimistic w $276M on hand against several billion in liabilities

Also a joke the FTX filed an 11

Does anyone believe these entities will exist post- bankruptcy?
 
  • #499
Another quick one from The Economist
Bitfront, an American crypto exchange, said it would cease operations, though it claimed that the move was unrelated to the collapse of FTX, the platform that went bankrupt earlier this month. Separately, BlockFi, a one-time darling of the industry, filed for bankruptcy and Kraken, another exchange, agreed to pay more than $360,000 to America’s Treasury for allowing transactions with users in Iran.
 
  • #500
WSJ - Years before Sam Bankman-Fried’s crypto empire collapsed, a group of employees quit in a power struggle—after becoming concerned about what they say was his cavalier approach to risk, compliance and accounting. The employees worked at his trading firm, Alameda Research, and were some of his earliest colleagues, including Alameda’s co-founder, Tara Mac Aulay.
https://finance.yahoo.com/m/97e57b37-7d9b-306f-8114-645244acff51/early-alameda-staffers-quit.html
That should have been a red flag, or at least a yellow flag.

Bloomberg - FTX's LedgerX, a Solvent Corner of SBF's Fallen Empire, Will Put Millions in Bankruptcy Pot
https://finance.yahoo.com/news/ftx-ledgerx-175-million-available-021838863.html

LedgerX -- one of the few corners of Sam Bankman-Fried’s crumbled crypto empire that remain solvent -- is preparing to make available $175 million for use in FTX’s bankruptcy proceedings, according to people with knowledge of the matter.

The money, which could be transferred as soon as Wednesday, comes from a $250 million fund that LedgerX had set aside for a bid to get regulatory approval to clear crypto derivatives trades without intermediaries. The firm, which is known as FTX US Derivatives, withdrew its application with the US Commodity Futures Trading Commission as more than 100 FTX entities filed for bankruptcy on Nov. 11.

A spokesman for the CFTC, which regulates LedgerX, said that the agency is aware of a planned transfer. Representatives for LedgerX and FTX didn’t immediately respond to requests for comment.

Bloomberg - FTX's Sam Bankman-Fried Still Hasn't Answered These Questions Ahead of DealBook Summit Interview
https://finance.yahoo.com/news/sam-bankman-fried-set-face-221649350.html

Regarding the question of whether or not FTX (SBF) improperly used customer/depositor funds, I believe the answer is 'yes' based on the use of customer funds without expressed permission/consent.

The Securities and Exchange Commission and the Commodity Futures Trading Commission are investigating whether FTX misused customer funds, and it’s been reported that the company lent clients’ money to Alameda Research, the crypto trading firm co-founded by Bankman-Fried. The two companies shared close ties and FTX received some customer deposits through bank accounts held by Alameda. If FTX did misappropriate customers’ money, the next question would focus on what the funds were used for. Options include covering Alameda’s liabilities, as well as fueling venture investments, Bankman-Fried’s $1 billion bailout spree over the summer or purchases like his acquisition of a 7.6% stake in Robinhood Markets Inc. Bankruptcy records show that Alameda is owed $4.1 billion for loans it extended to “related parties,” including $1 billion to Bankman-Fried.

Interesting development in Japan
Bloomberg - FTX’s Japan Unit Drafts Plan to Return Client Funds
https://finance.yahoo.com/news/ftx-japan-unit-drafts-plan-124544036.html
 
  • #501
Astronuc said:
should have been a red flag
To whom?

There seem to be too groups of people: Group A says this is risky, with no underlying value, a fiat currency made by people without the power to fiat. Group B says Group A is a bunch of old fuddy-duddies, don't understand the New Economy, and will be left behind when the windfall profits come.

Has anything changed?
 
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  • #502
Vanadium 50 said:
To whom?
To those doing 'due diligence'.

Vanadium 50 said:
Has anything changed?
Apparently not? Maybe? Until the next time?
 
  • #503
Interesting blog post from AWS insider on how they could not find any real world use for blockchain

the level 1 crypto skepticism is 'I am wary of cryptocurrencies, but blockchain is a revolutionary technology'

but 10+ years on, nothing has been built with blockchain that anyone would miss, other than the money they gambled on cryptocurrencies, so not only is crypto a bust, blockchain is as well.

https://www.tbray.org/ongoing/When/202x/2022/11/19/AWS-Blockchain
We really only had two questions, both for the big-finance players and for the startups. “What is it you want to do?” and “How does blockchain help?”

The answers, to our disappointment, failed to shatter any preconceptions. The things they wanted to do were perfectly reasonable. Some of them were damn exciting. They all needed databases. They could all make use of ledger-like data structures, also cryptographic hashing and signing. But, um, why did they need blockchain? Severe lack of clarity on that.

The key moment was when we got in a room with the CTO of this one startup, in Tribeca I think. When I heard their VC funding number I thought it was the valuation, not the investment dollars. The customer list was blue ****ing ribbon and don’t you forget it. These guys were razor-sharp.

They presented some of the systems they’d built and yep, we were impressed. Then, with the startup CTO in the room, one of my fellow engineers asked the key question: “All these systems, are there any that wouldn’t work without blockchain?” The guy didn’t even hesitate: “No, not really.”

And that was about that.
 
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  • #504
Poor baby.
https://www.msn.com/en-us/money/com...n-to-dollar100000-in-bank-account/ar-AA14JInS
"Am I allowed to say a negative number?" he told the outlet, when asked about his personal finances. "I mean, I have no idea. I don't know. I had $100,000 in my bank account last I checked," he said.

Bankman-Fried said "basically everything" he had was tied up in the now-failed company, making his financial situation "complicated."
 
  • #506
artis said:
I don't believe that, there must be some money put aside in a safe place. This guy doesn't seem like the type of person to forget about himself...

The fact that he lost his robinhood stock makes me think he might have just been paying 0 attention.

That said he is supposed to own like 100 million dollars of real estate in the Bahamas. Who knows if that's being sold for the bankruptcy or if he's just keeping it.
 
  • #507
https://www.cnbc.com/2022/11/30/for...ed-says-i-didnt-ever-try-to-commit-fraud.html
Former FTX CEO Sam Bankman-Fried, in possibly the understatement of 2022, said Wednesday, “I’ve had a bad month.”
...
“I wasn’t running Alameda, I didn’t know exactly what was going on, I didn’t know the size of their position,” Bankman-Fried said. “A lot of these are things I’ve learned over the last month [in the days leading up to bankruptcy.]”

New leadership at FTX said that Bankman-Fried exercised significant control over the entire empire.
I've heard this before.

"I'm just a poor boy nobody loves me. He's just a poor boy from a poor family"

https://www.businessinsider.com/sam-bankman-fried-ftx-bahamas-house-parents-name-for-staff-2022-12
Reuters reported last week that a $16.4 million house in a gated community with beach access in the Bahamas listed Bankman-Fried's parents, Joseph Bankman and Barbara Fried, as signatories and was described in property records as a "vacation home."

A spokesperson for his parents, both Stanford University law professors, previously told Reuters that they had been trying to return the deeds to the company "since before the bankruptcy proceedings."
 
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  • #508
Coinbase Global Inc. Chief Executive Brian Armstrong expressed skepticism about SBF's explanation about the movement of US$8 billion from his crypto exchange FTX to brokerage arm Alameda Research.
Coinbase Global Inc. Chief Executive Brian Armstrong said Sam Bankman-Fried’s explanation of sloppy accounting as the reason US$8 billion moved from his crypto exchange FTX to brokerage arm Alameda Research doesn’t stand up to scrutiny. Bankman-Fried gave the reasoning in an interview with Bloomberg published on Friday.
https://finance.yahoo.com/news/coinbase-ceo-armstrong-says-bankman-055501313.html

“I don’t care how messy your accounting is (or how rich you are) – you’re definitely going to notice if you find an extra $8B to spend,” Armstrong tweeted on Sunday, in reference to the funds showing up at Alameda. “Even the most gullible person should not believe Sam’s claim that this was an accounting error.”

A “substantial amount of assets” of collapsed cryptocurrency exchange FTX have either been stolen or are missing, an attorney for FTX said on Nov. 22 at its first hearing in the federal bankruptcy court in Delaware, U.S.
 
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  • #509
1670447508378.png
 
  • #510
Did Sam Bankman-Fried Finally Admit the Obvious?

Daniel Kuhn, CoinDesk
Thu, December 8, 2022, 1:30 PM

https://www.coindesk.com/consensus-...-sam-bankman-fried-finally-admit-the-obvious/

Interesting read.
Despite the focus on FTX following its catastrophic collapse, it’s remarkable how little we know about how the crypto exchange and its in-house trading firm Alameda Research actually operated. New CEO John Jay Ray III has called Sam Bankman-Fried’s crypto trading empire the “greatest failure of corporate controls” he’s seen.

Wednesday, Coffeezilla, a YouTuber with a rising star who has made a career of shining a light on sketchy projects in and out of crypto, pressed Bankman-Fried for information related to how different customer accounts were treated at the exchange. It turns out, there wasn’t much differentiation – at the very least during the final days the exchange was in business, Bankman-Fried admitted.

"At the time, we wanted to treat customers equally,” SBF said during a Twitter Spaces event. “That effectively meant that there was, you know, if you want to put it this way, like fungibility created” between the exchange’s spot and derivatives business lines. For Coffeezilla, this looks like a smoking gun that fraud was committed.

At the very least, this is a contradiction of what Bankman-Fried had said just minutes before when first asked about the exchange’s terms of service (ToS). “I do think we're treating them differently,” Bankman-Fried said, referring to customer assets used for “margin versus staking versus spot versus futures collateral.” All of those services come with different levels of risk, different promises made to customers and different responsibilities for the exchange.

According to FTX’s ToS, everyday users just looking to buy or store their cryptocurrencies on the centralized exchange could trust they were doing just that, buying and storing cryptographically unique digital assets. But now, thanks to skillful questioning by Coffeezilla, we know there were instead “omnibus” wallets and that spot and derivatives traders were essentially assuming the same level of risk.

We can also assume this was a longstanding practice at FTX. Bankman-Fried noted that during the “run on the exchange”, when people were attempting to get their assets off before withdrawals were shut down, FTX allowed “generalized withdrawals” from these omnibus wallets. But he also deflected, saying what, you wanted us to code up an entirely new process during a liquidity crisis?

SBF has apparently deflected questions on FTX's ToS, since he would have to admit that FTX agreed not to use customer cryptocurrency without expressed consent, but then he proceeded to use customer funds without their expressed consent. More details in the article.

There would be a “chargeable fraud case” if spot assets weren’t backed 1:1 as promised, or were used as collateral for loans or other purposes, Renato Mariotti, a former federal prosecutor, told CNBC. Bankman-Fried has said previously that “dollars” on the exchange and hedge fund were “generally fungible,” being used to reportedly fund personal loans to emloyees and make venture deals. Now, too, did he admit client funds were "effectively" interchange – at least in the final hours.
 
  • #511
There's a dude who reported to have won like 34k usd by shorting luna back in May. FTX didn't want to pay him, so he exposed his case on twitter and what no. Then FTX finally paid him (thanks to his rants on social network), but they didn't do it in a normal, usual way. They just updated his wallet balance in the website, without any trace of what had happened. They manually updated the database to resolve his case. This was a huge red flag, so he got out of FTX after this incident....
 
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  • #512

US Probes FTX Founder for Fraud, Examines Cash Flows to Bahamas​

https://www.yahoo.com/finance/news/us-probes-ftx-founder-fraud-005514809.html

(Bloomberg) -- US prosecutors, laying the groundwork for a potential fraud case against Sam Bankman-Fried and others involved in the collapse of cryptocurrency giant FTX, are scrutinizing how funds held by the exchange operator moved outside the US as it was hurtling toward bankruptcy, according to a person familiar with the matter.
 
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  • #513
Hmmm...I wonder what US law he broke. Bahamian law, sure, that's a rael possibility. But US? Wasn't this a Bahamian business? One might even ask if it was set up there so as not to have to deal with all those old-fashioend rules and regulations?
 
  • #514
Vanadium 50 said:
Hmmm...I wonder what US law he broke. Bahamian law, sure, that's a rael possibility. But US? Wasn't this a Bahamian business? One might even ask if it was set up there so as not to have to deal with all those old-fashioend rules and regulations?
I believe it applies to FTX-US transfer of funds. FTX-US is based, or operates, in US, so subject to some laws, or so it would appear.
 
  • #515
https://www.reuters.com/article/idUSL8N3321X6
U.S. Justice Dept is split over charging Binance as crypto world falters - sources
The investigation began in 2018 and is focused on Binance’s compliance with U.S. anti-money laundering laws and sanctions, these people said. Some of the at least half dozen federal prosecutors involved in the case believe the evidence already gathered justifies moving aggressively against the exchange and filing criminal charges against individual executives including founder Changpeng Zhao, said two of the sources. Others have argued taking time to review more evidence, the sources said.
 
  • #517
nsaspook said:
https://www.reuters.com/article/idUSL8N3321X6
U.S. Justice Dept is split over charging Binance as crypto world falters - sources
From the article:

"Among Binance’s arguments: A criminal prosecution would wreak havoc on a crypto market already in a prolonged downturn."

Hmm...
 
  • #518
Is that a bad thing or a good thing?
 
  • #519
russ_watters said:
From the article:

"Among Binance’s arguments: A criminal prosecution would wreak havoc on a crypto market already in a prolonged downturn."

Hmm...
Well they say "don't beat a dead horse" but this horse hasn't died yet. If you ask me - "beat it" !

Of course they should prosecute, otherwise this is similar to a thief running away asking the police to pause the chase because he has run out of breath for the moment...
 
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  • #522
nsaspook said:
I suspect the former girlfriend/former Alameda Research CEO Caroline Ellison is cooperating with the feds....
I hope that doesn't keep her out of jail.
 
  • #523
russ_watters said:
I hope that doesn't keep her out of jail.
When you think about it, she was just ceo of a hedge fund that was doing deals. She had no obligation to ftx's customers, since she was nominally unaffiliated with the exchange. The legal responsibility might entirely lie on people who were in charge of the exchange.
 
  • #524
Office_Shredder said:
When you think about it, she was just ceo of a hedge fund that was doing deals. She had no obligation to ftx's customers, since she was nominally unaffiliated with the exchange. The legal responsibility might entirely lie on people who were in charge of the exchange.
I find it really strange that you would assign her less culpability than Tom Brady despite the facts that she's the one who got the stolen money and she ran her operation out of the same office/condo as SBF. It seems pretty clear they were collaborating on the fraud.

And not for nothing, but if she was unaware of it she wouldn't have had anything interesting to tell the FBI.
 
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  • #525
russ_watters said:
I find it really strange that you would assign her less culpability than Tom Brady despite the facts that she's the one who got the stolen money and she ran her operation out of the same office/condo as SBF. It seems pretty clear they were collaborating on the fraud.

And not for nothing, but if she was unaware of it she wouldn't have had anything interesting to tell the FBI.

I only said it's reasonably that a lawsuit against Tom brady be permitted, not that he should be found guilty of anything (I think he is not guilty of anything, but the courts should be allowed to decide that).

I didn't say she was unaware of anything, I simply said as CEO of Alameda, perhaps she didn't have a legal obligation to uphold the terms of service of FTX, a totally different company. She could know exactly what SBF was doing, and not have any legal liability perhaps, depending on what SBF was doing.
 
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