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

[Vanadium 50]

Stanford will do OK. I mean, they could have SBF's parents co-teach a class in Business Ethics and have students lining up to take it!

 

[Astronuc]

Alameda had by mid-June 2022 borrowed 77% of the $13 billion of customer U.S. dollar deposits into FTX, according to an internal FTX spreadsheet introduced by prosecutors and authenticated by Ellison. Ellison said she asked FTX executives Gary Wang and Nishad Sing to gather the data for her when she grew concerned about the size of Alameda’s borrowings from FTX.

By this point in June, the data showed Alameda had borrowed 52% of all ETH deposits, 44% of USDT deposits and 25% of BTC deposits into FTX – as well as all of the Australian dollar and BRZ deposits into the exchange. (BRZ is an Ethereum token backed by Brazil’s currency, the real.)

When Genesis, a major Alameda lender, asked Ellison if she could provide documentation of Alameda’s financials, Ellison said she and Bankman-Fried worried that providing accurate financials would “show that Alameda was risky,” so the pair devised strategies to improve the look of Alameda’s financial position. (Genesis, now defunct, is a subsidiary of Digital Currency Group, which also owns CoinDesk.)

https://finance.yahoo.com/news/caroline-ellison-alameda-kept-using-134226709.html

 

[phinds]

Stanford will do OK. I mean, they could have SBF's parents co-teach a class in Business Ethics and have students lining up to take it!

Might have to be on a work-release program

 

[Vanadium 50]

Ethereum token backed by Brazil’s currency, the real

Couldn't they have used Dutch tulip futures or diseased cattle? You know, something more solvent?

 

[Vanadium 50]

Following up on the parents. They hired separate lawyers, which is...interesting. They received a $16M villa and at least $10M in cash as "gifts" from the company. Which, it seems, they do not want to return.

The "just a big dumb puppy that got in over his head" story is not likely to fly for two Stanford professors.

 

[russ_watters]

The "just a big dumb puppy that got in over his head" story is not likely to fly for two Stanford professors.

I doubt it will fly for SBF either. When you're cooking the books, it's really hard to split a hair between "I just thought it looked bad so I changed it" and "I knew it was fraud".

 

[nsaspook]

https://blockworks.co/news/sam-bankman-fried-trial-day-6

Thai sex workers, Chinese bribes, and Signal messages​

And those Thai sex workers? Their accounts were included in one of SBF’s strategies to unfreeze Alameda funds held on Huobi and OKX. These funds were frozen by Chinese government officials as part of a money laundering investigation.

Ellison alleges that SBF and others elected to send anywhere from $100 million to $150 million to various crypto addresses, believed to be tied to Chinese officials. She called this a bribe earlier in her testimony, a comment stricken from the record by Judge Kaplan. The judge also instructed the jury to disregard this comment.
...
Oh, and we learned that SBF believed he had a 5% chance of becoming president.

Insanity defense?

 

[Vanadium 50]

SBF believed he had a 5% chance of becoming president.

He may still. "Better infamous than unknown."

 

[nsaspook]

He may still. "Better infamous than unknown."

Looks likes he has a much better change of being a felon, first.

People have run for president from Prison before.

 

[Astronuc]

https://www.yahoo.com/finance/news/inside-meeting-where-caroline-ellison-232454439.html

Sitting on a beanbag chair, Ellison appeared “sunken, slouching,” according to Drappi. After some brief opening words, she relayed to colleagues the crux of the matter: "Alameda borrowed a bunch of money to make illiquid investments,” she said. “We ended up, like, borrowing a bunch of funds from FTX."

Staff members inevitably had questions, including Drappi. He asked Ellison about who else at either Alameda or FTX knew that customer funds were being withdrawn from the exchange, per the audio, which was recorded by Rick an employee who joined Alameda three days earlier. Ellison initially dodged the question, but Drappi pushed back and asked who explicitly knew. “I’m sure this wasn’t, like, a YOLO thing, right?” he added.

 

[nsaspook]

https://www.yahoo.com/finance/news/inside-meeting-where-caroline-ellison-232454439.html

“We ended up, like, borrowing a bunch of funds from FTX."

 

[Vanadium 50]

Having your ex putting you in jail for a zillion years redefines a bad breakup.

 

[kyphysics]

 

[Astronuc]

• A former senior FTX executive, Nishad Singh, who has already pleaded guilty, testified as the third week of Sam Bankman-Fried’s criminal trial began.
• Singh, who said he knew around $8 billion of FTX customers’ money had gone missing, helped crystallize points from previous testimony by other members of Bankman-Fried’s inner circle.
• “I had a lot of admiration and respect for him, but over time that eroded,” Singh said of Bankman-Fried, his friend from high school.

https://finance.yahoo.com/news/live-former-top-ftx-executive-143216145.html

 

[Vanadium 50]

One line of questioning zeroed in on a $200 million

Zeroed is right!

 

[russ_watters]

A little aside: my biggest failure and biggest success are on that list:

• I bought 3dFx instead of Nvidia around 1999 (Nvidia eventually bought-up the remnants after my stock zeroed out). Moral I guess is that I should have bought both competitors in an emerging market.
• I bought Facebook/Meta after the IPO failure, and I'm up about 1,500%. I wish I could say I'd bought a thousand shares, but alas, no.

Incidentally, my brokerage account still needles me about 3dFx. After Schwabb bought USAA's investment arm, I think a human was supposed to check the stocks, but didn't. The top line on my statement is a company called "THREE D F X INTERACTIVE ** DO NOT TAKE IN** SEE NOTES 6 YR NON-TRANS"

 

[nsaspook]

 

[Vanadium 50]

my biggest failure and biggest success are on that list

Ah, but what have you learned from that experience? And would you have done better picking a tech fund over individual stocks?

At the risk of repeating myself, investing needs goals, so investments need to be evaluated in light of those goals. One should understand "how do I make money?" and "how does this investment make money?" For example, McDonald's makes money by selling hamburgers, and I make money through MCD dividends, reinvestment, and the general trend of stock prices to go up.

If one "invests" in crypto, one hopes to make money because the price of crypto rises: which is just restarting that people would rather have BTC than USD. Why is that? Is it because I want to buy something where they take BTC but not USD? Sure...if I want ti buy some heroin or having someone whacked. But this is not a huge market. Mostly people hope to strike it rich by getting in early, buying BTC, and selling it later to other people who come along later.

The problem with this is that people think they are the early birds, but in fact they are the pigeons...er...latecomers.

 

[russ_watters]

Ah, but what have you learned from that experience? And would you have done better picking a tech fund over individual stocks?

At the risk of repeating myself, investing needs goals, so investments need to be evaluated in light of those goals.

Other than what I mentioned, at that time I bought 3DFx I was just out of college and not really seriously investing yet, so there were no real goals. Now, the goal is saving for retirement. 3/4 of my personal/non-401k "saving for retirement" money today is in S&P500 index funds, and only about 10% is in individual stocks (the rest in various other funds). That's enough to satisfy a desire to play a little (a very little - I haven't bought or sold an individual stock in a couple of years), but for me the key to investing for retirement is safety via diversification and simplicity.

 

[Vanadium 50]

The "what have you learned" was sort of rhetorical. But some of our number have set out on a path that, as far as I can tell, tries to get rich quick by out-investing people who do it for a living, based on what they heard in a podcast or three. I used to try and stop them - now I am happy to be their counterpatty.

The related to crypto as I stated above - people have no idea how this is supposed to make money. At best, they are driven by a fear of missing out, and that makes them easy targets for con artists.

 

[renormalize]

now I am happy to be their counterpatty.

Not clear if that's a misspelling of "counterparty" or "counterpatsy".

 

[Vanadium 50]

Freudian slip?

 

[Vanadium 50]

Insanity defense?

Maybe. Maybe more like the Twinkie Defense.

There seems to be an issue with ADGD and Adderall. The Federal Bureau of Prisons normally does not treat ADHD with amphetemines, which Adderall is. The defense may be laying the groundwork for an appeal under the argument "nothing else will do" and "our client couldn;t assist in his own defense."

Going one step further, the behavior that got him tossed in the pokey in the first place last summer may even have been deliberate.

As has been said before "Big Dumb Puppy" seems not to be flying.

As far as these being deliberate machinations, well, that would mean that SBF is a con-man. Remind me, what is he on trial for again?

 

[kyphysics]

• I bought Facebook/Meta after the IPO failure, and I'm up about 1,500%. I wish I could say I'd bought a thousand shares, but alas, no.

I failed with Facebook/Meta. I tax loss harvested my shares and STILL could have gotten in at $88 roughly a year ago (after the 30-day mark from my sale), but never bought back. I think I was ticked off at Zuck going into the metaverse with a Hail Mary type of company bet (literally changing name of company) and growing competition from Snap and Tik Tok. I thought the metaverse was kind of dumb and even IF it became a thing, there was no guarantee Meta would be the platform everyone used for it.

I realize now Snap is a great app with user growth, but CANNOT monetize if their life depended on it. NYU's Scott Galloway has said as much. They don't threaten Meta the way I thought. On the other hand, Tik Tok is just too short form for many advertisers. That's why their video min. lengths have crept higher and higher (trying to get advertisers trust that they can hold people's attention long enough for meaningful ads).

Instead of selling my Meta, I should have bought more. Although, hindsight is 20-20 and it equally could have gone wrong.

I semi-failed with bitcoin. There was a public library DVD on bitcoin I watched/rented over 10 years ago. For a tiny, tiny amount of invested cash, I could have had the greatest return in the shortest period in history probably. I just didn't fully understand what they heck the DVD was talking about. . . .I still don't fully understand bitcoin.

 

[russ_watters]

I semi-failed with bitcoin. There was a public library DVD on bitcoin I watched/rented over 10 years ago. For a tiny, tiny amount of invested cash, I could have had the greatest return in the shortest period in history probably. I just didn't fully understand what they heck the DVD was talking about. . . .I still don't fully understand bitcoin.

The way I remember my sister (fixed income securities analyst) telling the story, she convinced her pension management company not to try their hand in credit default swaps in the early 2000s because they seemed overly complicated and she didn't fully understand them. So I don't think you failed.

People have made money playing Bitcoin, the lottery and Beanie Babies but that doesn't mean you should try it.

 

[Astronuc]

https://news.yahoo.com/sam-bankman-fried-expected-fortunes-213936177.html

FTX/Alameda used customer funds to influence celebrities, politicians and political groups, and even non-profit advocacy groups with the expectation of having influence. It worked until it didn't.

What does K5 Global do? Apparently, venture capital and/or professional schmoozing?

 

[Vanadium 50]

But why wouldn't I want to put my money where Kim Kardashian says I should?

 

[BWV]

Stanford will do OK. I mean, they could have SBF's parents co-teach a class in Business Ethics and have students lining up to take it!

Along side the new Michael Lewis School of Journalism

the only thing sinking faster than SBF's chances of freedom is that writer's reputation

 

[BWV]

Doctor tries to order his girlfriend's murder on the dark web, loses the first down payment due to typing in the wrong address, has to true up the second payment due to the volatility of bitcoin, then has the record of the transaction used as evidence against him.

According to U.S. Attorney Buchanan, the charges and other information presented in court: On April 18, 2022, while in the Northern District of Georgia, Wan accessed a dark web marketplace from his cellular telephone and submitted an order to have a hitman murder his girlfriend. The order included the victim’s name, address, Facebook account, license plate, and car description. In the order, Wan stated: “Can take wallet phone and car. Shoot and go. Or take car.” Wan then electronically transferred a 50% downpayment of approximately $8,000 worth of Bitcoin to the dark web marketplace.

Two days later, Wan messaged the marketplace’s administrator, stating that the transferred Bitcoin did not show up in his escrow account on the site. The next day, the marketplace administrator asked Wan for the Bitcoin address to which Wan had sent the payment. In response, Wan identified the Bitcoin wallet address and provided a screenshot of the transaction. When the administrator said that the address Wan provided was not in their system, Wan replied, “Damn. I guess I lost $8k. I’m sending $8k to escrow now.” Wan then electronically transferred an additional Bitcoin payment worth approximately $8,000 to the marketplace. The administrator confirmed the new address was correct and that the Bitcoin had arrived in the escrow account. The administrator stated that they were proceeding with Wan’s order for a hit and asked whether Wan wanted it done as an “accident or normal shooting.” Wan responded, “accident is better.”

About a week later, on April 29, 2022, Wan electronically transferred another payment of approximately $8,000 worth of Bitcoin to the dark web marketplace to ensure his escrow account contained the total required to complete the order. Shortly thereafter, Wan posted the following in a forum on the dark web marketplace: “How soon should work be done? I have submitted an Order and curious how quickly it should be carried out? Is there a way I can find out any progress? If there is anyone in my location?”

On May 10, 2022, after the value of Bitcoin dropped, Wan electronically transferred another payment of approximately $1,200 worth of Bitcoin to the marketplace to ensure his escrow account still contained the total required to complete the order.

After learning about the threat to the victim’s life, FBI agents notified the victim, provided her protection, and questioned Wan. Wan admitted that he had placed the order, made the payments, and checked the status of the order daily on the dark web marketplace. Records from Wan’s cellular telephone and his Bitcoin wallet corroborated Wan’s confession. After speaking with FBI agents, Wan canceled the order on the dark web marketplace.

https://www.justice.gov/usao-ndga/pr/doctor-pleads-guilty-dark-web-murder-hire-plot

 

[Vanadium 50]

Most modern currencies have serial numbers that can be traced. One way of looking at crypto is that it is nothing but a serial number. No more paper.

But...aren't there...um..services where people exchange BTC to make them harder to trace?

As an aside, I'd like to meet the girlfriend and see just why Wan felt that given a choice between breaking up with her and murder, that murder was the safer option.

 

[Astronuc]

https://www.coindesk.com/policy/202...-house-testimony-with-ftxs-dangerous-secrets/

NEW YORK – To help make their case that Sam Bankman-Fried committed a historic multibillion-dollar fraud, prosecutors enlisted an accounting professor who assisted the government investigations into Enron and WorldCom two decades ago.

University of Notre Dame accounting professor Peter Easton took the stand in the ongoing trial Wednesday morning. Asked whether FTX ever spent user deposits, Easton, who was hired by the Department of Justice to trace billions of dollars of Alameda and FTX funds, replied definitively: “Oh, yes.”

User deposits were reinvested into businesses and real estate, used to make political contributions and donated to charity, the professor testified.

Wossh!

[A] chart showed user deposits falling beneath FTX’s bank balances around March 2021 – meaning user funds had lost their backing by that point, according to Easton’s analysis.

By June 2022, when FTX deposits were at their peak, the exchange only had around $2 billion on hand to back more than $11 billion in user deposits, Easton testified.

So much for transparency.

Easton said his investigation also showed customer funds were behind a majority of FTX’s investment into SkyBridge Capital . . . .

“We have a transparent system,” Bankman-Fried said in a clip played for the jury of his comments before Congress. Bankman-Fried, in the video, also discussed the company’s risk-monitoring system, contrasting it with the opaque Wall Street mess that fueled the 2008 financial crisis.

The truth, according to prosecutors and FTX insiders who have testified after pleading guilty, was very different: poor financial record-keeping and improper siphoning of customer money to Bankman-Fried’s nominally separate trading firm, Alameda Research. And once that started coming to light, the company fell apart in a rapid, 2008-style collapse.

Edit/update: Former general counsel at FTX, Can Sun, testifies that he was asked "to create ‘legal justification’ for using billions in customer funds amid collapse"
https://finance.yahoo.com/news/sbf-asked-ftx-general-counsel-182115080.html

That would seem to infer intent.

The Yale law school grad joined FTX at the end of August 2021 and stayed until early November 2022 shortly after the crypto exchange collapsed. Before going in-house at the exchange, Sun worked for Fenwick & West, where he also advised FTX as outside counsel.

Once in-house, Sun’s role consisted of various legal functions, like obtaining regulatory licenses for the exchange and dealing with how FTX treated customer assets — or so he thought, he testified. Bankman-Fried had allegedly told him that FTX customer deposits were unequivocally “safeguarded, segregated and protected.”

So, FTX appears to have violated its TOS with customers' funds.

During Sun’s testimony, prosecutors highlighted the terms of service, which did not permit the exchange to touch customer funds. (Sun testified he had worked on the TOS but that it was largely finished by the time he joined.) One provision stated that “none of the digital assets in your accounts are the property of, or shall or may be loaned to FTX trading”; there was another that said customers “control the digital assets held in your account.”

Meanwhile, the NY State Attorney General is suing 3 crypto companies for defrauding 230K customers of over $1 billion.
https://techcrunch.com/2023/10/19/n...g-for-defrauding-crypto-investors-of-over-1b/

New York Attorney General Letitia James filed a lawsuit against three crypto companies: Gemini Trust Company, Genesis Global Capital and its affiliates and Digital Currency Group (DCG) for allegedly defrauding investors of over $1 billion, according to a statement on Thursday.

The lawsuit also brought charges against former Genesis CEO Soichiro “Michael” Moro and DCG’s founder and CEO Barry Silbert for trying to hide $1.1 billion in losses and “defrauding investors and the public.”

 

[Vanadium 50]

Today I learned that FTX had a program to scam Nigerians serve the Nigerian public. Apart from the, um, amusing symmetry, and the "altruism" of stealing from the poor to buy a zillion-dollar mansion, there is the interesting possibility of, should he be found not guilty in the US, being shipped off to Badnewsistan to await trial there.

 

[berkeman]

should he be found not guilty in the US, being shipped off to Badnewsistan to await trial there.

"Madam prosecutor, my client has decided to plead guilty..."

 

[Vanadium 50]

"Ten years? Your honor, I am guiltier than that. Can you make it longer?"

 

[Astronuc]

It was just creative financing.