FTX faces potential hack, sees mysterious outflows totaling more than $600M

https://www.coindesk.com/business/2022/11/12/ftx-crypto-wallets-see-mysterious-late-night-outflows-totalling-more-than-380m/

by janmo • 4 years ago

546 809 4 years ago

coindesk.com

tfsh• 4 years ago

It's been stated that FTX can access the wallets of their customers [1], I wonder if employees or other bad actors knowing the ship is sinking have decided to - forgive me for the quip - plunder any remaining assets.

1: https://www.coindesk.com/policy/2022/11/10/ftx-violated-its-...

SighMagi• 4 years ago

That was my first thought. Not FTX related, but I just got another email from Coinbase reassuring me that they’re not gonna use customer funds without permission. I have in the past moved my shit out of Coinbase wallets because of doubts about that. Honestly though I just want to GTFO of crypto at this point…

readthenotes15• 4 years ago

"at some point, you are the greater fool"

"If you look around the table and can't see the chump, you are the chump"

perryizgr8• 4 years ago

Coinbase reassuring me that they’re not gonna use customer funds without permission

"Not gonna" is wildly different from "cannot". So are you sure they physically cannot use your funds? If that's not the case, their promise is worth just the price of sending that email to you.

lottin5• 4 years ago

Get out, man. Learn investment theory. All you need is a couple of index funds and bonds. Investing isn't supposed to be exciting or make you rich quick.

throwaway743• 4 years ago

Not to argue, but just to point out, banks can also do this. It's called "bailing-in".

Banks in the US can do it, but only with the excess of accounts containing more than $250k.

graeme5• 4 years ago

They’re making Madoff look good. He semi-voluntarily* turned himself in when the jig was up, and the govt eventually recovered about 2/3rd of the money

FTX seems like it’s still trying to steal funds

*Madoff confessed to his family, said he would turn himself in, and asked for 24 hours to get affairs in order. Family refused, called FBI immediately

fortran775• 4 years ago

Madoff recovery is 88.35%. See: https://www.justice.gov/opa/pr/justice-department-announces-....

Many of Madoff's victims exaggerated their loses. If they invested $1MM at a claimed return of 15% for 6 years, they would claim they lost $2MM, not the $1MM principal.

(I just hope our Government doesn't try to bail out crypto speculators!)

graeme5• 4 years ago

Thanks! Wow even better than I recalled

To be fair there’s something to that idea. Market returns about 7% on average. Over six years that would be an opportunity cost of 50%.

But, as you say there’s got to be some loss for choosing to put one’s money with a con artist

I doubt there will be a crypto bailout as it seemingly didn’t get big enough to blow up anything outside itself. It also had an anti public relations campaign for years

agotterer• 4 years ago

They also recovered money by clawing back returns that investors made in the years leading up to the scandal finale.

cookie_monsta2• 4 years ago

I honestly don't understand why any speculators get bailed out ever. They're in it for above-market profits, how is it that they don't have to accept the risk?

latchkey• 4 years ago

Heck, they are making Mark Karpelès look good.

https://twitter.com/MagicalTux/status/1591295272621314049

adastra22• 4 years ago

I’m getting my mtgox claim paid out, finally. Never would have picked that for my 2022 bingo card.

VagueMag8• 4 years ago

Perhaps there's some effective altruist argument for why this is best for the world. Trying to make the Ponzi lesson stick or something.

akiselev2• 4 years ago

He just wanted to bring back the guillotine. He’s a big picture thinker.

zeven76• 4 years ago

Investigating abnormalities with wallet movements related to consolidation of ftx balances across exchanges - unclear facts as other movements not clear. Will share more info as soon as we have it.

From FTX's general counsel[1], retweeted by FTX_Official. So that indicates it's not being sold off legitimately under some sort of liquidation proceedings. It could be insiders or it could be hackers.

[1] https://twitter.com/_Ryne_Miller/status/1591281729125613570

Rumors on Twitter[2] are there was also an update just pushed to the FTX app. Concerns are the update may contain malware. It makes sense to uninstall the FTX app if you have it.

[2] https://twitter.com/zachxbt/status/1591295039946493952

DavidSJ• 4 years ago

Reports on crypto Twitter are that this is a hack

Is that based on some evidence, or is it speculation?

zeven76• 4 years ago

I reworded things to separate the first hand information (FTX_Official indicating they don't know what's going on) from speculation (app hacker rumors).

jmathai• 4 years ago

Greed drives all of us to do things we normally wouldn’t. Given the nature of crypto, unless there’s a good reason to have the FTX app (say as opposed to using their website), then uninstalling it seems like very sound advice.

mudrockbestgirl4• 4 years ago

Reports on crypto Twitter are that this is a hack

It's really unfortunate to get "hacked" with such bad timing. You steal customer money and file for bankruptcy but now the bad hackers, probably from the Bahamas as well, take whatever is left and cash out. Oh no! /s

But it's alright, SBF said he's sorry.

blitzar2• 4 years ago

In unrelated news SBF just found he had a bunch of crypto in his personal wallet. Totally not at all the pile of crypto that was last seen in the FTX wallet.

groffee• 4 years ago

SBF takes "full responsibility".

yieldcrv2• 4 years ago

honestly, the vulnerability was probably already there and there was a symbiosis with the person. Rules for rulers, there are various keyholders in your empire. This company wasn't following any best practices, so no reason to think they have crypto security best practices internally.

this person absolutely knows that they can kick leadership when they're down and that all blame will go to the leadership

it doesn't require being an "apologist" for leadership to see this vulnerability. Council and compliance all resigned, the ceo resigned. Any semblance of checks are gone and any rogue developer can use their keys on anything, rumor now is that an app update went out turning them into malware.

its equally as plausible as just a cringeworthy vendetta of spiraling founders, dumber things have happened in crypto. smart things have too, I’m leaving towards a smart thing

iblaine• 4 years ago

It’s unfortunate that what started out with altruistic motives, a method for decentralized anonymous asset exchange, is being derailed by opportunists. There was a time where a 51% attack was the biggest concern.

All that said, I’m not surprised at where we are today.

readthenotes15• 4 years ago

Most of the rules of civilization are centered around preventing the 20% predators from devouring the 80% normal people.

n0tth3dro1ds• 4 years ago

It’s unfortunate that what started out with altruistic motives

Are you actually buying into SBF’s pathetic ideologies? Or are you more referring to Satoshi’s white paper when you refer to “altruistic motives”.

I can’t understand how anyone would take SBF seriously. He’s a smug charlatan who converted funny money to real money so that he could dump it into politics for his own aims, all while calling his actions “altruism”. Biggest false virtue signaler of all time.

heresie-dabord• 4 years ago

what started out with altruistic motives, [...] is being derailed by opportunists.

See: all human history.

The essential trust anchor will always be transparency that directly affects a person in society. Anonymous money and anonymous power will be exploited.

CPLX2• 4 years ago

In times like this I often find comfort in the expression "The Purpose of a System is What It Does"

https://en.wikipedia.org/wiki/The_purpose_of_a_system_is_wha...

flylib• 4 years ago

FTX CTO Gary Wang as well has a lot of recent GitHub commit activity in last 2 days and now suddenly the site is hacked https://github.com/garywang

zone4113• 4 years ago

How do you know it's him and not somebody else with the same name? I don't see any crypto projects.

bluelightning2k• 4 years ago

I'm as sceptical as the next person but I don't think "coder writes code" is anything.

dna_polymerase• 4 years ago

Yeah and I’m sure the Apple App Store review process won’t catch the steal_private_keys_and_upload_to_china() method they inserted. Not that iPhone apps can’t do this in the first place. A lot of FUD right now to create even more chaos.

ww520• 4 years ago

It's wild. The place is brazenly being robbed in public eyes. Is it under the Bahamas laws? What can anyone do?

mcast• 4 years ago

Bahamas has an extradition treaty with the US. If SBF doesn’t flee he will definitely get indicted in US court

TedDoesntTalk3• 4 years ago

I don’t think SBF would be dumb enough to steal $400m right now when the whole world is watching his every move.

laserbeam• 4 years ago

Knowing little about how ftx works... Is the article talking about customer accounts at FTX being drained? Or accounts belonging to FTX being drained?

mudrockbestgirl4• 4 years ago

FTX is a centralized entity, just like PayPal is. There is no such difference. As a centralized company, they are supposed to hold all customer funds in their own bank/wallet/whatever account(s).

sam345• 4 years ago

iait may be centralized but there's no comparison to PayPal. PayPal does not commingle funds

jdprgm• 4 years ago

This is an unreal speedrun nightmare timeline. At this rate I am half expecting to wake up to news tomorrow that SBF is dead.

can16358p3• 4 years ago

He'll probably play a Leauge of Legends match before though.

dang5• 4 years ago

Please keep this sort of nastiness off HN. We're trying for something else here, as you'll see if you review https://news.ycombinator.com/newsguidelines.html.

joshmn• 4 years ago

New speedrun world-best?

I realize this doesn’t add much by way of substance but this has been an incredible watch.

I hope someone is keeping an eye on SBF.

Gatsky2• 4 years ago

If this is real, most likely an inside job. I mean FTX staff probably had a lot of their own crypto on the exchange, so now that it appears Bankman stole it from them, why not steal it back.

manholio2• 4 years ago

This sounds like a great insider action to cover the fraud and mismanagement: leak the keys to the kingdom in a dark web forum, so that in the resulting commotion you can blame the hackers who had access all along and obviously made your platform fail. Something, anything that your lawyers can grasp at.

Gatsky2• 4 years ago

I doubt that Bankman would have sanctioned that though, since he’s already admitted to malfeasance. An insider could leak the keys and arrange for a cut of the proceeds, was my line of thinking.

paulpauper7• 4 years ago

I am skeptical because if insiders have access to the keys, they would not do it in such a obvious manner. They would instead drain crypto accounts that are pooled or reserved, not associated with the app directly. They would have drained these pooled assets discretely instead of a malicious app update , which draws too much attention. Of course, it's possible that said insiders had access to the app update but not the keys.

genmud• 4 years ago

Fraud. This is why banking regulation is important, almost all banking laws on the books exists because someone got screwed.

readthenotes15• 4 years ago

Because someone screwed over too many other people

fastball• 4 years ago

More like because the wrong people got screwed over.

mudrockbestgirl4• 4 years ago

Here is a view of the assets on-chain for anyone that's interested:

https://debank.com/profile/0x59abf3837fa962d6853b4cc0a19513a...

Currently at ~$390M. It looks like they're trying to swap most of the tokens they received into ETH on-chain.

smt883• 4 years ago

There's no way this is a coincidence. This is undoubtedly people who work(ed) at the company and were trusted with private keys trying to get away with some money while they can.

alasdair_3• 4 years ago

Agreed. It's by far the simplest answer. They already have the keys and have the code.

paulpauper7• 4 years ago

I don't think it was insider job. If insiders wanted to steal people's assets why do it in such a public manner? If they have the keys they can just move funds discretely from the larger pooled assets without draining individual accounts. A malicious app update draws way too much undue attention.

bmitc8• 4 years ago

What's weird is, why wasn't the system turned off? They've totally collapsed, filing bankruptcy, and supposedly aren't allowing withdrawals, so what was the point of leaving the system up and vulnerable?

555555• 4 years ago

They don't have the power to pause non-FTT blockchain systems. What you're suggesting isn't really possible. Someone has to hold the keys -- and I doubt they used sufficient multi-sig -- and anyone who has the keys can always move the funds.

shorthistory5• 4 years ago

1. Who is transferring the funds?

a. Bankman-Fried and associates

b. insiders (disgruntled)

c. outsiders (hackers)

2. Is it plausible that the transferred funds be laundered?

3. Can this altruism get any more effective?

This story is utterly fascinating. It keeps getting better and better. I remember thinking Mt. Gox was wild. This fraud is second only to Ponzi.

vishnugupta2• 4 years ago

The simplest explanation I have (occam’s razor) is a tie between 1.a and 1.b

I’ve also heard rumors that inside bad actors pushed out a forced FTX app update to gain access to accounts. So the advisory is to uninstall FTX and not go anywhere near that website. Any money one has is unfortunately gone, wait for the bankruptcy proceedings to recoup it, if at all.

vgatherps3• 4 years ago

I’ve also heard rumors that inside bad actors pushed out a forced FTX app update to gain access to accounts.

If it's an inside job with this capability you'd likely already have such access?

Only way is that somebody has access to push this, doesn't have access to the keys, and rewrites the app to send them assets or something. But the mass withdrawals imply the keys are compromised, and pushing the app would very unquestionably imply you?

It's quite strange that a bad update was pushed at all since it implies that the bad actor doesn't have key access, but everything else they do does.

headsoup3• 4 years ago

What I don't get (well I do, lobbying and inside deals), is why these guys have run so long (especially Tether). Just because crypto is a 'decentralised' wild west opposed to government shouldn't mean they sit outside of the laws around fraud, laundering and deception, especially if they're registered companies.

The lack of legal focus, given the obvious illegitimacy of it all is disgraceful and I can't even imagine the size of the wealth transfer happening through all this.

throwawaysleep4• 4 years ago

Popular appeal?

All sorts of scams, from dietary supplements to homeopathy pyramid schemes are permitted to carry on because fighting them is too unpopular.

Edit: take a look at Twitter. Crypto folks are busy worried that the Us gov will overreact and regulate crypto over this.

12700180802• 4 years ago

Scientology, herbalife, and other obvious scams have persisted. I think crypto people love getting defrauded, and as long as they enjoy it there won't be much pressure to prosecute.

lelanthran3• 4 years ago

I Dunn if it is fair to include Scientology in that.

Other than the amounts of money involved, it clearly is a religion.

echelon• 4 years ago

Just because crypto is a 'decentralised' wild west opposed to government shouldn't mean they sit outside of the laws around fraud, laundering and deception, especially if they're registered companies.

Entirely speculation, but something fun I've heard repeated occasionally:

If this was "just tech", it could find itself regulated easily. (Though this isn't necessarily the case.)

If it's a geopolitical weapon or spy tool of any consequence, then there may be other stakeholders pushing back against weakening it.

Plausible, borderline conspiratorial, but fun to think about.

VagueMag8• 4 years ago

'Testbed for CBDCs' and 'black budget money laundering' seem like compelling explanations for the stunning regulatory forbearance (so far) to me. I've also seen speculation that FTX/SBF were intentionally allowed to create Ponzi bubbles of epic proportions in order to discredit decentralized digital currency and make it radioactive in most of the public's mind.

rlt• 4 years ago

Alternatively, governments knew FTX was a fraud and let it happen to weaken peoples’ faith in crypto.

gorbachev• 4 years ago

Or just the usual story of near senile legislators being decades behind actual developments and just not getting it, and therefore not moving quickly enough.

px435• 4 years ago

FTX was able to fleece Wall Street investors specifically because of their deep Wall Street connections. This is a corrupt Wall Street story. The only reason they were exposed is because they left evidence on-chain, and people started asking questions. There are very few people who have been in the cryptocurrency space for more than 5 years that had any sort of trust in FTX.

https://twitter.com/concodanomics/status/1591232063906217984

Aaronstotle2• 4 years ago

The FTX App has allegedly been hacked as well. This reeks of an inside job/coordinated attack.

Edit: It is rumored that SBF is en-route to Argentina

Second Edit: This is a Twitter rumor, with no verification, could be fake news. I was going to paste the Tweet, but the Tweet has been removed because it was seen as unlikely.

12700180802• 4 years ago

Argentina has an extradition treaty with the US though?

Aaronstotle2• 4 years ago

Yeah, I will post the link to the plane that is rumored to be his.

notch656a7• 4 years ago

... and extremely porous borders. Doubt anybody would be dumb enough to actually fly directly to their target country.

Also worth noting, due to a quirk in the way Argentina citizenship laws are written once he is in the country he can file immediately for citizenship and he won't be deportable (although he will be extraditable). I'm not an attorney but that may help him in case his passport is revoked.

shorthistory5• 4 years ago

What is the source of rumor please?

saurik2• 4 years ago

https://twitter.com/0xfoobar/status/1591292545346473984

graeme5• 4 years ago

App not updated in app store. Could popup box be edited in app to be malicious of would such a feature need to already be coded in like Epic’s non app store payments thing?

Magi604• 4 years ago

Tether is just as if not more shady than anything coming out of this whole FTX saga. It wouldn't surprise me if people behind the scenes are working on it right now to try and bring it down and be first to claim that scalp.

rippercushions• 4 years ago

It gets worse: somebody has pushed what appears to be a malicious update to the FTX app, and the official FTX telegram channel is warning people not to even browse to the website!

https://twitter.com/zachxbt/status/1591293813519253504

graeme5• 4 years ago

I’ve been trying to figure out the technicalities there. Neither the ios nor android apps have updates since the crash.

The update box is clearly based on their pre existing popup used for things like 2FA.

Could this popup have been modified with new text and linked to a new malicious site without an app update on ios or android?

Or, could the popup only function if it was already coded into the app waiting to be activated? Meaning premeditated

fshbbdssbbgdd• 4 years ago

It’s pretty common for apps to load some external content from a server to show to the user. This is useful in part because it allows you to update the content without going through the slow app review process. Potentially, if your backend got hacked, the hackers could change this content.

trollied• 4 years ago

Lots of apps these days are merely shells for web content that is hosted elsewhere.

gorbypark• 4 years ago

A couple quick searches for “ftx app react native” makes me believe at least part of their app, if not the entire thing, is react native (it’s possible to have a hybrid native/react native app). It’s totally possible and quite common to be able to load the JavaScript bundle from a remote server. Microsoft has a service to do exactly that called Codepush. Expo also has a service and it’s not very complex to roll your own. How a react native app works is all the native code is compiled into a “shell” of an app and then a JavaScript bundle is loaded (it can be shipped in the binary or loaded from a server) and that’s where all the layout and logic lives. Not only is it possible to make small changes, you could conceivably ship an entirely new app this way as long as you don’t need to add any new native dependencies. Of course the App Store/Play Store don’t allow “major” changes, but they have no real way of knowing. In Apple’s case, you need to provide them with a login for them to review the app (not sure about the play store, but possibly them too). It would be trivially to load one bundle for Apple and another for everyone else. If you had control of the backend you could even target specific accounts and load a compromised bundle with no one else the wiser. It’s fairly easy to strip out the JS bundle to examen, so I’d say targeted attacks would be the smart way to do it. It would give you a lot of time before people caught on vs compromising everyone. I’m sure there’s folks out there already tearing into the js bundle looking for shenanigans.

tootie2• 4 years ago

If half of this drama happened to JP Morgan, it would be bank runs and global depression.

hestefisk7• 4 years ago

Indeed. But JPM is at least regulated so it shouldn’t happen (post GFC…).

alasdair_3• 4 years ago

Isn’t this just people that live in the Bahamas draining their own accounts (which is still allowed)?

Plus, obviously, people who can find a random Bahamas native to KYC their account for them.

paxys5• 4 years ago

I imagine a large chunk of FTX users in the Bahamas are FTX employees, and others associated with the company.

555555• 4 years ago

At the very least they would know someone there who is a citizen and could withdraw their funds for them. A loophole was utilized where a Bahamanian FTX user would create an NFT on FTX's NFT marketplace, and the locked user would buy it with the price equal to all of their funds. Then the Bahamanian would withdraw to fiat and take their cut. People probably made dozens of millions in a day taking 50% cuts while laundering people's money out.

datalopers• 4 years ago

SBF and Caroline (and probably Trabucco) probably already on their way to non-extradition countries and taking what little cash remains with them. They'll end up in prison if they don't.

shorthistory5• 4 years ago

Who (which government agency etc.) would be expected to track their whereabouts in this scenario?

paxys5• 4 years ago

DoJ and SEC are both already investigating FTX.

wmf4• 4 years ago

Do the Pinkertons operate worldwide?

Or maybe Black Cube.

sb057• 4 years ago

The problem with countries that don't extradite to the U.S. is that assassinations tend to be woefully easy.

notch656a7• 4 years ago

And extraordinary rendition.

TBH if you look at the data the US doesn't extradite that liberally. Even the Liberian torturer son of Charles Taylor or whatever was safe in the Caribbean despite being extraditable; as long as you didn't commit murder or do something big on the public radar or make political enemies or steal too much money I get the impression the US government doesn't try too hard. But they will definitely try to extradite this fella.

shorthistory5• 4 years ago

Guys, don't worry: Sam has said he's sorry

dang5• 4 years ago

Please don't post unsubstantive comments. We're trying for something else here.

https://news.ycombinator.com/newsguidelines.html

AndreLock• 4 years ago

This is absolutely wild and unprecedented. Imagine being a victim of Madoff's ponzi and - after already being traumatized by the unveiling of the fraud - discovering that the rest of the money had been stolen.

Madoff's ponzi was larger, but the recovery rate was 88%. It looks like customers who didn't withdraw in time will end up with 0%.

sillysaurusx8• 4 years ago

Can confirm. Lost 100% of my mtgox holdings in 2013. Theoretically my account balance is 7.73 BTC. I can still log in and see it. Maybe by the time I retire I’ll have recovered like 0.7 BTC. Which amusingly would be the sum of my original $11k investment.

A lot of this is just gambling. People need to go into it with the mindset that the money will be gone tomorrow, and then be pleasantly surprised if it doesn’t.

See this millionaire who is now worth $10k due to FTX: https://www.tiktok.com/t/ZTRxWq77B/

rkagerer• 4 years ago

If you've been keeping up with your claim filings you should get around 1.1 to 1.25 BTC (estimate from https://blog.wizsec.jp/2021/02/mtgox-claim-calculator.html?m...)

Seattle35032• 4 years ago

I can still log in and see it.

Who operates the site?

jl27188• 4 years ago

So, did Madoff's victims just end up with normal returns like they would have gotten any other way?

cuteboy193• 4 years ago

The ended up with 0.9x their original capital

emadabdulrahim3• 4 years ago

It's wild to me that he hasn't simply had a heart attack and died from the insanity of his actions and the consequences of it all.

Imagine throwing a life like that and he's barely turned 30. Hubris and foolishness can lead to one's own grave.

edit: I'm not wishing for his death. That's not what my comment was about. More on the psychological impact of deception at this magnitude and could any person cope with that.

wmf4• 4 years ago

He said the whole thing was a calculated risk. He only spent five years on crypto so he has plenty of time to try again. He probably wasn't counting on prison time though.

MisterBastahrd• 4 years ago

Well, that's one way to look at it. The other way to look at it is that he's still insanely rich even though he's lost the vast majority of his fortune, and he probably has it locked away in a place that the Feds can't get it... so as long as he gets to a non-extradition country, he will probably be better off than 99.99999% of the people currently residing on this planet. I'd rather not travel because authorities are out to get me than not travel because I'm too broke to do so.

dang5• 4 years ago

Fancifully entertaining someone's death is definitely over the line in HN comments. Please don't post like that.

https://news.ycombinator.com/newsguidelines.html

Edit: I'm surprised at how many people are eager to go there:

https://news.ycombinator.com/item?id=33570385

https://news.ycombinator.com/item?id=33570266

https://news.ycombinator.com/item?id=33570205

That is not what HN is for, so please don't.

emadabdulrahim3• 4 years ago

Apologies if my comment sounded like wishing for someone's death. I promise that was not my intent.

I'm aghast at the magnitude of his disastrous actions and wondering how could someone cope with the situation he put himself in, from a psychological point of view.

2pEXgD0fZ5cF• 4 years ago

Cryptocurrencies are speedrunning the history of the financial system and why it is the way it is.

smaudet2• 4 years ago

After 10 billion USD goes missing you can bet it won't stay unregulated for long.

But yeah it became apparent a while back that some very bad actors, speculators, had become involved in crypto, so I became inactive.

readthenotes15• 4 years ago

10B didn't go missing, it was stolen and they know stole it and where he put it.

One to two billion is missing and probably stolen.

vgatherps3• 4 years ago

A real good takeaway here is how even a single gap in compliance controls can lead to unbounded failures, here I think largely access controls and tracking.

If an exec can just go and cook the books, or like sbf did, "secretly transfer 4bn to alameda", it doesn't matter if you have strict auditors. It doesn't matter if you have compliance and control rules around comingling. This will literally never be visible to anyone in your exchange since their data source is fundamentally wrong.

Nothing they did was proper or legal in the first place! It's already quite regulated in that regard. But they were able to do so in the first place since the required compliance frameworks weren't completely in place.

JacobThreeThree• 4 years ago

This is just criminal behavior. There's plenty of fraudsters in the financial system.

redox993• 4 years ago

Cryptocurrencies are working just fine. FTX users didn't actually own any crypto. This is people giving away their money to a criminal business. The whole point of cryptocurrencies is that you don't need to trust a third party.

"Not your keys, not your coins"

rocket_surgeron• 4 years ago

Every time one of these cryptoscams matures I curse my rotten, stupid, brain.

If I was smart, I too would be ripping off all of the cryptobros.

Instead I dumb and do honest work.

smaudet2• 4 years ago

A) few people can make money off of a ponsi scheme

B) The unregulated crooks are making it so crypto either will be outlawed or regulated (e.g. central exchanges regulated), so you won't be able to scam for very much longer

C) it's not just crypto bros, many people made the speculative investment who are relatively uninterested in it, you are mote likely to defraud your standard investor looking to trade stocks with e.g. Robinhood than any major players.

So don't feel bad or think you have missed out. If you want to defraud someone go sell NFTs, those are literally nonsense sold to idiots...

mrich2• 4 years ago

People will be going to jail for this. Do not take the short term view.

quantified2• 4 years ago

Let's keep out eyes on this. It is a super lurid scenario (to use a word introduced by @dang on this posting).

By "this" I don't mean the earlier bits of the FTX debacle, but specifically this draining event. The statement that "FTX apps are malware" is weird in that it implies they became malware a while back. I could see either hackers penetrating due to inadequate security, or insiders setting up for an opportune time. Until the crypto is tumbled, it will be possible to trace its movements. Perhaps it'll just get frozen somewhere to keep it inaccessible by FTX interests. Let's see how long it takes to determine and locate any suspects for this. I have no guess aa to that, but watching with interest.

Who says the Binance app won't turn into a threat at some point?

xisthesqrtof92• 4 years ago

Create products, real value and make money.

At least that’s how I think of it, speculation creates nothing new. Instead it depletes resources that could have otherwise been used on something more meaningful.

555555• 4 years ago

Be glad your mind doesn't tempt you with this crap. You'll pay for it one way or another, and in the end, money doesn't matter beyond a very low point.

mrjin• 4 years ago

Why has this to be hack? Wouldn't it be much easier an inside job?

tomashertus• 4 years ago

If something, this really smells like inside job. They are just draining everything out of the connected wallets. This is fucking shame.

moneycantbuy• 4 years ago

to what extent can my pc/phone be compromised simply by going to a website? how would i know if malicious software is downloaded/active?

shorthistory5• 4 years ago

My thoughts also... can this be bigger than FTX?

Can iOS/Android apps be updated without 3rd party approval?

sgammon4• 4 years ago

There is no evidence that a bypass occurred related to iOS or Android app review

An analysis of the app update showed it disabling user features like account transfers. That makes sense for their bankruptcy steps.

gfd• 4 years ago

iirc someone on hn said the going rate for zero-days is just $1-2 million. there were at least 3 RCE on chrome just this year: https://www.theregister.com/2022/04/15/google-third-fix-chro...

the math works out for someone to spend it here given the amount of panicky crypto whales trying to get their money out of ftx. (OTOH, the math also suggest that these exchanges should've been hacked long long ago if these cheap zero days exist, so idk)

throwawaysleep4• 4 years ago

Could be as simple as the defenders walked off the job at FTX.

dang5• 4 years ago

All: I know it's a bit hard but if you're going to comment on this, please review your comment to make sure it isn't shallow, lurid, or gloating. Most posts so far in this thread have been below that line. On HN we want thoughtful, substantive, and above all curious comments—where by curious is meant intellectually curious, not gawking.

https://news.ycombinator.com/newsguidelines.html

gasull6• 4 years ago

To all the people replying that crypto isn't regulated: that's a myth. Exchanges are regulated and keep KYC info of their customers.

If the FTX hack is true, then all that KYC info will be sold in the black market.

Regulation didn't prevent the hack (or rug-pull?). Self-custody with DeFi does prevent it.

It's shocking how some people are for tinkering hardware/software and self-hosting services like Nextcloud, but it comes to money they would rather leave their life savings with a third party (a bank or a custodial exchange) and renounce to all financial privacy.

throwawaysleep4• 4 years ago

You going to bet your tech skills vs a hacker when it comes to guarding your money?

The reason people are comfortable tinkering with hardware and software is that it involves little to no risk. The stakes are extremely low.

the-anarchist2• 4 years ago

You mean a hacker that would need to enter your house, look for your hardware wallet, beat the mnemonic out of you and quickly enough steal the coins for you to not be able to transfer them yourself before he manages to find a computer with internet access that is sufficiently hidden to not be traced back?

iakh• 4 years ago

Is it really that surprising people would rather keep their money in a bank that has hired professional security guards rather than at home under their mattress?

oneoff786• 4 years ago

It’s a bit surprising if they spend a lot of effort complaining about banks

gasull6• 4 years ago

Yes, until we had cryptocurrency.

bsder• 4 years ago

The difference is that when a bank gets robbed, I can still go get my money back via the legal system.

When a crypto exchange or a crypto wallet gets robbed, you have nowhere to go to get your money back.

There are good reasons why we don't keep large amounts of cash in our pockets or in our mattresses.

the-anarchist2• 4 years ago

Good luck getting your money through the legal system when the bank collapsed!

wesapien• 4 years ago

How do you know self hosting people do the thing you're suggesting?

gasull6• 4 years ago

I've seen posts on r/selfhosted about Uniswap out other DeFi protocols being downvoted to oblivion and with comments like "burn crypto too the ground". They want people to have autonomy, except when it comes to money.

conradev• 4 years ago

Whatever info FTX had, sure. Looks like your private documents were stored with Stripe, a much better steward of your data:

FTX partners with Stripe to ensure a secure identity verification process. Please note data will be stored and may be used according to the Stripe and FTX privacy policies.

https://help.ftx.com/hc/en-us/articles/360027668192-Individu...

Seattle35032• 4 years ago

I wouldn't be surprised if FTX has a copy of all documents and PII. I don't think regulators would accept "Stripe suddenly went under" as a valid excuse for not having KYC data.

cuteboy193• 4 years ago

keep KYC info of their customers

This is AML. It has nothing to do with protecting client funds.

Though knowing FTX, they might have advertised compliance with "Employees must wash hands" as "We are a fully reglulated exchange complying with all applicable local and national laws"

poisonborz• 4 years ago

Selfhosted services are typically entirely self-contained. You access them with clients controlled by you, with devices on your network, and apart from updates from trusted sources of your choice, not exchange with untrusted parties at all. I'm all for decentralised financials but the topic is orders of magnitude harder.

gasull6• 4 years ago

You can self-host your Bitcoin node, the Uniswap front-end, etc. You can be your own bank.

throwawaysleep4• 4 years ago

And the giant scam that is crypto marches on. I feel like such a schmuck for not working on ICOs when that’s as all going on. Was sure that this was all fraudulent, but you can walk off with a billion dollars now and nothing will happen.

Ekaros2• 4 years ago

Or get on early on some of this junk. But I back then didn't believe it would go up and still don't believe it to stay up or go up more...

Some many opportunities from pre-mined shit coins to ICOs and so on.

DogOfTheGaps• 4 years ago

Elon posted about this on twitter: https://twitter.com/elonmusk/status/1591313397362352130

nixcraft• 4 years ago

He must be happy not to take the call with Sam Bankman-Fried to invest money https://twitter.com/TechEmails/status/1591107918816247808

trophycase• 4 years ago

Where are the regulators and enforcers when we actually need them? How is any high up in this institution not arrested yet? What the hell are they doing?

Like is this a psyop to destroy crypto? Is this preferential treatment of SBF due to his donations/regulatory capture? Imagine if there was a mass shooter in a crowd of people and they just let him continue firing until he ran out of ammo, that's analogous to what's happening right now. Absolutely insane.

threeseed8• 4 years ago

Like is this a psyop to destroy crypto

Why would the government get their hands dirty when crypto can self-implode on its own.

cuteboy193• 4 years ago

I would remind you that classifying crypto to be securities would very easily make all of this illegal. Yet the crypto sphere fought tooth and nail against this.

jl27188• 4 years ago

https://twitter.com/jagoecapital/status/1590751676105125888

paulpauper7• 4 years ago

Regulators are like the fire trucking coming after the home burned down. Regulators seem to do a poor at at stopping people from being scammed. Scammers keep coming up with new types of scams that evade regulators, and people keep falling for them.

rchaud3• 4 years ago

interesting hypothetical with the mass shooter. crypto regulations being what they are, you would need some equivalent of a "good guy with a gun" to take out the bad one.

YossarianFrPrez11• 4 years ago

Regardless of whether you are pro- or anti- crypto, the collapse of FTX, SBF's bubble bursting in a rather extreme fashion, and now this hack are more nails in the coffin for mainstream support.

I am no fan of crypto myself, but it's interesting to think what would have to happen for crypto to burnish its image.

Would key people have to voluntarily form some sort of coordinating council and self-regulate? Would they have to invite governments to regulate them better? Whatever the solution is, I'd be highly surprised if it could be done algorithmically and reassure anyone.

bamboozled• 4 years ago

Is it?

Maybe this is part of the hardening of these systems? Part of the evolution which grows a thicker skin?

What about all the trials of traditional currencies we all know and love?

Not really a crypto fanboy, but I'm not sure this means the end of anything.

BlueTemplar5• 4 years ago

From the guy that did "FTX bankruptcy explained!" :

"John Law - The First Financial Engineer - A History of Paper Money and The Mississippi Bubble" :

https://youtu.be/H5uKPUPQSyQ

douglaswlance• 4 years ago

This isn't a crypto failure. Crypto works.

This is a human failure. FTX didn't collapse because of the technology. It collapsed because of human error.

The fix is rather simple. If an organization looks like a bank and quacks like a bank; it should be regulated like a bank.

foogazi• 4 years ago

This is a human failure

Is there any crypto out there without humans ?

Is there an undo button to reverse the transaction?

All financial systems involve humans

threeseed8• 4 years ago

it should be regulated like a bank

And how would they implement KYC/AML regulations which are fundamental to banking ?

YossarianFrPrez11• 4 years ago

I agree that the algorithms powering crypto are sophisticated pieces of technology. Just look at the zero-knowledge proofs.

The thing is that "not being regulated like a bank" is exactly what many people like / liked about it. (Yield farming, using DeFi for mortgages, etc.)

What I'm saying is that Crypto seems to be headed to being taught alongside, if not the Therac-25, then the Mars Climate Orbiter (which was lost to some people working in metric vs standard.)

croes2• 4 years ago

So bank regulation worked in 2008, is was just a human failure?

Communism works, it's just human failures?

The measure of whether something works is whether it prevents human failure.

albertopv• 4 years ago

All crypto currencies are a ponzi scheme. Change my mind.

bmitc8• 4 years ago

People keep saying this, but I don't follow. FTT was a token manufactured out of thin air. Crypto works as a concept, I suppose, but people saying crypto works is like the people that say Agile works. How long do we have to wait to see crypto working? Where are the success stories of crypto? There's a long laundry list of hacks, scams, company failures, "tokenomics", NFTs, <x> on blockchain, etc. Saying crypto works as a technology base is not enough. Currencies and tradeable "assets" are a social thing. It isn't just a technology.

Thorrez7• 4 years ago

If a bank gets hacked, generally the transactions get reversed. If a cryptocurrency exchange gets hacked, that generally can't be reversed.

Regulation can make things more secure, but I don't think it can realistically stop all attacks. Regulation is slower than attackers. The ability to reverse transactions is what's really needed to prevent attackers from getting away with money.

hestefisk7• 4 years ago

Indeed. Beyond the failure of human greed in the crypto Ponzi schemes, FTX is also a massive regulatory failure. These firms have been allowed to play with people’s money for too long.

me551ah4• 4 years ago

Crypto works for what use case exactly? Crypto payments take much longer time than traditional credit card ones , are barely supported by most websites and in many cases cost more in transaction fees than credit cards.

And with a lot of people storing their money in these major crypto banks , what we now have is a fairly centralised structure which kind of defeats the purpose of crypto. Worse, these banks also hold each other’s tokens similar to what your normal banks do. And if that’s not enough some of them even do fractional reserves and use the real money they get for investing.

polygamous_bat5• 4 years ago

This isn't a crypto failure. Crypto works. This is a human failure.

"Guns don't kill people, people kill people."

listenallyall2• 4 years ago

This seems like a simplification. Crypto, like any currency, needs to be able to be easily converted to and from other currencies. I can walk up to thousands of money changers and exchange USD for Euros, Pounds, and plenty of small countries' currencies. Meanwhile it may be technically possible to do the same with crypto, virtually nobody is, and the places that do offer a conversion, like BTC ATMs, charge enormous fees.

baq2• 4 years ago

The fraud going on in there was not human error. Reuters wrote about a backdoor sbf used to make transactions with ftx assets off the books, without alerting controls. If this is true, it’s oceans eleven stuff.

himinlomax2• 4 years ago

Bad user interfaces have caused catastrophes (see for example Three Miles Island or the Mont Saint Odile Airbus crash) that have also been labeled "human error", but those catastrophes wouldn't have happened without the bad UI.

MrMan3• 4 years ago

as SBF himself allowed in the Bloomberg interview, this system only works if humans, driven by FOMO and greed, bid up the tokens. that, more than the technology underpinning the system, is a necessary condition for defi or centralized crypto to "work."

defi is rife with hacks theft and rug pulls. but a form of fraud that is built into the entire ecosystem are tokenomics that carve out allocations of tokens to early holders, so they front run every one else.

this cannot be escaped - there is no refuge from the grift built in to the entire ecosystem. decentralized is a lie propagated to support a scam on everyone who got in later than early holders.

colechristensen• 4 years ago

Crypto that doesn’t suffer from these kinds of failures is boring. It looks like traditional banking with a different API. Exciting maybe for banking nerds, but not so much for anyone else. Ultimately though blockchain ledgers will probably only be long term useful for record keeping between small closed groups of independent entities like banks settling overnight balances between themselves. It’s never going to be entirely algorithmic as there is always the chance of mistake or failure which needs human judgement to correct.

YossarianFrPrez11• 4 years ago

I think most people would say that they want banking to be boring.

petesergeant2• 4 years ago

blockchain ledgers will probably only be long term useful for record keeping between small closed groups of independent entities like banks settling overnight balances between themselves

It’s never going to be useful for that, though. It doesn’t solve any of the problems that small, closed groups who know each other and have legal recourse have.

paxys5• 4 years ago

In the short term – yes. More broadly though, large-scale frauds like this one will only result in increasing government scrutiny and regulation, which can actually be good for the crypto investment ecosystem.

YossarianFrPrez11• 4 years ago

Hmm, tbh, that's a point I hadn't fully considered. To flip your point around, what hypothetical scenario would be bad for the crypto ecosystem long term?

bellBivDinesh• 4 years ago

The problem is the crypto community’s skepticism of proven financial safeguards. Large financial systems are centralized for a reason and they seem intent on finding out why by hitting every bump in the road at full speed.

YossarianFrPrez11• 4 years ago

Indeed. In a way it reminds me of how easy it is to be utopian if you ignore incentives.

nightski2• 4 years ago

What's amusing about your comment is that exchanges are the one centralized part of crypto due to the interfce with fiat and they also tend to be where all of the fraud occurs.

redox993• 4 years ago

Pretty much everyone in the crypto community would be fine and happy if exchanges were forced to prove they own the users funds. Crypto people generally don't want crypto regulation. But exchanges are not crypto. They are a third party holding your crypto.

The problem is that regulators "confuse" that (or pretend to) and any regulation that comes out hurts the users, and the DeFi space, instead of focusing on centralized business like FTX that are outright stealing users funds.

Also what FTX did is without a doubt already illegal, it's not like it's some kind of loophole or legal thing they did.

BLKNSLVR2• 4 years ago

I actually see this as an opportunity for the established financial companies to insert themselves into the ecosystem, using their established reputation, processes, and adherence to traditional bank regulation as a 'trust' base that's been both lacking permanently and (whatever was there) eroded over the last 12 months.

Both exchanges and coins / tokens are going at what looks like very cheap right now.

TEP_Kim_Il_Sung4• 4 years ago

Their established reputation

The reason trustless decentralized crypto currencies were invented: So we don't have to rely on banking corporation's glowing reputations.

YossarianFrPrez11• 4 years ago

I'd be curious to read anyone's thoughts on what would have to happen for crypto to improve its image at this point. Would being regulated exactly like traditional banking / finance be enough? More regulation? Would it be regulation + lower rates of fraud, hacks, collapse, and abuse? Or something else I'm not thinking of?

can16358p3• 4 years ago

Transparency. Crypto has almost everything needed to be fully transparent with a public ledger but exchanges (CEXes) still operate behind closed doors.

winternett• 4 years ago

Depositor Insurance probably... But still, every single promise has been burnt in the crypto world.

petesergeant2• 4 years ago

It would need a legal, non-speculation use-case that isn’t much better solved by extant centralised systems

TEP_Kim_Il_Sung4• 4 years ago

Not everything that calls itself "crypto" is decentralized, peer to peer, or a crypto-currency.

https://www.corbettreport.com/bitcoinpsyop/

yieldcrv2• 4 years ago

Shame poorly run companies and stop using them. Mainstream’s insistence on conflating this with crypto masks the proper shaming of mismanaged companies.

electic• 4 years ago

This isn't crypto. This is a centralized exchange with a centralized website, with centralized databases, that is run and controlled by humans. In fact, if you use a centralized exchange there is no use of blockchain for the most part.

There's a literal saying, "Not your keys, not your coins". Only if people would listen.

bmitc8• 4 years ago

There's a literal saying, "Not your keys, not your coins".

Doesn't that also legitimatize a hack then? If someone hacks or steals your keys, you can't then turn around and say "but wait, those aren't your keys".

LilBytes2• 4 years ago

The exchange is a component of crypto, as an industry. Imagine defending social media but shitting on Facebook. To use your words to try and make your argument:

This isn't social media. This is Facebook with a centralized website, with centralized databases, that is run and controlled by humans. In fact, if you use a Facebook there is no use of social media for the most part.

There's a literal saying, "not paying for it, you're the proruct". Only if people would listen.

Thorrez7• 4 years ago

You're right that a lot of the risks are due to holding in a central website. But cryptocurrency in a central website is more risky than fiat in a central website, because if a central website gets hacked and the hackers steal fiat, generally those transactions will be reversed, whereas if the hackers steal cryptocurrency, generally those can't be reversed.

concinds• 4 years ago

I'm pro-crypto. This is just a repeat of Mt Gox from 2014. Same scam. Gamblers and get-rich-quick idiots get wiped, as they should. Those people don't want regulation; they see that as an obstacle to becoming billionaires. In a few years, you'll see them gambling their money again.

The real reason there'll be regulation isn't because the community wants to be reassured; it's because governments are afraid, and want control over the entire financial system since they believe they can tame "systemic risks" (while using bullshit value-at-risk models; I guess everyone in this story's an idiot). And in the new bull market, when the abysmal idiots want to get rich quick again, you and I might bail them out.

ShredKazoo3• 4 years ago

A less-discussed effect here is that crypto sketchiness crowds out legitimate applications. If someone has a problem that crypto is actually a good fit for -- an application that would legitimately deliver value for customers, insuring medical tourism perhaps -- a lot of people will dismiss it just because they assume crypto=scam.

As crypto gets scammier by the year, this crowding-out effect means that the dream of early adopters 10+ years ago, of a world economy running on cryptocurrency, becomes more and more distant.

Combine with rising interest rates, I wouldn't be shocked to see BTC drop below $10K and never recover. Past crypto bubbles have reinflated by exposing crypto to larger and larger segments of the investing public, but I think we may be running out of greater fools. For example, last I checked the number of Americans who own crypto is pretty similar to the number who have an old-fashioned brokerage account.

alexchantavy• 4 years ago

If someone has a problem that crypto is actually a good fit for -- an application that would legitimately deliver value for customers, insuring medical tourism perhaps -- a lot of people will dismiss it just because they assume crypto=scam.

If there's a great application that solves an important problem using crypto then I imagine most people would focus on the problem and not the fact that crypto is used to solve it; they'd probably even gloss over how the application works.

smt883• 4 years ago

Past crypto bubbles reinflated primarily because everyone had too much cash and interest rates were falling for decades. Even smart money had nowhere to go.

We may not see an environment like that for the rest of our lives.

px435• 4 years ago

This is a Wall Street corruption story.

https://twitter.com/wallstreetpro/status/1591167190996504576

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. 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.

The only reason FTX got caught is because of evidence they left on-chain. 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.

sillysaurusx8• 4 years ago

Very interesting take.

How would another investment fund transfer customer funds to Alameda while being able to sweep it under the rug?

I think the transfer wasn’t the problem. It was illegal, yes. But the empire fell because Alameda lost the money.

Alameda’s CEO: “I use very little math. Being comfortable with risk is important. We tend not to have things like stop losses.” https://www.tiktok.com/t/ZTRxWbctK/

polygamous_bat5• 4 years ago

This is a Wall Street corruption story.

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.

sgammon4• 4 years ago

Dude, in a world of Lloyd Blankfeins, Kevin O'Leary is a small fish.

eternalban• 4 years ago

Wiki was quiet about Caroline Ellison's family but a random post on the internet just happened by and the claim is her father is Glenn Ellison.

https://economics.mit.edu/people/faculty/glenn-ellison

but p.s. the whole comment is worth a paste:

SEC Chair Gary Gensler’s old boss at MIT was Glenn Ellison. His daughter Caroline Ellison is the CEO of FTX sister-company Alameda Research (and Sam Bankman-Fried’s lover apparently).

The GC of FTX used to be lead counsel to Gary Gensler when he was CFTC Chair.

Sam Bankman-Fried’s mother was Hilary Clinton’s lawyer.

Gabe Bankman-Fried, brother to Sam (also a former Jane Street trader), is founder of “Guarding Against Pandemics”. He was a Legislative Correspondent for the US House of Representatives and an advisor to large political donors in the Democrat party.

The family Aunt Linda Fried is a WEF member on the Global Agenda Council on Aging.

The father, Joseph Bankman, is a Stanford professor who has lobbied on behalf of Hedge Fund managers before Congress before (film records exist).

FTX Head of Ventures & Commercial at FTX Ventures, Amy Wu, started with the Clinton Foundation years ago.

Nishad Singh FTX Director of Engineering has spent over 8 million for Dem candidates.

Obama's Commodity Futures Trading Commissioner, Mark Wetjen, was the head of FTX Policy & Regulation.

Chief regulatory officer of FTX is Dan Friedberg was previously a lawyer at Ultimate bet (a site where they basically cheated against players).

Stuart Hoegner General Counselor at Bitfinex/Tether was previously Director of Compliance at Excapsa which was responsible for the Ultimate bet poker software.

dzink2• 4 years ago

1. Crypto and web3 is so tarnished in consumer minds, it cannot recover. The next big thing in this space needs stay away from those terms like the plague.

2. Energy has become so valuable these days and Crypto tech has become so WASTEFULLY, UNNECESSARILY energy intensive, that the next iteration needs to be as cost efficient and effective as software. Transaction costs need to begin and remain extremely low to none. Only a process that is always cheap to run will be able to take over micro transactions worldwide and unlock true financial freedom for the world.

3. Last but not least, any transaction tech that cannot cash you out cheaply and immediately and easily should be considered a ponzi scheme. Marketing your coin and not allowing people to liquidate it due to natural or artificial constraints, makes you immediately not a store of value but a scam and dangerous to the entire ecosystem of trust.

The current financial system took a LOT of guardrails to keep people from tanking the trust in it for their own self gain. When you lose trust in the system, people pool their money out of it and go buy oil, or bricks, or stocks, or whatever else is actually worth something. If you want to dominate with a tech-based system. Trust should be completely unbreakable - as in identity needs to be absolute and bad actors banished from the system forever or some severe term that works as deterrence.

dzink2• 4 years ago

Trust is oil that makes economic engines fast and abundant, while distrust is sand - even a few specks cause damage. Trust between actors is key here, not just trust that the system won’t malfunction. The next iteration has to make every participant as safe as can be (without raising the threshold for entry).

I would approach the next iteration as software with a very robust test suite - there is a rich portfolio of financial scams out there and your system needs to help deter, detect, prevent, etc, as much of that as possible automatically. All human systems devolve down to policing rule compliance with time.

Draw them in with ease of use that beats current financial tools (transaction fees for commercial transactions for example) and keep them in with trust (any bad actor has only one identity and loses it or is prohibited from using it for a time, - forcing them to use non-digital payment processing with much higher transaction costs.

eastbound• 4 years ago

1) To recover, a crypto will probably need to include specs about how the exchange should run.

Exchanges have failed 3-4 times, and it seems they’re part of a currency since people keep coming back to them. So there needs to be a system where I keep having control over my coins while they’re in an exchange: ability to withdraw from the exchange, ability to approve a transaction.

Mistletoe• 4 years ago

About #1 I think you are wrong. History has shown us that all they need to forget it is a few days of green numbers again. The siren song of a few days of up only.

himinlomax2• 4 years ago

"Web3" was never mainstream, despite the obvious manipulations to try to make it so.

jasonwatkinspdx4• 4 years ago

All reasonable points, and potentially insurmountable challenges. Also whatever it is, needs to have incremental utility, otherwise there's no road from the present to the future for it.

Also to repeat a minor rant of mine, anyone designing a would be successor to Etherium should think very deeply about programming language theory and consult/engage with experts in that community. Much pain could be avoided by finding types and semantics appropriate to automated contracts.

ryanSrich4• 4 years ago

1. Remember ICOs? Web3, NFTs, and DAOs are going to be this cycles ICOs. The word crypto isn’t going away, but everything else might.

2. Crypto’s (as an industry) energy consumption is negligible when looking at other similar sized industries. POW is still the best method of mining.

3. 100% agree.

The current financial system took a LOT of guardrails to keep people from tanking the trust in it for their own self gain.

The current financial system took decades to be rigged properly. It rewards politicians and elites. There’s no denying that. The everyday man is left holding the bag 9 times out of 10. This was the very reason Bitcoin was created. Thinking the government is going to save you is an insane idea.

tootie2• 4 years ago

I have never understood what problems crypto/Blockchain/web3 is actually supposed to solve. I know it gained traction during the Libertarian/Austrian economics zeitgeist following the 2008 financial collapse. There was fear that the traditional fiat system was irreparably broken and couldn't be relied on. In reality regulators and central bankers did a pretty solid job (not perfect but they eventually got it right). DeFi was basically saying regulation is impossible to do without corruption so let's make transactions possible and regulation impossible. Not a great idea and now a fully failed experiment. Crypto as an asset class for profit was only ever an emergent property fueled by speculators. Crypto as actual currency is still valuable (mostly for criminals) so it may stay for a while but it's not going to make anyone rich ever again.

irusensei8• 4 years ago

I’d highly surprised if it could be done algorithmically

Except this exists since the beginning?

I feel people are missing the point. A decade ago a guy created some system that allows users to digitally self custody funds without a third party. That’s self regulation to you.

MtGox was not that. Celsius was not that and finally FTX was not that. Binance is not that. Those companies and their tokens conjured out of thin air are glorified digital cassinos folks.

Government regulation? Will it make a difference? The stuff they did is already ilegal in pretty much any country isn’t? By the way wasn’t SBF trying to push regulations to hurt his competitors? Didn’t he funded D and R candidates? Do you really think you can trust anything that can come out of regulation to be effective and not exploitable?

FFS doesn’t FTX US division have a NY bitlicense? That’s probably the most strict license in finance.

As for crypto reputation I see this as a big W for the core principles of self custody. Bitcoin “toximaxis” being right all along. Even here people often reply me they feel more comfortable using a third party. It’s all good but perhaps you should instead trade stocks or idk commodities or wathever?

imtringued3• 4 years ago

I think this is the end of fully centralised exchanges. All exchanges will have to build their own Validium and customers will self custody their non fiat funds on that Validium and the centralised exchange merely runs the order book logic and fiat onramp.

quickthrower2• 4 years ago

It is “just” another hack/collapse. That has been happening since mtgox and earlier and it hasn’t put people off using it l.

tigrezno• 4 years ago

I don't see banks losing mainstream support when they have caused massive crisis with derivative products and shit. We rescue them so new generations will be swimming in debt and nothing happens.

It's not about crypto, it's about human nature and avarice.

listenallyall2• 4 years ago

nails in the coffin for mainstream support

People have short memories, further, people get caught up the hype. If Bitcoin's price starts to bounce, and especially if it manages to approach a new all time high, plenty of people will be on board, in fact even moreso, because the tagline will be that Bitcoin is resilient, it always comes back, it can overcome any crisis.

Furthermore, although it seems like a lot of people are talking about FTX, probably 90% of the people who know of Bitcoin are entirely unaware of this story. I own some crypto assets, and I had never heard of "SBF" and the only thing I ever knew about FTX was that it made an awful television commercial. Never thought about them ever since.

fallingknife2• 4 years ago

This stuff seems pretty crazy, but it's no worse than what happened in early 1900's Wall St. If crypto is ever going to be used as a real payments system, and something you would put in a 401k, it will need regulation similar to stocks. Not sure if it really works, though, because it would remove the anonymity and decentralization that are pitched as the entire advantage of the system.

bo1024• 4 years ago

Blockchain tech should distance itself from finance and cryptocurrency. The most interesting and promising thing about blockchains is decentralized coordination of group decision making.

Based on your comment and the rest of HN, many people think blockchain = finance with cryptocurrency and NFTs. That’s what FTX was. Boring. DeFi is only slightly more interesting.

Blockchains like ethereum do run on a cryptocurrency, but the currency is not the most interesting part, it’s just lubrication for interesting applications.

sweep71• 4 years ago

One of the biggest issues with Bitcoin as others have pointed out is the catch-22 of self custody. Another huge issue is offshore unregulated exchanges like FTX. The resolution is actually regulation that allows financial institutions like Banks to hold Bitcoin. Services like this already exist with companies such as Casa (keys[dot]casa) where you have a multi-signature wallet where one of the keys is held by them. The problem with Casa is that they cannot be FDIC insured. A 3 of 5 signature wallet can create a sliding scale of security vs ownership with the most security and most insurance being offered by the Bank where they hold 3 of the 5 keys. This may be attractive for people who want to own a little bit but not take on the risk. Banks may even do the purchase for you as well (for a fee of course). For those who say this is just the current system with different steps, the difference is the possibility of taking on 100% of the risk/ownership yourself. Just the possibility of that shifts the power dynamic in the clients favor. Additionally, once institutions get legal clarity, they can also start running their own lightning nodes which generate revenue in the form of fees. Since they will hold large amount of BTC reserves, they can compete for more traffic. More traffic equals more fees. And no, I am not saying lightning is in a place right now where this would happen; but what is today isn't what will be tomorrow. This is just conjecture obviously. Once such things are in the hands of such institutions (as well as an approved spot ETF in the US) then the narrative on MSM will shift (dear public, it is safe to play in this space now). IMO I believe that is is the actual reason as to why there has not been any regulatory clarity on BTC.

mudrockbestgirl4• 4 years ago

According to the latest reports, SBF is potentially on the run on a private jet [0] from the Bahamas to (probably) Argentina. He hasn't been confirmed to be on that plane, but it seems likely. This stuff is straight out of movie.

[0] https://www.flightradar24.com/LVKEB/2e2e7cfd

AustinDev5• 4 years ago

If he is in fact on the run... Does this dude really think the CIA and FBI won't find him? He's likely not safe anywhere but Russia, China, North Korea or Israel.... maybe Pakistan.

xisthesqrtof92• 4 years ago

Why Israel? I’d assume they’d hand him over given their close background no?

paxys5• 4 years ago

Why would the CIA and FBI care? It's not like they are going to send Navy SEALs after him. This is a DoJ matter, and the most they will do is file extradition requests. If the country he is in decides to ignore them, well that's about it.

ajb4• 4 years ago

No, not safe in Russia. From https://mobile.twitter.com/kamilkazani/status/15791389474472...

"In contrast, Russian cryptobros that I know tend to act very, very lowkey. The fewer people know about your activities, the better. Posting about dealing with crypto in social media is absolutely unthinkable. Why? Because that makes you too easy and lucrative prey"

That thread describes how a basement was found, in the house of an official in the Russian prison system, which appears to have been specifically designed for the capture and torture of crypto owners to give up their coins. It had its own crematorium for disposing of the remains.

If these guys think that they can take some coins and live a nice life in a place without strong rule of law, they have a nasty surprise waiting for them

raverbashing• 4 years ago

But was he really in the Bahamas before? Or somewhere in the US

Argentina is an... interesting choice, and I'm sure he'll adapt just fine to the place and the bureaucracy and also there's no guarantee that's a safe haven in any way.

Edit: flight is showing as n.1 being tracked worldwide

bmitc8• 4 years ago

Interestingly enough, the plane seems to be headed for Buenos Aires, and there is LABITCONF (https://en.labitconf.com/), a crypto conference, going on there right now. Who knows if it’s actually his plane. Seems a bit weird that it would be given the plane is registered in Argentina.

SilasX• 4 years ago

Not disagreeing, but what's the basis for thinking that's a plane owned by/affiliated with SBF?

labrador• 4 years ago

So it's turned into a rug pull?

ddorian43• 4 years ago

This reminds me of `OSHA laws being written in blood`. The same has been true for everything in life and the stock market. And human nature didn't change with Crypto, so it WILL be the same.

dehrmann• 4 years ago

Others speculated that the outflows could be coordinated by a member of Bankman-Fried’s inner circle

They announced the hack and told users not to log in so insiders could get their funds out first, right?

tmaly• 4 years ago

Optics. The timing of the hack is suspicious

Markoff• 4 years ago

this is mt gox all over again, one would think people will learn something over the years

infrawhispers• 4 years ago

FTX General Counsel confirmed unauthorized transactions: https://twitter.com/_ryne_miller/status/1591326796305530880?...

mywaifuismeta• 4 years ago

FTX US and FTX [dot] com initiated precautionary steps to move all digital assets to cold storage

What assets?

jl27188• 4 years ago

I would like this to be a rogue white-hat. Anybody have a theory?

yalogin2• 4 years ago

This whole saga has done irreparable damage to crypto. It will take a lot of time for it to come out of this hole. When there is money involved, and that too this much, there will be conspiracy theories flying around and the regular retail investor will be tough to win back. It will be very interesting to see what happens from here on out. Crypto doesn’t have any uses to begin with, if it’s purely used as pump and dump schemes why bother?

mjburgess2• 4 years ago

All it takes is a business case: how will this business make money? Where will its cash flow come from? Where's the value-add? How easy is it to be out-competed? Who are the existing market players? How do they make money? What are you offering customers that will attract them to your business? What is the horizon for profitability?

You know, absolutely fundamental questions that have never been asked or answered of crypto. Questions that were "presumed answered" by made-up market capitalisations, and the flood of teenagers and young-adults into the schemes.

"This time" is never different. The route to making a sustainable profit never changes.

dan-robertson5• 4 years ago

I don’t know what you’re suggesting here really but in general running an exchange seems like a reasonable looking business – you match someone who wants to buy with someone who wants to sell and collect a tiny fee – and FTX appeared to be well run and profitable. The risks would mostly be getting hacked, massively (unintentionally) screwing up the accounting or being outcompeted. I don’t think one could have easily predicted this from first principles and if you’d told me a year or 5 months ago that one of the big N exchanges would blow up before 2023, I wouldn’t have guessed FTX.

knorker• 4 years ago

I'm curious about when you thought it was anything else?

I don't think this will affect its reputation noticeably.

Which demographic is going to be turned off by this?

The regular public won't hear about this. the FIRE investor people basically seem to use a percentage as a lottery ticket. Wall Street I would hope already saw the consistent story.

Is it hard core blockchain people, who knew of all the other crashed parties, but thought surely that's all behind us for the big players, having grown up now? But then nothing seems to faze them.

Maybe the whales who don't actually care about blockchain, but were sold angel investor status? Yeah, possibly.

2sk21• 4 years ago

The regular public won't hear about this. From what I am reading, quite a few people had money in FTX so this may not be entirely true. The word will spread about people who lost it all in the FTX bankruptcy.

forgotusername6• 4 years ago

Regular public were shown multiple FTX TV adverts featuring A-list celebrities. The collapse of FTX is being featured on major news outlets. I'm pretty sure ordinary people will hear about it.

ReptileMan• 4 years ago

Not sure about that. I didn't even knew FTX existed. Alt coins the drama surrounding them are too high volume low impact. But I always thought of crypto as gambling with extra steps. I think that most people in crypto know the ropes by now.

empiko• 4 years ago

This whole saga has done irreparable damage to crypto.

There were so many similar sagas in crypto, that this is not surprising at all by now.

binarynate• 4 years ago

Larry David was right: https://youtu.be/Ut3m9OK1c7Y?t=46

pbourke2• 4 years ago

this is some kind of rare triple word score double-reverse irony. I love it.

paulpauper7• 4 years ago

So ironic. the latest comments on the official FTX one are funny https://www.youtube.com/watch?v=BH5-rSxilxo

googlryas• 4 years ago

I wonder how much Larry got paid for this? Very approximately he has a net worth of $500M and makes $50M/yr on Seinfeld royalties alone. How much do you have to pay someone like that to do a commercial for you?

grammers• 4 years ago

Crypto is a ponzy scheme and always has been. The FTX disaster is just another sign of this.

dmichulke2• 4 years ago

For comparison - a regulated traditional finance entity:

On October 31, 2011, MF Global executives admitted that transfer of $700 million from customer accounts to the broker-dealer and a loan of $175 million in customer funds to MF Global's U.K. subsidiary to cover (or mask) liquidity shortfalls at the company occurred on October 28, 2011.

https://en.wikipedia.org/wiki/MF_Global

EdwardDiego• 4 years ago

Is this "whataboutism"? And if so, what's your point precisely?

I don't think anyone has ever claimed that financial malfeasance is impossible in traditional banking entities.

YossarianFrPrez11• 4 years ago

One key difference is the following:

In January 2013, a judge approved a settlement that would return 93 percent of customers' investments, with the prospect of additional payouts from the company's general estate.

austhrow743• 4 years ago

I’m not seeing anything about a hack

chatterhead• 4 years ago

Absolutely bullshit. Fried's parents are helping him build a defense against jail time for breach of fiduciary duty and embezzlement while his team coincidentally gets "hacked". Hacks are quickly becoming strategic fail-safes against corporate incompetence and useful as backroom data sales.

The promise of cryptographic currency was that we have the power. These exchanges by design sap that power for a promise that now seems illusionary at best and a massive liability at worst.

FINRA and the SEC need to charge Fried and his executive team immediately and begin the process of tearing apart that exchange.

pbourke2• 4 years ago

The promise of cryptographic currency was that we have the power.

As usual, we don’t. The question is, do you want the power to be in a condo in the Bahamas or in a building with the company’s logo on it, within walking distance of the SEC and SDNY?

smoldesu• 4 years ago

Well, if you take the exchanges away nobody has access to convenient liquidity. It's unlikely that mainstream cryptocurrency will have a future after we've seen so many failures at such a large scale.

paulpauper7• 4 years ago

How is $ftt still at $2? What will happen to it in bankruptcy proceedings? $2 is still higher than it was in 2019.

adam_arthur2• 4 years ago

The fact that it’s not 0 is kind of amazing. Demonstrates the vast ignorance of most in the crypto space

yalogin2• 4 years ago

Does anyone know what the state of fintech is now? Haven’t heard much about them. There are a lot of companies like chime that received investments but not sure how much they can survive in a downturn

usednet• 4 years ago

Deleted - Recent developments proved me wrong.

cheeze• 4 years ago

Go for it.

paulpauper7• 4 years ago

Crypto's performance is worse than even banking/housing stocks in 2008. No end in sight to the selling. People are blaming FTX, when it more likely crypto was going to keep falling anyway as the fad/bubble bursts. FTX is just more salt on the wound. BTC was already down 70% YOY when FTX failed. S&P 500 and Nasdaq up huge this week. I dunno why anyone would waste their time with crypto anyway when far superior investments exist.

ojr• 4 years ago

price of bitcoin since 2009 doing fine

paulpauper7• 4 years ago

There have been so many hacks over the past 3 years. What happens to this money and the people behind it? Does it get mixed or stay dormant in the wallets forever? Few arrests, AFIK despite so much $ stolen. Except Bifinex 2016 hacker and Silk Road 2012 hacker.

127• 4 years ago

Orders of magnitude more compared to 2008. Only one person went to prison after that farce. At least with crypto there's some form of public ledger.

0xbadc0de5• 4 years ago

Patrick Boyle breaks down the situation with his usual eloquence and dry humor. Video is worth watching just for the chart of the corporate structure. https://youtu.be/zTFhnpf-IE0

photochemsyn• 4 years ago

Over 130 companies referenced in the bankruptcy filing, and 'around 77 companies' in that organizational chart! The first thought is that's an optimal structure for a money laundering outfit, as if those companies are constantly transferring funds from one to the other, dirty money can be fed in to that system and then get lost in the mix, coming out as fairly clean on the other end. See Nick Kochan, "The Washing Machine":

https://www.goodreads.com/en/book/show/21230193-the-washing-...

staindk• 4 years ago

Thanks for the link! Very good video indeed and I'll have to look into some more of his videos. Very funny and well presented.

raziel414• 4 years ago

That video is amazing. Thanks for sharing!

anm892• 4 years ago

It's pretty astounding that there was essentially no volatility in crypto markets along with this. To the point of being fishy.

qeternity• 4 years ago

It shouldn’t be astounding. The entire crypto market is controlled by a handful of powerful entities. It goes up when they want it to, and it goes down when they want it to.

It crashes when they lose control, as they did earlier in the year. But at this point I don’t believe there’s enough riding on FTX that they’ve lost control again.

FTX is a story of retail and normies getting rinsed. But that’s zero sum. Who do you think ended up on the other side of the equation? Those people are in a decent position.

anm892• 4 years ago

Yeah, somehow, I don't think a yearlong 80-90% down is the choice of a cabal of all powerful overlords.

I did forget to wrap my doorknobs in tinfoil today so maybe I'm just not thinking straight

crypt1d4• 4 years ago

This last week has been a rollercoaster. I've been in crypto since a long time ago and have seen quite a bit, but this FTX implosion takes the crown. And to be honest, I don't think its over.

rvba• 4 years ago

What is the difference between this, terraluna earlier this year or MTGox?

crypt1d4• 4 years ago

Luna was quite bad, but it was pretty straight-forward path to death that everyone saw from a mile away. Not many people predicted that FTX and SBF will fall from grace within a timespan of 48hrs. The whole thing is also so full of scandals, theft and corruption we will be reading about this in the news for weeks to come.

mtGox was so early in crypto, there wasn't any institutional capital or major players, mostly retail/regular folks experimenting with shiny new tech. FTX is an intermingled web of retail, institutions and big name investors as well as having their own investments, huge donations to politicians, lobbying arm, etc. The fallout from this will set us back for years.

lvl102• 4 years ago

SBF was hailed as a crypto savior just a few weeks ago after the Luna fallout. He was viewed as Warren Buffett during the financial crisis. Perhaps Coinbase will be the ultimate winner here if crypto somehow survives. I imagine more than 75-80% of the assets tied to crypto will liquidate in coming weeks. I don’t think this will be “just another” crypto blow up. It’s end game time.

xeromal3• 4 years ago

I think MTGox was actually worse just due to the small size of the market then and how much of a joke their security was. FTX just seems like a fleecing job that tons of crypto exchanges and businesses have pulled off. MTGox was sheer incompetence.

cycrutchfield• 4 years ago

If you believe there is more to come and this isn’t over, are you still holding crypto?

xtracto2• 4 years ago

I've been in cryptocurrencies/blockchain since 2012. I "missed" the BTC boat and got into ETH early. I'm of the thought that CeFi services like Ftx, Nexo, Coinbase and similar are stupid. The only thing that should exist is simple Exchanges between Fiat and cryptocurrency. But everything else is just a scam IMHO. Why would you do a CeFi in crypto , when theres more TAM in doing it normal FIAT? Because you want to Avoid regulation and scrutiny.

Anyways, through all this saga, I see ETH is still at $1200, which has held pretty well. I think the right price is around $600, how it was on Nov 2020, before all speculation. The rest of the price is just people playing around. But that's not what ETH is for, and these high prices are hurting it's real goal.

I'm definitely still holding crypto. Mostly ETH, because I believe in the core technology. I've done some smart contracts and have a couple ideas for the future.

But man, I surely hope all cryptos crash and burn this time, so that speculators stop polluting the technology.

xwdv5• 4 years ago

Personally I liquidated all remaining crypto. I think these are the end of days for crypto and before the end of this year anyone still holding crypto assets will find them significantly less valued. There is no path to increasing value.

BeFlatXIII3• 4 years ago

It's shorting time!

crypt1d4• 4 years ago

I'm all in fiat right now, and will stay like that until things calm down a bit.

booleandilemma2• 4 years ago

A rollercoaster or a skydive without a parachute?

misiti3780• 4 years ago

Another interesting thought I keep going back to is .... since crypto is really zero sum, who the hell was on the other side of these horrible trades that has billions now?

crypt1d4• 4 years ago

At this point it wouldn't surprise me if they siphoned off the money by being on the other side of those trades via different entities...

SkyMarshal• 4 years ago

I suppose in this case it's probably a negative sum game. The assets in question are the FTT token that Alameda mined and gave to FTX as collateral, in return for real customer assets from FTX that Alameda used to gamb... er trade with. But FTT then went to zero, tanked the whole market, and the customer assets Alameda holds lost value too. Everybody loses.

bombcar4• 4 years ago

Supposedly from what I'm hearing from /r/buttcoin rumors, Alameda was very bad at trading, so the billions have gone to the people doing the opposite trades from Alameda, which were being funded by FTX to try to gamble back the amounts lost.

drummer• 4 years ago

Not your keys, not your crypto. Never leave funds on exchanges. When will people learn?

Gasp0de3• 4 years ago

FTX is just an exchange right? Any sensible person only puts funds into an exchange that they want to trade. Not your keys, not your crypto.

sgt101• 4 years ago

I think that they said they would pay 8% interest on your funds. Which I guess makes it quite attractive. A discord server I was on in the spring had people offering advice on how to get this... I just assumed it was a scam, perhaps other people weren't so cautious.

Gasp0de3• 4 years ago

I mean it should be obvious that anyone who offers 8% interest has to do some high-risk stuff with your funds, right?

ryanSrich4• 4 years ago

“Any sensible person”.

I think this is an unfair characterization of people that keep large sums on exchanges. It’s not unreasonable to trust a company worth billions to hold your funds. Some might even argue an exchange is safer than a hardware wallet in the sense that if you physically lose the wallet, or completely forget the password, you’re SOL.

No one expects a multi-billion dollar exchange to vaporize over night. All that has changed this week. However, I don’t think it will have much impact on people storing their crypto off exchange. What I do expect is that reputable exchanges will start being more open about customer funds, and audits of those funds.

gitfan86• 4 years ago

"No one expects a multi-billion dollar exchange to vaporize over night."

Actually that is exactly what us 'crypto sceptics' have been saying the whole time. All of crypto is an accidental or intentional Ponzi scheme sitting on top of a vague promise of "democratizing finance"

crazygringo2• 4 years ago

No one expects a multi-billion dollar exchange to vaporize over night.

Except for everyone who has?

We don't expect banks to vaporize because they're FDIC-insured with extreme regulations on their lending/investing, highly regulated.

But crypto exchanges are the wild west. Totally vulnerable to both hacking and ponzi scheme fraud. Essentially zero regulation or customer insurance. And "vaporizing over night" is how it always goes -- to quote the famous phrase, you go bankrupt slowly and then all at once.

So it's actually incredibly unreasonable to trust a company with essentially zero oversight to hold your funds.

And sure, there can be a movement towards more openness about funds/audits. But now customers have to decide... which auditors can be trusted to review the numbers, when it's the exchange selecting and paying the auditors? How can you even know? And do the auditors provide any defense against hacking?

kkielhofner2• 4 years ago

“Not your keys, not your crypto” is one of the most out of touch axioms in the crypto space (and that’s really saying something).

See: the vast majority of the population (even within crypto) that can’t figure out how to setup a wallet in the first place. Then, if you get that far, you can join the hordes of people that lose access to it, dig through garbage dumps for a laptop, have malware that inspects the clipboard and replaces addresses, make a wrong click in Metamask and get cleaned out, etc, etc, etc.

dylkil• 4 years ago

smart contract wallets allow users to recover funds in the event they lose their private key - https://www.argent.xyz/learn/what-is-a-smart-contract-wallet...

bombcar4• 4 years ago

If you lose your passphrase or get your coins stolen - should have done security better or used an exchange.

If an exchange goes bust, not your keys, not your coins.

There is always an answer as to why it it is your fault, which is why it will never really catch on.

unboxingelf3• 4 years ago

People are used to banks and treat CEX as such.

Crosseye_Jack• 4 years ago

People can be sensible and misinformed at the same time. Personally I don't feel that the flashy tv ads put out by exchanges are targeted at the crypto savvy. For Example https://www.youtube.com/watch?v=noekVG8XLQI & https://www.youtube.com/watch?v=eVdTjxkM1TY

hestefisk7• 4 years ago

I think you can say “not your keys…” to people like you and I who understand why. The problem us bulk of retail investors in crypto have no clue and probably couldn’t care less (until they lose their money).

edf13• 4 years ago

It’s interesting that we aren’t seeing a bigger crash in overall crypto prices - generally it’s holding up ok

zeroclip4• 4 years ago

Hopeful thinking: people realize that FTX is a CEX and the true value of crypto is in DeFi and DEXes.

Reality: contagion will spread next week and everything will probably crash, even if DeFi remains unaffected.

zeroclip4• 4 years ago

Restating my comment from Celsius unwinding one month ago:

Three clear and obvious outcomes of this unwinding:

1. The crypto mantra "not your keys, not your coins" rings true.

2. Entrusting your personal financial data with a private company is sure to end in disaster, either by hack or court order. Privacy should be a basic and legally protected feature of blockchains.

3. Centralized Finance or CeFi is mostly a sham and deserves to be heavily regulated. Not to be confused with on-chain and transparent Decentralized Finance or DeFi platforms like Aave that have behaved predictably through this downturn, and have never required KYC.

https://news.ycombinator.com/item?id=33153865

We haven’t seen privacy and KYC be an issue yet with FTX but data breach could be next after the money goes.

maccard• 4 years ago

The crypto mantra "not your keys, not your coins" rings true.

Until crypto has a workable solution to this that doesn't rely on me keeping paper copies of my master key in a safe, it's not really viable for the masses without exchanges like coinbase and co.

Entrusting your personal financial data with a private company is sure to end in disaster, either by hack or court order

Hard disagree here. In all my years of interacting with private companies they have always protected my money, even when it was taken from me fraudulently.

Centralized Finance or CeFi is mostly a sham and deserves to be heavily regulated.

I dunno, cefi works pretty well for me.

Of course the difference is that the cefi institutes and private companies are regulated traditional banks.

Privacy should be a basic and legally protected feature of blockchains.

For a decentralised system that touts it's benefits as not being tamperable, a legal protection is worthless. If we require legal protections for blockchains what value does that prove over a centralised regulated system? Also, as it's decentralised and privacy focused there's nothing stopping someone in a country with a different interpretation of "legal protection" being involved.

We haven’t seen privacy and KYC be an issue yet

We absolutely have, with AML checks. Try cashing out 100k of crypto and using it as a deposit for a mortgage with a bank or lender, and see how open to it they are. This has been the case for at least 3-4 years here in the UK.

zeroclip4• 4 years ago

See social recovery wallets, paper wallet isn’t only solution. Masses might prefer a custody on exchange but with that comes risk like in Celsius, FTX. Regulation needed to curb this risk so that those services feel just like the other “safe” CeFi services you are used to.

In all my years of interacting with private companies they have always protected my money, even when it was taken from me fraudulently.

I was talking about data. On a long enough timeline, all financial services holding user data will be vulnerable to a breach. Money maybe also vulnerable but less so if regulated, I guess you are lucky to be interacting with regulated exchanges.

If we require legal protections for blockchains what value does that prove over a centralised regulated system?

Regulate the companies, like Celsius and FTX. Users can use these on and off ramps into blockchain with more regulatory oversight and assurances their assets won’t be leveraged without their consent.

Your last point seems like misunderstanding. I say we haven’t yet seen FTX user data and privacy be breached.

Havoc2• 4 years ago

Even by crypto standards this is looking gnarly

dools• 4 years ago

dang wants everyone to be thoughtful and curious with our comments.

It’s absurd that anyone is still giving crypto anything but derision.

It’s like someone posted a flat earth website and dang is like “hey let’s hear them out”.

Forget about it.

isoprophlex• 4 years ago

I emphasize with what you're saying but... then just don't comment, and optionally flag the submission?

someguydave5• 4 years ago

“crypto” includes all possible electronic money? Your sentiment is vapid and tiresome.

fmajid• 4 years ago

Is this like the people in Lebanon who have taken to robbing their banks to get their own money out?

fumblebee• 4 years ago

Surely it's not a coincidence that on the day FTX announces bankruptcy, this gigantic hack occurs?

Some folks in this thread are speculating this might've been an inside job.

I suspect, it's likelier that hackers had been aware of a vulnerability for some time, had a plan to drain these funds, but decided to hasten the timeline on the basis of the news FTX was going under.

stephc_int137• 4 years ago

From a technical standpoint, how difficult it is to hack your own company?

What would you do, if you spent years building a Crypto/Ponzi scam and that you were the first to know that it was going to crumble?

Let it go and face the consequences? Or try to save a few bucks knowing that you don't have much more to lose if it fails?

michaericalribo• 4 years ago

There’s as much evidence for your theory as there is for GP’s

lordnacho4• 4 years ago

From a technical standpoint, how difficult it is to hack your own company?

It would be easy. If you're the founder might have special access to the keys, in fact you probably need to for emergency purposes. Whether that's a "hack" I don't know, it seems to just be theft.

The real question is what do you do with the fact that you have the keys? If you are tempted to nick all the money, you might end up in a bad place.

pclmulqdq5• 4 years ago

A lot of the crypto "mega-hacks" we have seen in the past have involved insiders: either insiders getting phished or insiders doing the theft themselves.

7-8 digit hacks are often legitimate hacking, but suspiciously-timed 9 digit hacks have been inside jobs in the past.

I'm giving more than even odds to the theory that a top executive of FTX wanted a retirement fund. Let's see if one of them disappears.

TacticalCoder• 4 years ago

I suspect, it's likelier that hackers had been aware of a vulnerability for some time, had a plan to drain these funds, but decided to hasten the timeline on the basis of the news FTX was going under.

This make no sense to me. Thieves in the crypto currency world seize the opportunities before other thieves do: what more do "hackers" need than 600m? 700m? 900m?

Why let a vulnerability unexploited, risking someone else to exploit it before you? Because 600m wouldn't be enough? (and before the price crash it was probably worth way more than 600m).

I don't buy it.

Insider job 100%. Especially seen that it's a know fact it was run by scammers.

It's not as if we were talking about honest people playing it fair. We're talking about a scam.

A more than shady company, ran by scammers.

I call insider job unless proven otherwise.

JamesianP10• 4 years ago

They might've been in the process of transferring crypto silently for months and only now had to rush overtly enough to be spotted.

BeFlatXIII3• 4 years ago

Drain the funds before the creditors get to them.

socialismisok• 4 years ago

From what I understand, SBF described the product as a Ponzi scheme in so many words 6 months ago, yet somehow attracted more money than Enron. Now he's fled to Argentina, and people are are missing billions.

Apparently he even had a custom client built that wouldn't trigger auditing.

It never ceases to amaze that this story happens again and again.

danans• 4 years ago

Now he's fled to Argentina

What is it about inflationary and socialist Argentina that would attract a cryptocurrency capitalist con artist? Do they have no extradition treaty?

Animats• 4 years ago

Yes, the US and Argentina have an extradition treaty.[1]

[1] https://www.state.gov/wp-content/uploads/2019/02/12866-Argen...

sgammon4• 4 years ago

This is not true. You should edit it. Reuters has it that SBF is still in Nassau.

lizardactivist• 4 years ago

Is it in the US government's interest to see FTX thrive, or to see it disappear? What about crypto currency in general?

X6S1x6Okd1st6• 4 years ago

The hacker has spent the last 11 hours slowky and incrementally converting all the various tokens they got to ETH. They've been using a variety of different defi exchange and have eaten large slippage fees, at least once over 5M lost in slippage.

We're not seeing any else, e.g. laundering through another exchange, splitting into different accounts, automating the liquidation of tokens to ETH, off loading ETH into a cold wallet etc.

The on chain activity makes this look like an individual who did not prepare extensively before doing this or doesn't have the skills to use automation/operational best practices

EDIT: first outflows from 0x59abf3837fa962d6853b4cc0a19513aa031fd32b have started, they still haven't liquidated all their PAXG, a stable coin pegged to gold, unclear if it's freezable.

They were able to liquidate all of their USDT except 4M on avalanche, and all of their usdc both of which can be frozen. Dai is a usd pegged stable coin that can't be frozen, they have nearly 1% of it. Note that Dai is heavily exposed to USDC so authorities could pressure USDC to destroy Dai

FollowingTheDao2• 4 years ago

Corporate theft is not a hacking.

seretogis• 4 years ago

When you say "corporate theft" are you referring to theft from corporations or theft by corporations? I'm not sure it's clear which is relevant here.

zen212• 4 years ago

The on chain activity makes this look like an individual who did not prepare extensively before doing this or doesn't have the skills to use automation/operational best practices

How common is the knowledge of these best practices?

boppo16• 4 years ago

A hacker who got in from the outside would probably be sophisticated enough to at least 1. automate transfers 2. launder through monero or a tumbler or something

This looks like someone who barely understands crypto because all of the transfers can be traced, and since they're apparently working manually and slowly, the audit-surface is huge.

bonestamp2• 4 years ago

What are the chances that this is an insider and not an outsider? I ask because the timing of this "hack" is obviously a little suspicious.

bogota• 4 years ago

the fact that it has been executed so poorly to me seems like it is an insider who woke up and thought they could get away with it because they hd access to the keys

MrMan3• 4 years ago

almost surely an insider.

fellellor3• 4 years ago

Probably SBF himself. Even if he can’t use this funds directly he can use them as collateral with a more skilled group to fund his eventual escape from the authorities

Shocka1• 4 years ago

I would be more inclined to think insider, but I suppose it could also be an external player. Maybe they have had access for awhile and been waiting for the right time, whenever that would have been. Either way, their hand would have been forced as of the last few days as they seem to be acting hastily.

AirStreamer27• 4 years ago

How can USDC or USDT be frozen?

X6S1x6Okd1st6• 4 years ago

The smart contacts have a blacklist that the companies can add to, that would disable transfers.

eightysixfour• 4 years ago

Both are centrally managed and are semi-regularly frozen at the request of authorities.

somebodythere• 4 years ago

The smart contract has an array of frozen addresses that will not be permitted to move funds, which can be edited by Centre and Tether respectively.

VagueMag8• 4 years ago

Why would the attacker move the funds to any remotely censorable coin like DAI?

themihai3• 4 years ago

I think he tries any avenue available. Even if 50% is lost it's still a good trade.

hamiltonians3• 4 years ago

Dai cannot be censored by

wklm2• 4 years ago

what are the best practices for dumping a significant amount of illiquid shitcoins under time pressure?

papichulo4• 4 years ago

Asking for a friend? :)

HaZeust3• 4 years ago

Bulk bridge swap service IMO. Avalanche or Fantom would be your best bet right now.

X6S1x6Okd1st6• 4 years ago

The harmony bridge hack by Lazarus group (north korean actor) is a good example:

The first address used is 0x0d043128146654c7683fbf30ac98d7b2285ded00

It's a bit harder to trace using public tools because they immediately start splitting off the various coins to other addresses, but looking at just the USDC:

They split it off into a single purpose address that is just responsible for converting it to ETH. They do this via private transactions utilizing uniswap v3 and a set amount just about every minute (they settled on ~2M). If you scan through them their slippage is very good here. If you wait a bit of time you let the arbitrage bots move funds from wherever is available so your slippage isn't so bad.

account responsible for USDC conversion: https://debank.com/profile/0x58f4baccb411acef70a5f6dd174af78...

This account was also responsible for a number of liquidations: https://debank.com/profile/0x9e91ae672e7f7330fc6b9bab9c259bd...

They again show good slippage and also show that they use 3 different exchanges

After they've converted everything to ETH with good slippage they then fan out to multiple accounts that then do a series of deposits into tornado cash at 100 ETH each.

They were done with the liquidation within 2 hours. This attacker is still liquidating as far as I can tell

biztos• 4 years ago

I'm sure this is a total noob comment but I love how the account is named "FTX Accounts Drainer" on Etherscan:

https://etherscan.io/address/0x59abf3837fa962d6853b4cc0a1951...

[Edit: and also the Heist label is very useful!]

hi5eyes• 4 years ago

common for etherscan to label malicious wallets

api2• 4 years ago

Is it a coincidence that the founder of FTX seems to be fleeing to Argentina?

Of course one would assume he or his conspirators would do a better job, but maybe not if this busting out was initiated under time pressure.

Once again almost everything in cryptocurrency proves to be a scam.

bboygravity• 4 years ago

"Once again almost everything in cryptocurrency proves to be a scam."

This is like saying "once again almost everything in US dollars proves to be a scam" after Lehman fell.

The sentence makes no sense at all to me.

matheusmoreira2• 4 years ago

Once again almost everything in cryptocurrency proves to be a scam.

Once again people on HN hate on cryptocurrencies for no good reason.

This isn't a cryptocurrency problem, it's a fractional reserve banking problem. These centralized exchanges are unregulated banks in disguise. It's no surprise to anyone that they exhibit all of the problems of unregulated banks. Problems such as "we used customer deposits to gamble, lost everything and are now insolvent".

To think one of the reasons cryptocurrency was invented was to end the need for such things...

Maursault• 4 years ago

seems to be fleeing to Argentina?

That could only work before 1997.[1]

[1] https://www.congress.gov/treaty-document/105th-congress/18/d...

matheusmoreira2• 4 years ago

Weird. Why ETH and not Monero? ETH can be traced.

hamiltonians3• 4 years ago

no hurry. it's not like he needs the money now

smeej2• 4 years ago

They're largely ERC-20 tokens, which can be swapped for ETH on DEXes. Monero is a whole separate blockchain, and cross-chain swaps are still in their infancy and don't have markets to convert ERC-20 tokens to Monero, or definitely not with any sort of volume.

The ETH will probably eventually be laundered and some of the cleaned coins sent places they could eventually be traded for XMR and eventually cashed out, but there's no way to do that quickly, and this needs to be done quickly.

haldujai• 4 years ago

The on chain activity makes this look like an individual who did not prepare extensively before doing this or doesn't have the skills to use automation/operational best practices

This may be an understatement of their skill level. It seems the individual(s) also used a Kraken account to transfer funds and have been identified per their CSO.

https://twitter.com/c7five/status/1591434844760076290?s=61&t...

X6S1x6Okd1st6• 4 years ago

I believe that is the white hat group. It helps to identify the exact txns & addresses they are referring to here.

drexlspivey• 4 years ago

Looks like he sent the money to a kraken account under his real name lol. https://cryptoslate.com/ftx-hacker-identity-discovered-by-kr...

MisterTea• 4 years ago

What if its a frame job?

grumple• 4 years ago

Verrry skeptical. They get hacked the same week that they go under and face regulators?

For apps to be compromised, that means a dev was involved, either knowingly or unknowingly. And as a dev, that unknowing part would be very hard, way more difficult when dealing with an app that handles so-called financial transactions. If something got in unaudited, that's also on the devs.

xwdv5• 4 years ago

A private plane departed from the Bahamas yesterday with an unknown destination. Ultimately it landed in Argentina.

derwiki• 4 years ago

Do you have a link with more information?

xwdv5• 4 years ago

Yes, we’ve tracked him here: https://flightaware.com/live/flight/LVKEB/history/20220525/1...

They’re gonna get this fucker.

FollowingTheDao2• 4 years ago

Corporate theft is not a hack.

abakker• 4 years ago

So, let’s assume that this hack is not meant to preserve money, but to destroy evidence. If you spread a lot of s** around and overwrite all this stuff with malware, does it create plausible deniability?

jmount• 4 years ago

It has got to be an insider's improvised "plan B."

wly_cdgr2• 4 years ago

11/11 was an inside job

moneywoes• 4 years ago

Likely insiders withdrawing funds

arithmetiqa• 4 years ago

Honest question. How is it that the traditional banks stay comparatively secure from hacks and the crypto scene is an endlessly reporting the next big breach? Maybe the crypto exchanges should hire some bank security experts or at least adopt their best practices

adam_arthur2• 4 years ago

Because the crypto firms are a handful of 20 something kids with 0 security background

maxbond• 4 years ago

I'd wager that it's because banks are able to reverse transactions, so even though there must be hackable banks out there (on account there being thousands of them), it must be incredibly difficult to monetize.

Additionally, if you hack a crypto exchange it isn't clear that law enforcement will be all that interested. If you steal from a bank, or from the people who've made deposits at that bank, it's a different story.

Lastly there's an infrastructure of coin laundries to facilitate crypto heists that's accessible to everyone, but in "tradfi" that infrastructure either doesn't exist or isn't generally available.

blamazon• 4 years ago

I forget who, but some human described crypto as speedrunning the past century or two of financial history, which seems apt. I think the traditional banks and regulators learned similarly hard lessons too, it was just mostly before I was born.

sweetbitter• 4 years ago

Well, you should consider what exactly would be hacked. Banks don't really hold huge amounts of gold or physical cash anymore, most of what they have is 'credit' and debt.

Cryptographic currencies are not credit, they are the gold. They are what gold would be if it were easily divisible and could be transferred anywhere, instantly, for only several cents worth of transaction fees.

Despite how quickly you can transfer cryptocurrencies, you could secure it as well as you physically secure gold if you really wanted to. The problem is that there are a bunch of businesses who are holding peoples' gold for them in such a way that bidirectional channels exist between front-end machines and back-end machines that have the private keys on them, and there is no regulation instructing these wannabe banks to perform cryptographic signatures on airgapped machines. It is as if Fort Knox were just leaving all of its entrances open.

bogomipz3• 4 years ago

The article states:

According to on-chain data, various Ethereum tokens as well as Solana and Binance Smart Chain tokens exited FTX's official wallets and moved to decentralized exchanges like 1inch. Both FTX and FTX US appear to be affected."

Can someone say what the significance of moving these tokens to a decentralized exchange is? I'm guessing there's a strategic reason for doing so. Can someone explain what that it is if so?

RadixDLT2• 4 years ago

this twitter post has more info: https://news.ycombinator.com/item?id=33571261

tevon3• 4 years ago

This is additionally a reminder that crypto currently holds a fairly irreconcilable catch-22.

"Freezeable" tokens completely defeat the purpose of a decentralized currency. Why create nodes/verifiers etc if a wallet can be unilaterally frozen, either under pressure from gov't, community, or another entity.

However NOT allowing freezeability allows for massive hacks, either by insiders, poor security, or sloppiness.

Seems the solve is somewhere in the middle, a pool of trusted intermediaries.

lupire8• 4 years ago

51% vote to freeze (by validators) is decentralized.

jl27188• 4 years ago

This 51% number is not really relevant in blockchain consensus. There is Byzantine consensus, which derives from a specific set of assumptions, but those don't really apply. In reality, consensus is not at all a vote. Coinbase and Circle can accept a chain with only 1% validator support, and that will probably be the canonical chain. Apologies to the many blockchain economists and computer pseudo-scientists that spent the last decade on this, but Consensus is mostly an irrelevant concept. The good news is that new cryptographic primitives are there to fill the same role, and we're just getting started with that.

jl27188• 4 years ago

It seems to me that validators aren't taking their sovereignty seriously. They are either following the exact suggested rules of the blockchain, or they are following the laws, but I have not seen the idealized consensus scenario where each node is soft-forking their rule-set to align with their own values. This was explicitly suggested in early discussions of bitcoin. There are three basic scenarios where a block participant may make a values judgement:

1. Including a transaction into a block

2. Block acceptance and propagation

3. Chain acceptance by the client

Everything else is cryptographically locked, as in, a full-chain audit would reveal discrepancies, but these choices maintain internal consistency. You may hate this idea, but it is coming, and the default rule set will come from the jurisdictions. However, they will only have the power of transaction censorship by unanimous consent, total power of block censorship, and almost no control over chain censorship.

I just had a half-baked idea: a chain that has the ability to hard-fork only in small differences, but essentially allows an infinite number of forks and merges in such a way that each transaction is valid if not explicitly invalid. In other words, a transaction fork does not invalidate the proof of an unrelated transaction that descends from the forked root hash. This would have to be a very different kind of hash/proof. Such a chain would greatly reduce the risk of rule modifications such as censoring transactions from an attacker, while also supporting the choice to use a chain without censorship, and enable reconciliation between the two.

tevon3• 4 years ago

Can someone deeper in the space explain the series of transactions from

"letssavecrypto.eth" to the FTX Drainer address?

Seen here: https://etherscan.io/address/0xaa16547cdc32268542145d3401120...

My guess is its a way to communicate a message via txn data.

tevon3• 4 years ago

Nevermind, looks like its an on-chain add for another crypto service. Haven't seen that before

https://etherscan.io/tx/0x6bdd6c7d90c7f67223f7971745d5bc1f7b...

Text in utf-8:

Check out Fringe Finance, fully decentralised/non custodial platform. It's very very important to support projects like Fringe if we don't want events like FTX to repeat. Do check :- https://www.coingecko.com/en/coins/fringe-finance Problem won't solve just by creating Fck FTX Token. We need to support Fully Decentralised and Non Custodial platform Fringe at any cost. Lend/Borrow/Stake/LP/Stable Coin/Collaterals etc etc Team has been burning midnight oil, putting their blood and sweat into this. Check website, Read mediums. This project can end centralised scams for ever. Let's save crypto and pledge no one ever gets burnt again. Support Decentralisation, Support Hardwork, Support Fringe Finance.

interleave• 4 years ago

Related to seeing mysterious outflows on ETH.

I built a little tool that tracks the transaction networks of several top tokens.

If anything: Highly entertaining, I see a LOT of weird stuff.

It's called Pudding (because that's where the proof is) at https://alexisrondeau.me/pudding/

RadixDLT2• 4 years ago

man, everyone including major investment banks – everyone was talking about him (bankman-fried) like he's walking on water and has a zillion dollars.

Havoc2• 4 years ago

It's gonna be the guy that fixes the printer & its his first forray into crypto world

cokeandpepsi• 4 years ago

between this and twitter I'm smiling ear to ear, you love to see it

hestefisk7• 4 years ago

Am I the only one who is worried about the potential identity theft that could emerge from the hack? Ftx would have documentation used for KYC checks for thousands of customers / users. Passports, social security etc. If the attacker is interested in more than siphoning out assets to secret wallets, this could get them more ugly. I have an Ftx account.

fellellor3• 4 years ago

A cousin of mine, just a week ago proudly showed me his balance on FTX. He had earned close to 1 BTC through the various crypto consulting jobs he’d done this month. This was a huge deal for him as he’d been unemployed/underemployed for many years. And now this crap takes place. I’ve been unable to reach him since leading me to suspect that he has probably lost his money. I sincerely hope that is not the case but this entire fiasco breaks my heart. I hope SBF and his accomplices suffer and rot.

fellellor3• 4 years ago

This guy SBF has close links to China. Who knows maybe the Wang chap on his board is a CPC guy. It’s time to consider state involvement in this fiasco. Why ignore that possibility?

mikestaub• 4 years ago

Would issues like this even arise if it was all open-source and on-chain? I don't mean a DEX run by a DAO, I mean a Delaware C-corp with managers that simply makes every git commit public, maybe even their email servers. You could claim that this would be a competitive disadvantage but it might actually be a novel way to build a moat in this industry.

jacksmith131313• 4 years ago

Thanks to via: Contact hacker wise @ g mail com. They were quite attentive to my circumstance and got me my money back. Excellent service. I have no hesitation in commending them to anyone else who has been scammed. A grateful client. If you have been through the same issue and know you got scammed, I strongly recommend their services.

przeor• 4 years ago

"I was initially a crypto skeptic, but after studying some of the more interesting crypto projects, I have come to believe that crypto can enable the formation of useful businesses and technologies that heretofore could not be created."

The telephone, the internet, and crypto share one thing in common. Each technology improves on the next in terms of its ability to facilitate fraud.

As such, I was initially a crypto skeptic, but after studying some of the more interesting crypto projects, I have come to - Bill Ackman (@BillAckman) November 20,

FTX faces potential hack, sees mysterious outflows totaling more than $600M

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