What Happened at FTX?

https://lcamtuf.substack.com/p/what-happened-at-ftx

by robin_reala • 4 years ago

41 17 4 years ago

lcamtuf.substack.com

FTX: “'**** the regs' they make everything worse”

FTX employees submitted payment requests through an online chat platform where a disparate group of supervisors approved disbursements by responding with personalized emojis. Other practices included the use of an unsecured group email account as the root user to access confidential private keys and critically sensitive data for the FTX Group companies around the world, the use of software to conceal the misuse of customer funds; the secret exemption of Alameda from certain aspects of FTX.com’s auto-liquidation protocol. Also, the audit firm for the Dotcom Silo was Prager Metis, a firm whose website indicates that they are the “first-ever CPA firm to officially open its Metaverse headquarters in the metaverse platform Decentraland".

aliqot• 4 years ago

Just link the tweet thread that you're summarizing.

https://twitter.com/GRDecter/status/1593272102047580161

downvotetruth2• 4 years ago

The paragraph highlights excerpts not in the direct link from the court filing: https://s.wsj.net/public/resources/documents/FTXFILING.pdf

Aleksdev• 4 years ago

Yeah, that first quote in your post is what they will play on repeat in the courtroom if he is ever arrested.

freitasm• 4 years ago

Scam and robbery. But that's the kind of "thought leaders" some of these "crypto investments" attract. We already know that.

basseq• 4 years ago

It is far too early to publish these kinds of articles. It will take months if not years to untangle "what happened" and do a true retrospective. This is little more than a poor summary of "what we know so far".

dragontamer• 4 years ago

Its not a complicated story.

Last week: "FTX lent customer deposits to Alameda research. Both FTX and Alameda are owned by SBF".

This week: "Alameda research issued personal loans to SBF".

We've gone from "SBF probably stole everyone's money" into "SBF definitely stole everyone's money". There's not much else to say, honest. I guess you can dig into the details more-and-more and try to figure out how various groups will deal with the fallout, but that's really not the important bit here.

notch656a• 4 years ago

These same scams have existed for hundreds/thousands of years. What really happened is baseline greedy-as-hell VCs became desperate and drunk to keep up with inflation (and take advantage of "free" money) when the fed pegged interest rates way down into the (real) far-negatives. It made the story of SBF et al even more likely.

People sought riskier and riskier investments and did less and less vetting. The real estate situation where you had to waive all inspections and put up massive earnest cash up front was just an analogy for what was going on everywhere. Just to keep up with inflation you basically had to put yourself out there and pray, and people who otherwise would end up as little more than punks at Jane Street sniffed the blood in the ocean.

While SBF is the primary culprit here, the fed's short-sighted policies created incalculable damage to our economic landscape and advantages for scammers. I fear we will disproportionately be seeing more unwinding of these kind of schemes.

kebman2• 4 years ago

This is true. For more on the topic, look up the seigniorage of the antiquity, and not least the ... self issued ... gold certificates of Stockholms Banco of 1661, boasting the first printing of bank notes used in Europe. It didn't go so well...

snoot• 4 years ago

people who otherwise would end up as little more than punks at Jane Street

What a terrible way to end up. No wonder they turned to crime, with that as the only alternative.

gennarro• 4 years ago

Nothing new in this article. Just endless fascination I suppose.

chitowneats• 4 years ago

In short, the collapse of FTX had little to do with cryptocurrencies

How far does the price of BTC have to drop before we dispense with this charade?

kebman2• 4 years ago

In the end it would seem that SBF and his gang wasn't so interested in crypto as he was in fiat currency and real estate. As for the ramifications for the crypto scene, the trust of cryptocurrencies has gone right into the cellar now, if not in Bitcoin itself, then certainly in the centralized actors now purporting to offer it to retail customers. In turn, that would of course also warrant a rebate. Not least because it puts pressure on other bad actors on the scene.

bcrl• 4 years ago

As the number of crypto exchanges that have imploded spectacularly keeps rising, I'm starting to think that crypto exchanges can't be run profitably. From Quadriga to FTX now, I have friends that were burned 5+ years ago, and yet the same story seems to keep repeating itself. There's a term for people that keep trying the same thing over and over while expecting different results... Unless these are all completely isolated cases of fraud?

gruez• 4 years ago

I'm starting to think that crypto exchanges can't be run profitably.

Coinbase and Kraken would beg to differ. They have been operating since 2011 and 2012 respectively.

As the number of crypto exchanges that have imploded spectacularly keeps rising

Given that the number can only go up (exchanges can't un-implode), this statement seems like a truism. You could say the same about VC backed companies, for instance.

polygamous_bat• 4 years ago

>I'm starting to think that crypto exchanges can't be run profitably.
Coinbase and Kraken would beg to differ. They have been operating since 2011 and 2012 respectively.

Kraken isn't public, and we don't know their inner balance sheet. However, Coinbase seems to have lost more than a billion dollars in the four quarters [0]. Definitely not how I define "running profitably."

[0] https://www.wsj.com/market-data/quotes/COIN/financials

oldgradstudent• 4 years ago

They have been operating since 2011 and 2012 respectively.

Madoff appeared to be operating well and meeting all withdrawl demands from the 1970s until 2008.

FTX appeared to be operating successfully until a week before it collapsed.

We'll see when some event forces transparency. Usually it's a collapse, but it could be a lawsuit with discovery for another reason.

What Happened at FTX?

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