This may be a "culture gap" (or language gap) between crypto and traditional finance. The FT text directly addresses the question that we're told "No one [is] asking." They asked where's the money, and they're exposing the fact that no coherent response has been forthcoming.
That's reporting. The likely interpretation of that piece of reporting is crystal clear to the intended readership. (I.e., the money is probably gone.)
[For people who really want to nerd out: If you read all available public filings, the stories in the financial press are much easier to understand accurately. However this one is not subtle.]
4. pump up their favorite coins with their newly minted Tethers
My first suspicion would be that FTX was more fraudulent to its investors than people claim.
It pretended to have a lot more customers & deposits than it actually did to pump up FTT, to get real money from investors looking for a real business rather than crypto BS.
Mainstream institutional money is gigantic, and it's mainly refusing to invest in coins. However, it's not afraid to invest in companies selling shovels to the gold rush.
You can get a lot more money by defrauding institutional money than you can by defrauding retail.
Is there hard evidence this isn't what happened?
All I see is that the records were so bad they have no idea who's owed what.
That seems like a really convenient way to cover up you didn't actually have customers in the first place and everything was a fraud.
It's actually much, much worse than that. Tether, by misrepresenting its reserves, essentially "prints" money by faking the peg. This was already done in the overnight lending markets by huge financial institutions abusing the fractional reserve system, but at least there's a tiny facade of regulation on that side.*
For whatever it's worth (I have no skin in the crypto game, I just watch for the drama), Tether posts some third party audits around this, but who knows if that's trustworthy.
It isn't an audit but a report. The difference is that a report just says "this person had $100 in their checking account on this date" an audit tells you where those funds came from and how long they have been in the account.
tether (aka USDT) and Bitfinex are part of the same iFinex group.
The Panamera papers revealed what everyone in the business knew: they're all exactly the same owners.
So tether/Bitfinex: one and the same.
Now how does FTX relates to tether? Bifinex's top lawyer happens, what a coincidence, to be an ex-colleague of FTX's top lawyer. But wait, it gets better: what does these two used to work together on? A poker server software that had a "god mode" where owners would see customers' cards and defraud them.
So these two lawyers were already working hand in hand on a previous fraud. And now at least one of them is caught, again, in a similar fraud (replace poker with crypto), where the money sent to these guys disappears in a black hole.
But it's just a coincidence right?
OK... What about this one: it's well known that the Bahamas bank at the center of the entire tether thing is Deltec/Delbank (they also have tens if not hundreds of companies).
Guess who SBF bought a bank in the US from? From the owner of Deltec.
So tether and FTX may be related in that they both frauds (at least one is proved to be a fraud now).
Or, if we listen to those who correctly explained SBF and FTX were scam from day one, before SBF was even in the news as the savior of the world, FTX and tether are one and the same fraud.
Tether is ultra shady but they may have counterfeited their way into solvency (buy cheap bitcoins, print fake usdt to pump bitcoins... The guys were already in this game back when Bitcoin was worth $200 or so IIRC). Especially if, by sheer luck, the trading arm of Bitfinex (Bitfinex has a company that is to Bitfinex what Alameda was to FTX) happens to be those on the winning side of the trade where FTX/Alameda lost billions.
For that's the thing: they "lost" billions and we're to believe it's retail who won big vs the billions FTX lost?
But I'd say it's unlikely anything substantial will be publicly disclosed. I only except lies and more lies from the very same media that were presenting SBF as an altruistic genius.
Tether has been around far far longer than FTX has. It has also been called a fraud for half or more of that time and it is still standing strong. FTX wasn’t publicly called a fraud, at least here on HN. The moment Coindesk published that FTX and Alameda were a house of cards, the house collapsed in 2 weeks more or less.
Tether has probably made a ton of money by lending newly minted tether at 1-6% annual interest to people pessimistic enough to short it unsuccessfully this whole time, ironically.
Sounds a lot like what banks do. They mostly lend out money they don't actually have, with the hope that the owners of the money they lend out don't notice.
A lot of what FTX did was indeed bank-like, the difference being that they avoided outright qualifying as a bank because of the associated regulations.
Incidentally, this was something they got in trouble for just a few months ago because they made it seem like they were covered by FDIC (like banks are required to be), but were not.
The main difference is that banks enforce a low loan to value ratio and collateral. So a bank will give a 10k personal loan to someone who has 100k of stock and 500k of equity in their home. If that person doesn't pay back the loan the bank can sell some of that person's stock or put a lean on the person's house. With FTX no one was putting up collateral other than crypto.
In addition, banks don't precisely lend out "money they don't have." They lend out cash they don't have against outstanding loans that are rationally expected to be repaid. If those loans are bad and the bank conceals it, or if they misrepresent the amount of those loans, then that's fraud. (IANAL)
If you believe that IOUs by definition aren't valuable, then stay away from treasury bonds.
If you're just drawing some kind of distinction between valuable things that aren't money and valuable things that are money then ok. I don't understand the point, but ok.
> If you believe that IOUs by definition aren't valuable, then stay away from treasury bonds.
IOUs are like a lottery. Treasury bonds, OOM call options, they all aren't valuable on their own, there's just a chance I might win. In the case of treasury bonds, that chance is more like 99.99%, in the case of the call options, it might be 20%, but it's a spectrum, and never 100%.
At the end of the day, my landlord isn't going to take a treasury bond for my rent payment, and neither is my supermarket. IOUs are not the same as hard cash.
It's a Tesla, and yes, they needed the entire MVPA.
It might be because I applied with a downpayment of 10K so they just shut up and gave me a super low interest rate.
I didn't actually need the loan, I just saw interest rate increases coming and figured I could save a few bucks by taking the loan and putting the balance of the value of the car in a CD or bond at higher interest a few months later, which I did.
Your interpretation here is very kind. I really don’t understand how anyone can read this and think it somehow indicates we’re “supposed to believe SBF’s claims”.
Bankman-Fried deflected the FT’s questions about the excessive borrowing and soured investments that ultimately sank Alameda, blowing a hole in FTX’s finances, and would not be drawn on the legal consequences he may face. He said he deliberately avoided getting involved in Alameda’s trading and risk management to avoid conflicts with his position as chief executive of FTX, and neglected to monitor the risk they posed to the exchange.
Correct - the "everyone" is mainly NYT and some politicians. There are some questions there as it's a bit sketchy why they're treating him with such kid gloves.
Seems to me people have completely unrealistic expectations of how financial crimes play out. This will take years to unwind.
Pretty obvious the "why isn't he in jail yet" screaming is coming from the same place as "why aren't I rich yet," on which this entire empire was built. This stuff takes time. He's very obviously going to prison.
For context: Enron, whose operations and collapse caused way more negative impact on the public, fell over in 2001. It wasn't until 2004 that Skilling (CEO/COO/general bad actor) went into FBI custody. It wasn't until 2006 that he was convicted.
Yeah, SBF is going out on a media tour and admitting to all his crimes, so hey maybe they should arrest him now - but why? He's clearly too dumb/narcissistic to run. Take him to court based on media appearances and he may claim he was hopped up on a boatload of amphetamines to the point of actual delusion. Then oops, guess we didn't gather all the hard evidence needed to convict so we lose our shot! Jeez, people.
> Seems to me people have completely unrealistic expectations of how financial crimes play out. This will take years to unwind.
I doubt there can be a group more perfectly self-selected for seeing TradFi, media and the government as corrupt than today's crypto community. What they are experiencing is conformation bias, affirming things they always "knew" to be true all along, based on gut feel more than any real knowledge of how long investigations typically take.
To which I have to keep linking this comment[1] which explains why Enron would reasonably take longer than FTX. If you don't want to read it, it's:
A) Massive corporate hierarchy in which to untangle responsibility vs SBF and a few others,
B) Complex accounting subtleties vs "lol we gambled customer deposits", and
C) Lawyering up and denying everything vs blabbing to every journalist he can[2]
In practice, the reason he hasn't been arrested is because of jurisdiction and the delays extraditing him, not because it's just so hard to make a case.
I don't know what this has to do with my comment. I only said that the media and select politicians have been very soft in their questions and engagement with him. They have been considerably harsher with others in the tech and financial sphere who have done less.
You don't think law enforcement considers whether it has enough evidence for a conviction prior to arresting someone, especially if that person is 1) actively producing more evidence of the crime by the minute, 2) not apparently a flight risk, and 3) not actively further harming the public?
>You don't think law enforcement considers whether it has enough evidence for a conviction prior to arresting someone
I do. Do you consider what I wrote amounting to the above?
>especially if that person is 1) actively producing more evidence of the crime by the minute, 2) not apparently a flight risk, and 3) not actively further harming the public?
A flight risk is 100% a thing. What is the opposite based on, that he is an idiot, or that even if he is he wont get some advice on that end? That's crazy talk.
>>>Seems to me people have completely unrealistic expectations of how financial crimes play out. This will take years to unwind.
I remember Bernie Madoffs case unwinding rather quickly once news broke.
The elephant in the room that needs to be addressed is that SFB was the second largest doner to the democratic party where the DOJ is headed by an democratic appointee. This is a very bad look for justice and the democratic party and the longer they let this drag out the worse it looks for them.
Bernie Madoff who faced credible allegations of fraud for years and only shut down when he straight up told his sons "it's one big lie?" I don't know that that's actually as "quickly" as it appears.
Sure, hopefully they'll track down any crooked campaign contributions that might have been made. Unfortunately many traditionally-crooked campaign contributions are legal now.
My point wasn't if the donations themselves were crooked or not. It's that he was giving large sums of money to the party that is supposed to be investigating him. It's a huge conflict of interest.
He is just a kid, he is merely 30, and grew up in a home with business lawyers. It has been such a hard life. If it wasn't for the shady Crypto market, he could be having a good life as a Doctor like we always wanted him to be. He got mixed up with this Caroline girl (How can you blame her, he is so muscular and good looking) and gave him all these ideas of having a crypto exchange. Clearly the problem is crypto, and it should be banned. It is ruining all these highly connected well to do young kids life's. /s
I don't understand these media criticisms in the form of "Why doesn't every MSM outlet cover everything at once and ask every question of everyone and also make every inference we all want to hear?" The NY Times elicited more details out of SBF than anyone else. He more or less confessed to some of the major elements of his crime while pleading ignorance/incompetence at the girth of his wrongdoing. Asking in a friendly, non-challenging tone is a pretty standard interview technique to disarm your subject and encourage cooperation. "How much did you steal and why aren't you in jail?" isn't going to get a useful answer.
I thought it was long admitted, even by the NYT (citation below) in a recent reorg, that they were controlled by the Democrats to an extent that even they found losing them readership and thus money.
That said, I can't find an exact citation, but one article back then noted replacing editors in attempt to be more neutral.
At some point the NYT just got rabies where Trump was concerned. The news pages became gross and distracting even to folks like me who are normally core NYT readers.
Now this is nuanced, ok? Trump has publicly called for elimination of the Constitution. That's not the media, that's him. But anyway, re the NYT, the really important point (for me) is that they allowed the front page to become unreasonable and unreadable.
Maybe it has recovered now. I don't know. I'm afraid to look.
This: "This will probably come out in court anyhow since the creditors will be looking into fraudulent conveyance. So this isn’t something you will be able to hide.”
Yes.
Reading the bankruptcy filings and seeing what the accountants are finding is probably more productive than listening to the self-serving statements of a crook.
Absolutely correct. There is no way this will be forgotten.
The FTX estate will be want to collect all available assets, including outstanding loans to SBF, to distribute to FTX' creditors.
Disbursements from FTX when it was close to insolvency will be scrutinized under the doctrine of fraudulent conveyance which makes it illegal to distribute funds from a company that cannot meet its obligations to its creditors.
This wont be "forgotten" somehow. At this point, there doesn't seem to be any drama or reasons for concern here, and from everything we know (that I know) it looks like this will all be resolved eventually as part of the bankruptcy process.
Listening to him is like listening to another opportunist in another industry, Michael Avenatti. They're in trouble, but they keep on pretending like there is nothing to question or wonder about.
And he seems to be the only one asking SBF the hard questions and not accepting his BS meaningless answers. It's quite disappointing to see an independent YouTuber doing better journalism than major news outlets.
There are interesting questions here. I did not know this bit about Paper Bird not being part of the bankruptcy managed by Ray -
"The bankruptcy filing states that Paper Bird owned 75% of FTX International.1 However, that does not make it part of the FTX bankruptcy. In fact, Paper Bird filed for its own bankruptcy, the same date at FTX did, with separate counsel: Adam Landis of Landis Roth & Cobb while the lead attorney for FTX is James Bromley of Sullivan & Cromwell."
And really, the whereabouts of those loans should be very high up the list of things people are interested in - if nothing else, 10 digits somewhere safe sure is a nice bucket of grease to facilitate a disappearance to somewhere without extradition.
Find a way to put everyone involved behind bars for many lifetimes with the possibility of parole should the funds be returned.
I'm astonished by the number of fraud cases we've seen involving staggering amounts of money, and we don't have laws that give judges the option to put people away for life after some threshold of money is stolen, with the possibility of a reduced sentence only if enough money is recovered.
We have RICO for organized crime and I feel like this needs to be expanded to business dealings as well.
Matt Levine’s column yesterday quotes a Bloomberg interview with Zeke Faux where they did ask where the money went, and SBF gave some approximate numbers in a spreadsheet. I don’t see why this is trustworthy, but for what it’s worth:
> “You misplaced $8 billion?” I ask.
> “Misaccounted,” Bankman-Fried says, sounding almost proud of his explanation. Sometimes, he says, customers would wire money to Alameda Research instead of sending it directly to FTX. (Some banks were more willing to work with the hedge fund than the exchange, for some reason.) He claims that somehow, FTX’s internal accounting system double-counted this money, essentially crediting it to both the exchange and the fund.
> That still doesn’t explain why the money was gone. “Where did the $8 billion go?” I ask.
> To answer, Bankman-Fried creates a new tab on the spreadsheet and starts typing. He lists Alameda and FTX’s biggest cash flows. One of the biggest expenses is paying a net $2.5 billion to Binance, a rival, to buy out its investment in FTX. He also lists $250 million for real estate, $1.5 billion for expenses, $4 billion for venture capital investments, $1.5 billion for acquisitions and $1 billion labeled “fuckups.” Even accounting for both firms’ profits, and all the venture capital money raised by FTX, it tallies to negative $6.5 billion.
> Bankman-Fried is telling me that the billions of dollars customers wired to Alameda is gone simply because the companies spent way more than they made. He claims he paid so little attention to his expenses that he didn’t realize he was spending more than he was taking in. “I was real lazy about this mental math,” the former physics major says. He creates another column in his spreadsheet and types in much lower numbers to show what he thought he was spending at the time.
Several reports – & SBF in recent statements – have identified $2.1B to $3B as the cost of buying out others' stake in FTX, primarily Binance (an early investor). That was true traditional but not publcly-traded equity, not FTT tokens (though perhaps FTT tokens were accepted as part or most of the payment value out).
Now, by structuring these as "loans" to SBF, for him alone to increase his (already overwhemling) majority control, meant he'd unethically levered up the enterprise into a "heads SBF wins even more, tails everyone else loses everything" precariousness. Losers at risk from such an arrangement would include, and eventually now have included, customers with custodial funds that should never have been at any risk at all - but were so commingled across purposes & entities under SBF's shoddy self-dealing & criminally-negligient management that they were de facto contributors to these unwise sweetheart insider loans.
So at least $2.1B, & perhaps up to ~$3B, of this "loaned" value (in cash & other tokens) may have made its way to Binance, and thus we wouldn't expect it to be in SBF's current pockets. It was still taken inappropriately, though. And, the magnitudes further make SBF's claims of not knowing the details of either Alamedas or FTX's balance sheets not credible. Honest people generally don't send $3B of value through themselves, to elsewhere, without at least some sense of the stocks & flows involved.
However, perhaps after those loans, the large venture investments into FTX are reported to have sent around $300M cash (of the raised funds) to SBF. He's also described that as repaying him for acts like buying out Binance with personal funds, almost as if he hadn't been loaned billions from FTX to do that. That money looks instead more like a VC's willingness, in a suitably hot deal, to let the founder take some value out to have more-diversified wealth. I'd expect the debtors to especially chase that cash money, to see where it landed, for possible recovery by SBF's victims.
Another missing question from recent interviews: when SBF does his, "I've got nothing, now" or "maybe $100k" act, ask him: why hasn't he declared bankruptcy?
He borrowed ~$3B from FTX/Alameda-related entities, in order to lever-up further into FTX. If he presumably per the debtors-in-management team still owes his associated-entities $3B+, and has "nothing", he should be in bankruptcy.
SBF is a very smart person with a now-documented history, during his ascent, of blatant misrepresentations about weighty matters & a flexible view of ethics.
When such a person claims "oops, I kept poor records & didn't manage the staff or complicated legal entities I'd chosen & didn't pay close attention", but then slowly & vaguely describes past actions in the most self-exonerating ways possible, the presumption should be that the post-fall accounts are retroactive fabulations. The character 'hapless-Sam' is just as much a self-aggrandizing fiction as the character 'hyperethical-and-hypercompetent-Sam' was.
And even if fully true, "I was a reckless gambler bad with math even when I was selling people on the idea I'd hedged out all the gambles and was brilliant at math" only helps explain, but does not excuse, criminal deception.
If I own 3 companies. And borrow a billion from company A to buy 10% of all B-tokens from company B, and use those B-tokens to invest in company C.
It seems the books would say that company A has a valuables loan worth 1B when repaid, company 2 has a very sought after and valuable token with a market cap at 10B and 9B available with the sale of its holding. And company C has a very high order flow, making it a valuable exchange.
All the while I have net zero, but 1B in exposure on my investments, but no worries my companies are easily worth 11B
Ofcause a house of cards like that is easy to see through if someone doesn’t accidentally name the accounts really poorly…
Government investigators are not in a habit of validating every bloggers empty rhetorical questions.
The author is complaining in the comments ZeroHedge copy-pasted their post without permission. ZH should feel bad for spreading babbling gossip and impotent rage more than anything.
Why is no one asking? LOL pretty much everyone knows the answer but won't say it. The reason is that those who are supposed to ask the questions would open a pandora's box of their own shiz and dealings. So they prefer to pretend it never happened...
If we don't talk about it, then it never happened is it not so?
Because the US government has been captured by Organized Crime. Look up the documentary Everything is a Rich Man's Trick. Then look into all the connections between the mafia and the presidents of the USA.
Reminds me of one of my favorite quotes as of late:
“You’re just saying ‘okay, the world is run by idiots,’ and I would say ‘no, the world is run by professional criminals.’ If you think it’s all by incompetence at this point, how come everything is so coordinated between all these guys with these policy agendas if it’s all just ‘by-chance incompetence?’”
It's the deepest rabbit hole I've ever found and there's tons of receipts. The mafia actually formed something called The Commission which was basically their own Congress.
Highly recommend Wilful Blindness: How a Criminal Network of Narcos, Tycoons and CCP Agents Infiltrated the West by Sam Cooper. Canada-focused, and an excellent bit of journalism.
What’s the big deal with the film? JFK is a bigger deal because he didn’t survive. Otherwise his assassination is one amongst many. Whether or not there is this conspiracy going on, how much different would things be if the opposite really happened?
I don’t think much would be diff. Very important assassinations like MLK and Malcolm X would still happen. Capitalism being the primary “thing” in all American’s lives would still be a thing. Liberalism would still make the government a tool for private capital/capitalism as it is now.
Whether or not the US government is captured by Organized Crime seems unimportant. The deepest rabbit hole one could find these days in why the world sucks would be investigating capitalism, neoliberalism, and imperialism.
SBF also donated an equal amount of money to Republicans. He just did so using dark money PACs because he was afraid of a PR backlash - said journos would freak the f out. He donated about $40 M to both parties.
If you don't use up all of your budget for the year, it gets reduced for the next one. This is a major reason the defense spending in general doesn't go down. Nobody wants to have lesser budget, it impacts their promotions and mini political empires.
Same is true in many large organizations, which is why mass layoffs and other forms of 'shock therapy' happen every once in a while, because the way the system is managed doesn't naturally lend itself to small incremental corrections.
One individual did not make poor defense spending decisions - that took the efforts of 400+ Congress members. SBF's lackadaisical attitude was more akin to carelessly dropping your wallet while you are in the can.
It really is a stupendously large sum of money. We're all used to hearing these crazy numbers thrown around but to think what you can do with that much money [$1B]. Heck, you could pay a million people a thousand bucks each. To what depths will a random person sink for that much money? And 100,000 people are still a huge army at your disposal for $10k. And 1000 select individuals for a cool million each. (Check out how much soviets used to pay american spies (a: pittance) to get a sense of what can be asked of the willing recipient.)
It's not at all surprising that the corporate media has failed on this aspect of the story, they're the ones who hyped this guy to the moon, after all. Most of the so-called journalists are just stenographers for the rich and powerful-- just look at their abysmal reporting on Ukraine.
It seems that they are critiquing two major news sources (NYT & WSJ). I've been following the conflict from BBC News and The Economist, and the reporting has been solid in my opinion.
This site also only seems to push back against more left-wing news outlets, I didn't see anything saying how Fox News pushing for appeasement isn't a good idea.
Ah yes, questioning the wisdom of sending tens of billions of dollars in weapons and cash to a regime controlled by neonazis and that is so corrupt it was denied EU membership is "appeasement".
That's reporting. The likely interpretation of that piece of reporting is crystal clear to the intended readership. (I.e., the money is probably gone.)
[For people who really want to nerd out: If you read all available public filings, the stories in the financial press are much easier to understand accurately. However this one is not subtle.]