I suppose we could merge these threads since it's not as if they're partitioned along the lines of "this thread for the civil complaint, that one for the criminal charges".
Imagine reading a document like this with "United States of America v Your Name" at the top. It would be terrifying. These charges are serious and SBF is going to go down for a long time if convicted.
There's also a forfeiture section in the federal indictment that demands forfeiture of all any and all property that is traceable to the commission of the offences.
The forfeiture in rem ones are my favorite, for instance “United States v. Article Consisting of 50,000 Cardboard Boxes More or Less, Each Containing One Pair of Clacker Balls” [1]
He is the donor. And, no, recipients of legal donations don’t have to give them back because they came from a bad person. (The illegal donations he seems to have admitted to might have to be given up, but that’s a separate legal issue.)
Well, yes, bankruptcy clawbacks are another issue on top of both the criminal forfeiture discussed upthread and the campaign finance issue I raised in response.
> 31. From the inception of FTX, Bankman-Fried diverted FTX customer funds to
Alameda, and he continued to do so until FTX’s collapse in November 2022
I assume they have the evidence, and while what SBF was saying (we never touched customer funds etc.) was never particularly credible - it blows up the narative that he has maintained to date. Indeed much of the case is built on his public statements (and testimony) being false.
They have SBF’s own idiot mouth as evidence when he claimed, multiple times, that Alameda was created first, got its bank account, and FTX used that Alameda bank account when FTX was created.
He alludes to it here: https://youtu.be/4o_jPzBZSIo at 11:58 or so, where he mentions “before FTX had its own bank account.”
I know there’s a longer explanation, but that’s the best citation I can come up with off the top of my head. In the longer explanation, he specifically says that creating a bank account for a new company can be difficult, so they used Alameda’s bank account as they waited for a bank account specifically for FTX.
This goes specifically with point 31 in the document. Of course, they’ll have better evidence once they go through discovery, but this moron has been on a self-incrimination tour. I’d call it a wild success!
I'm just an engineer, but even I know that if you create an entity and expect to perform financial transactions as that entity, you need a bank account. Corporations, LLCs, HOAs, clubs, lemonade stands. Well, perhaps not lemonade stands... If you don't have the bank account open yet, then don't initiate any transactions.
It stretches credulity very far to believe someone running a financial institution did not know this.
1) SBF cared about traditional rules of banking/finance
2) SBF cares about doing things the 'right way'
He may have been doing it purposefully wrong, or he may have just wanted to do it as fast as possible ("Move Fast and Break Things") and so he skipped the requesite steps to get to what he wanted done, faster.
Not a justification for his actions, but simply why he may have done it
> Of course, they’ll have better evidence once they go through discovery, but this moron has been on a self-incrimination tour.
And lots of armchair lawyers have been deeply triggered by how the "media" have been proven to be corrupt and in on the scam by allowing him to speak. If there is any conspiracy here it is that the media were doing the bidding of the DA to get SBF to talk the nonsense he has been, trap him and put a massive bow on an easy prosecution.
I know nobody expects him to be a reliable narrator, but it's actually very easy to create a bank account for a new company, at least in my experience starting a small business.
Just a few days ago, he was hoping to "make people's money back". [1]
It's a bit sad, as he appears delusional. A less forgiving viewpoint would be that his background cultivated his sense of being untouchable; that it was just a case of having another go.
But not as sad as the people who lost money they couldn't afford to lose.
I'll also add that SBF going on tour was the stupidest thing he could have done. Every time he spoke, he was giving the government more evidence. Hubris has often been the downfall of the rich and powerful throughout history. What's changed is now we get to see it in real time with people like Musk and SBF.
Just to give some perspective that I don’t think HN really gets: most of my friends have increased their twitter usage.
If you aren’t aware, whatever the team did there a few days ago really has appeared to cut bots down to almost 0.
SBF is an [alleged] criminal who has [allegedly] defrauded people of billions of dollars, and will likely be spending a substantial amount of time in prison for it.
These things aren’t the same. A restaurant changing their menu to suit a larger audience is not “hubris” simply because it no longer caters to you.
Just for reference what Musk did is just blocked half the mobile carriers in emerging markets, kneecapping their ability to grow Twitter in those countries whilst only temporarily tamping down on bots. The bots will be back, the users won't.
Honest question: are low income users viable for an ad supported platform? As it is I think only North American online ads actually make decent money, though perhaps European and Asian ad markets also deliver value close to break even. It is all an investment in the future. The last 15 years have had a belief that more users means more money but this might be thinking that all users are the same when some are much more valuable than others.
Meta makes revenues of about $15Bn in US & Canada, $8Bn in the EU and $10Boutside of EU & US/Canada each year. So it's clearly not nothing, and it's not like Twitter can afford to be picky about where it makes money.
> it's not like Twitter can afford to be picky about where it makes money.
Being picky about where you make your money is absolutely essential for most businesses. Every dollar in revenue costs some amount of money to generate, and choosing the right market segments to invest that money in is a foundational part of a business plan.
Revenue is not profit. It costs money to serve content. The EU has a 1.5x population of NA so that means it is only a third the revenue per user. The third segment has 6x population of NA so the revenue per user is only ~8% of a NA user and that population’s revenue stream is probably dominated by Japan, Korea, Australia and wealthy countries. At a certain point it costs more to serve content than ads will pay. Twitter doesn’t have the pockets to run a loss as an investment indefinitely so it needs to be picky about where it spends money.
> The project was part of Elon Musk’s attempt to rid Twitter of spam. But rather than work to remove individual offenders, the company identified mobile networks associated with large spam networks in specific countries, and blocked users who relied on those networks from receiving SMS messages from Twitter, impacting people with two-factor authentication. Then it blocked traffic from those carriers completely.
> From 5:35 AM to 6:45 AM PT on Sunday, Twitter shut down access to the primary telecom providers in India and Russia, as well as the second biggest telecom company in Indonesia, Platformer has learned.
Twitter use is up because everyone wants to see the sometimes insane tweets put their by their top leadership. I had never used twitter prior to Elon taking over, and I made an account to check it out for a week or two.
Ultimately stopped using it because it isn’t really for me. I also don’t care enough for anyone’s opinion that much that I’m willing to scroll through insanity, bots, and a holes to find a nugget. But I’m sure millions of others do enjoy that.
> most of my friends have increased their twitter usage
Meanwhile, all of my friends have erased their Twitter accounts (some migrating to Mastodon, others to other social media sites, others happily forgoing social media at all), all of the organizations I'm a part of have stopped using Twitter for official communication, the subreddits I follow have banned Twitter links, and my product has removed its Twitter integration. Large swathes of the internet are defederating from Twitter.
I qualify as a marketer. I don't want my ads seen by people not local to my market. Audience size alone isn't useful, it's about target audience, of which, almost none of that would have been blocked recently. (I don't use or market on twitter).
If we assume (big assumption) Musk has done everything right since the closing, he may still just be rearranging the deck chairs on the titanic. His hubris got him stuck in a deal way over paying for Twitter. I think he thought he could run his mouth and get out of any real consequence like he's done every other time. Except this time he found out.
> Just to give some perspective that I don’t think HN really gets: most of my friends have increased their twitter usage.
So your friends are using twitter more and you just assume everyone else does too? Have you considered that people who have other opinions exist and theirs is as valid as yours?
> Have you considered that people who have other opinions exist and theirs is as valid as yours?
I think parent is saying the opposite.
"Just to give some perspective that I don’t think HN really gets"
Parent has seen several comments assuming everyone's leaving Twitter and Musk is destroying the platform and himself and will never recover. I, likewise, reading Reddit get the same feeling that some pockets think everybody is leaving Twitter and going to Mastadon or something like this is a big cultural revolution. I think that is true in some pockets, but like parent I don't think anyone except Musk really knows what the actual engagement numbers look like, and even he doesn't know what they'll look like long term. But he is clearly making a bet, and it's silly for a biased hivemind to already assume his downfall when it actually hasn't happened yet. Just like there was a broad assumption that Twitter would have all kinds of technical issues after most of the staff was fired. Maybe that's still to come, but it hasn't really happened yet, and it can't be assumed.
Twitter isn't necessarily going to be an epic failure, and it's strange how some pockets of the internet feel they should make that assertion, whether you agree with Musk's politics or not. And politics is what it really comes down to. Politics is what drives the desire for these communities to see Musk fail, nothing else.
And at any rate it is very strange to compare Musk to SBF in any way.
Everyone assumed my comment about hubris referred to how he's running Twitter now. I think what he's doing is dumb, but that's not my point. His biggest problem is he way overpaid, and saddled the company with a ton of debt. My hubris comment was referring to him talking big and signing a deal he never intended to follow through on. He could run Twitter perfectly and still be forced into bankruptcy by the end of '23. IMO, that's a very likely scenario.
Is there an information source that says he didn't massively overpay and saddle Twitter with a near insurmountable debt load? Reports are Twitter has stopped paying its bills [1], which is common when bankruptcy is inevitable.
If he wasn't the type to go on tour and shout, then he wouldn't have attracted enough investors in the first place to be rich. It takes a specific personality to market things so others will buy, and that personality doesn't like to shut up and so won't.
Some things sell themselves, but most great ideas sit around unknown by people who need them just because they don't know about it. I'd love to buy a better mousetrap to take care of my mouse problem, but if one exists I don't know about it. If you shout that your mouse trap is better I'll probably try it.
I think I know just the thing for you. It's a sophisticated autonomous mousetrap that doesn't even need bait, as it has the ability to locate and catch the mouse all by itself. With its unique combination of strength and agility, this mousetrap is able to outsmart any mouse. When you least expect it, the mousetrap will pounce and capture its target. It's called a cat.
Right, everything in his life up to this point has taught him that if he keeps talking he'll be able to convince anybody of anything. He convinced his series B investors to hand over $420 million in "investment" funds to FTX while he pocketed $300 million of that personally.
It's sort of curious that this SEC action is to protect the venture capital investors like Sequoia who invested in FTX shares directly.
If I were a retail investor who lost my savings in FTX, I might be feeling upset that the government is rushing to action in defense of billion-dollar funds whose own due diligence failed massively, while seemingly nothing is being done to help those who invested in crypto based on FTX's Super Bowl ads and celebrity endorsements...
At the same time, I fully understand why it's like this. Because the VCs bought actual FTX shares, the SEC has a clear case of securities fraud. The law is pretty clear about what happens when you sell shares in your company and lie about it.
In contrast, it's not really settled whether the little people who sent money to FTX in exchange for a crypto ledger entry were actually buying securities, commodities, custodial services, or something else — maybe nothing at all. (The crypto guys love this ambiguity, of course! They've been lobbying for regulation that keeps crypto in a no-man's-land where tokens that look and work like securities would still be something else.)
This seems to be the reason why the SEC doesn't have a clear-cut case to protect FTX customers, but does have a case to protect rich VC crypto-bro partners.
Frankly, it seems to me that VCs should be liable for money FTX owes its customers. These are professional investors who didn't insist on very basic things, such as proper financial sheets from a finance company. Frankly, that's gross negligence. Professional investors should have legal responsibility to do at least some due diligence. In addition, they're becoming owners of a company. As owners, why shouldn't they be exposed to liability that could have been prevented with some basic due diligence?
I agree! For VCs, crypto has been a “Heads we win, tails you lose” proposition.
Normally it takes 3-10 years for a VC investment to reach an exit. In crypto, they get tokens that they’ve been able to dump to retail almost immediately. A16Z has a particularly suspicious shitcoin pipeline via their Coinbase board seat.
I hope SEC also ends up prosecuting investors who participated in these token offerings, and ideally also employees who got paid in tokens [1]. But I have no idea if there’s a legal basis because American securities law is designed to protect investors and doesn’t necessarily seem to account for the A16Z-style case where they’re essentially co-conspirators in the fraud: supplying crypto founders with money for marketing which pulled in retail dollars which ended up straight back to the VC’s and founders’ pockets.
[1] What difference does it really make if you’re a founder selling unlicensed securities, or an employee who signed a contract where you get paid in those unlicensed securities and then you dump them on retail investors? The SEC should look at these schemes which were popular with companies that hire on HN too.
> I hope SEC also ends up prosecuting [...] employees who got paid in tokens
Prosecuting those rubes for being among the victims? If there is evidence they pumped and dumped those tokens or didn't report their income correctly, then sure. But otherwise, why prosecute people for being stupid enough to accept payment crypto?
Often VCs will have a seat on the company's board--in which case they might be liable.
However, it doesn't seem that Sequoia et al had seats on the board, at least from this early 2022 press release [1].
Holding shareholders that are not directors accountable is extremely difficult. This is called "piercing the corporate veil" (worth a google) and is done only vary rarely and in cases of clear and outrageous misconduct attributable to the shareholders themselves—it's so rare because it's antithetical to the entire premise of the "limited" corporation.
Which makes it even more interesting. One of the most head scratching pieces of this puzzle that SBF got truckloads of VC money with laughable fundraising rounds + no board seats.
It didn't make any rational sense.
Unless the logical conclusion is that it means 'zero liability'.
Setting aside the arguments to be made for/against the idea, and focusing on the implementation instead: most investments are handled through some sort of limited liability vehicle and so even if the “investor” was held responsible it would not necessarily impact the human(s) that stood to gain.
At a minimum, tax code should be changed to discourage limited liability corporation forms. Personally I'd also like to see that limited liability as a concept would be forbidden in many/most industries/cases. In Brazil the management and owners of a bank may be held liable if bank fails even without wrongdoing. And I think there has not been many failing banks in Brazil...
The SEC is authorized to pursue criminal cases for securities fraud (among many other things). Furthermore, they can refer criminal cases to the Dept of Justice, which has almost certainly happened.
To the extent that FTX defrauded consumers, these will be reflected in civil and criminal cases.
To my knowledge, the SEC does not protect deposits in the event of bankruptcy. Most individuals with assets on deposit at FTX are unsecured creditors.
> If I were a retail investor who lost my savings in FTX, I might be feeling upset that the government is rushing to action in defense of billion-dollar funds whose own due diligence failed massively, while seemingly nothing is being done to help those who invested in crypto based on FTX's Super Bowl ads and celebrity endorsements...
It's not one or the other, he can be charged for both. It's up to the DOJ to file a criminal case, and they didn't arrest him for no reason.
People who bought the FTT token on the FTX exchange most likely thought of themselves as investors, since the token promised rewards tied to the exchange’s cash flows.
I’m not sure it’s fair that the big boys get investor treatment and the retail suckers who were led to believe they’re investing get… nothing so far.
Whoa, are you trying to tell me all the big fish hyping up the Regulators Are Evil Economy get near-total legal protection of a regulated market, but all the little people who got taken in by it are going to get screwed?
An incredible and unforeseeable development!
Surely there will be more charges over time but the end result isn’t going to change much. The wealthy people who’ve been boosting all of this will take the smallest losses of all.
None of the big fish are getting money back. No one is going get money back. It's gone.
At the same time, I have trouble finding sympathy for anyone involved. SBF is a sociopath, thief and liar.
Those big-name investors should have known better and I'm sure in many cases they did. They probably should start lawyering up too, because they've got investors of their own who have been harmed either through malfeasance of actionable incompetence.
And the 'small time' investors -- mom-and-pop, widows and orphans investing the life savings on the platform -- all crypto is a scam, a Ponzi scheme, at the very best it's a casino or playing the numbers. Always has been. Always will be. All they had to do was open their eyes or maintain critical thinking in the face of promoters trying to bamboozle them.
And yet dumb money says I'm wrong. BTC up 4% on the day....
It wasn't a crypto investment for the mums and dads! That's the whole issue. They were treasuries - holdings that shouldn't have been at risk. SBF and his asshole friends dipped into them to close positions and shore up riskier trades made by another company Alameda.
People rush to simplify here with 'there are no angels" arguments. It doesn't matter that it was crypto. Those funds were stolen.
It is often the case that the victims of scammers were up to no good themselves, and allowed greed to cloud their judgement. People sign up for schemes that are flagrantly pyramid schemes, knowing it's a pyramid scheme, because they think they'll be able to get in and get out before the pyramid collapses. This kind of behavior is the norm in the crypto currency scene.
8% APR from a crypto company was obviously a pyramid scheme. Anybody who put their money into FTX was either unbelievably stupid, or knew they were playing with fire and hoped they wouldn't be the ones to get burnt.
If somehow all the money has been utterly destroyed so nobody involved gets any of it, that would probably be the best outcome. If the cryptobro investors get their money back, they're just going to use it in other scams to hurt more people.
You don't need money going back for it to be the case that the big fish will be fine, have many avenues for recourse, and the small people will be completely and thoroughly burned.
I always find it interesting how in our implementation of capitalism here in the US, wealth is able to insulate and protect itself from many of the very measures capitalism is supposed to peel away and counter (in the interest of society at large).
It's almost like it there are fundamental inherent flaws that need to be fixed to continue on and we can't keep treating things like business is usual if we want to enable continued growth vs stagnation due to power concentration like we've seen in non-capitalist systems in the past.
You're going to see the big players like Sequoia get some retribution here and to a magnitude that's significant enough to be usable and recoverable, meanwhile you're going to see all sorts of others life savings evaporate, resulting in a far less recoverable scenario, with little to nothing recovered--at least that's how this tends to play out, historically. Everyone will of course lose, but you'll see disproportionate losses and disproportionate recoverability. Disproportionate wealth as a proxy to power does this.
It’s the fundamental contradiction of modern capitalism (capitalist ownership of the means of production). On the one hand, it claims itself as privately owned capital, but on the other hand relies on the state to maintain this ownership. At some point this will break either into an ancap privatism or a communist socialism, because one side on the rope will eventually win as technology breaks down the human social control systems that allow this contradiction to persist.
I would expect that the bankruptcy proceedings and any future civil lawsuits are the main avenues for individuals to seek individual redress.
If I were an individual, I wouldn’t really care about how the criminal charges were structured, since it’s not like I would get any individual benefit out of his jail time, one way or the other.
> If I were a retail investor who lost my savings in FTX, I might be feeling upset that the government is rushing to action in defense
The customers will be paid before investors with whatever money is there. This is well established by previous case precedents, including in places like unregulated poker betting sites.
Anybody can have a claim, including the SEC, but the courts decide allocation order.
> The customers will be paid before investors with whatever money is there.
That really depends whether the investment is structured as a secured loan (senior debt) or not. Secured loans get paid out in full, before the unsecured creditors such as customers.
> but the courts decide allocation order
Mostly that is defined by the laws of the jurisdiction, not the individual court.
In the Bahamas, the ranking of creditors and shareholders are as follows[1]:
Creditors with a mortgage or fixed charge: assets secured in this way are outside the scope of the insolvency.
Costs of insolvency proceedings: all costs and expenses properly incurred in the company's winding-up (including liquidator's fees).
Employees' debts: sums due to employees under the terms of their employment contract.
Preferential payments, such as unpaid taxes, contributions to occupational pension schemes and liability for compensation for injury or occupational disease.
Creditors with a floating charge.
Unsecured creditors.
Shareholder loans.
Shareholders' equity.
In the US[2]:
Under the Bankruptcy Code, the priority of allowed claims and interests is, in descending order:
Secured claims.
Administrative expenses and priority claims.
General unsecured claims.
Subordinated claims.
Equity interests.
Outside of bankruptcy, creditor ranking is determined by state law and in certain circumstances, the agreement of the parties, such as in an intercreditor agreement. In bankruptcy, the priority of creditors' claims and interests in a debtor's estate is set out in the Bankruptcy Code.
VC early investments may be a convertible note, often senior debt that can be converted to equity in the next investment round[3].
The costs of insolvency proceedings, or administrative costs, may be determined by the liquidator. The liquidator will generally milk the system (within their legal limitations) as much as possible (extremely high charge-out costs per hour, etcetera), so customers will often get didly squat. A senior liquidator might be charged out at say USD800 per hour, down to the secretary who might be charged out at USD120 per hour. The liquidator’s goal is to charge as many hours as possible, without being so extreme that the court pulls them up on it, or to finish up quickly if there is no more money left to suck.
The various players in crypto space have written a ton of EULA mumbo-jumbo explaining that the coins are not securities (as they want the freedom to pump&dump/front run orders/etc). If they admitted the cryptos are securities, all sorts of pesky regulations would apply
Yup. At the end of the day, this isn’t complicated. The man directed assets (whatever you label them) that were clearly meant for the use of the owner only into SBFs investment vehicle for his use (Alameda).
Yes, thank you! So many comments are like "it's a crypto investment, you shouldn't expect safety" when they weren't investments but holdings. As if this was just market forces at play. They have no idea about happened here.
This may seem unfair but this is their best shot at securing a conviction. Elizbeth Holmes was convicted for defrauding investors, not users of Theranos devices.
Either way, the money is likely gone. Nobody is being protected.
> This seems to be the reason why the SEC doesn't have a clear-cut case to protect FTX customers, but does have a case to protect rich VC crypto-bro partners.
I mean, given that FTX.us was supposedly completely isolated from FTX.com isn't that true?
Assuming (and I understand this is a big assumption) that SBF is correct that FTX.us deposits were completely isolated and US customers can be reimbursed in full, the only US citizens harmed by this would be Sequoia et al.
Even if it turns out US customers are actually left holding the bag as well, does the SEC even have clear jurisdiction over FTX on that? Maybe? Wouldn't the DOJ criminal charges be much better wrt nailing him for that though?
Seems much easier for the SEC to charge him with defrauding investors, as that's pretty much a slam dunk case at this point and also clearly the jurisdiction of the SEC.
You can draw analogies here to Capone and tax fraud etc. etc.
He essentially admitted this in recent calls so it's a 'safe' charge that the SEC used to get him arrested in Bahamas and presumably his personal assets will also now be frozen while they assemble the rest of the consumer fraud and other charges.
It's possible that we will hear from individual investors at trial or sentencing. Even though the Theranos trial was about defrauding investors, there was still testimony from an actual customer. ("The first patient to take the stand in trial of former Theranos CEO Elizabeth Holmes said that the company’s blood test inaccurately showed she was suffering a miscarriage when in fact she had a healthy pregnancy.")
This might just be the 'first arrow' from the SEC with much more to be added down the track, but it's interesting to see that they have gone in heavily on defrauding equity investors in the FTX business -- rather than pulling the rug on customers.
Either that's because it's easier for the SEC to prove, and get it to the point of demonstrating fraud? Or the US customers and the FTX US business were relatively untouched throughout this whole process, so there is less to go on for US customer fraud?
Or, perhaps, this is just the first arrow to smoke out more data, informants, etc, with a strategic view to adding further allegations down the track?
This might just be the 'first arrow' from the SEC with much more to be added
down the track, but it's interesting to see that they have gone in heavily
on defrauding equity investors in the FTX business -- rather than pulling
the rug on customers.
Isn't that the same approach that federal prosecutors took with Theranos as well? From what I understand, Elizabeth Holmes went to jail for defrauding her investors, not providing false test results to patients. I think the SEC's reasoning here is the same — investor fraud is easier to prove, so hit the fraudster with that charge first.
I think you're spot on, it is easier to prove (or prosecutors have more experience prosecuting) financial crimes. To give them credit-- they at least tried to get Holmes for defrauding patients too, but she was acquitted of those charges [0]. Her partner, Sunny Balwani, was convicted on all counts, including defrauding patients [1].
It's also worth point out, if you're interested in seeing punitive justice, that you're going to steeper punishments for defrauding investors than patients. If Holmes were nailed on defrauding patients, that would add something like $100 worth of fraud for sentencing guidelines, which is nothing. But an investor who was defrauded of $100 million... that's $100 million of fraud.
You have to specifically prove every instance fraud in a criminal case, so harm that is spread very widely but very shallowly (millions of people who lost $10) doesn't scale up for a fraud case, but harm that is narrow but deep (an investor who lost millions) can be easily done.
It wasn’t for lack of trying though, Holmes was charged with defrauding patients but acquitted on those counts. Only the investment fraud charges stuck.
It’s because neither the SEC nor the CFTC have jurisdiction over crypto.
The holding of the EPA v West Virg case (CO2 emissions) was that federal agencies can’t regulate new domains without actual legislation. The Securities Acts of 1933 and 1934 unsurprisingly says nothing about crypto.
They both went all-in on this crypto bullshit in their latest funds and convinced otherwise healthy companies to pivot into it also. Their returns for these latest funds will be decimated and I couldn't be happier.
The most interest aspect in the FTX saga, for me, is that SBF was treated very gently by major news outlets (and maybe by government regulators too)... until regular individuals in social media started asking: Why is SBF being treated so kindly? Why would journalists (and regulators) assume that SBF meant well?
A possible answer that no one ever mentions is that SBF possesses many qualities that are valued and admired in elite circles. Consider:
* SBF attended MIT, an institution that is valued and admired in elite circles.
* At MIT, SBF majored in Physics and Math, two difficult subjects that require hard work, academic rigor, and high intelligence -- all qualities that are valued and admired in elite circles.
* Both of his parents are prominent professors at Stanford, so they are also valued and admired in elite circles. Presumably, over the years they tried to instill in SBF the values and behaviors that are most prized by other members of the elite -- including honesty.
* By all accounts, SBF truly could understand and could explain the distributed consensus protocols and algorithms that enable crypto-assets -- abilities that are valued and admired in elite circles.
* By many accounts (before FTX's implosion), it seemed that SBF actually believed in his own slogan, "effective altruism" -- the kind of inspiring idea that is valued in elite circles.
> The most interest aspect in the FTX saga, for me, is that SBF was treated very gently by major news outlets (and maybe by government regulators too)... until regular individuals in social media started asking: Why is SBF being treated so kindly? Why would journalists (and regulators) assume that SBF meant well?
This wasn't universally true. See the VICE coverage for example.
The "old" media bought into SBF in exactly the same way it bought into Elizabeth Holmes, presumably for some of the same reasons. They have a strong bias/gravity towards covering "wunderkind" entrepreneurs, and they do "access journalism" with these people. It's more about their personal lives and personalities, because that's the story that always sells.
In addition, most outlets (including the NYT) have had a massive blind spot into how shady everything in the crypto space really is. They've long bought the bullshit, and many of their "crypto reporters" are unquestioning crypto bros who basically are industry mouthpieces rather than real journalists. So in a sense they're actually complicit in all the scams and losses, because they've boosted the fiction that "crypto" is somehow legitimate.
One has to hope that a corner has finally turned here, and SBF's highly visible fall will cause these "old" outlets to start doing actual real journalism on the whole "industry" rather than just fluff pieces and boosterism.
> The most interest aspect in the FTX saga, for me, is that SBF was treated very gently by major news outlets (and maybe by government regulators too)... until regular individuals in social media started asking: Why is SBF being treated so kindly? Why would journalists (and regulators) assume that SBF meant well?
I went through a few examples people brought up of journalists supposedly treating Bankman-Fried kindly the other day[1]. When I read what journalists were actually saying, they were quite negative about Bankman-Fried (saying he was "betraying his clients" or saying FTX "didn’t crumble due to bad luck, but what now appears to be unsustainable layers of deception").
The crypto community seems to be trying really hard to deflect from the fallout of yet another major crypto scam, and spinning whatever they can to make this seem like this is the fault of establishment non-crypto folks. Remember that just a few days ago people were claiming that Bankman-Fried hadn't been charged because he had paid off U.S. politicians.
> Several months ago, I found myself having a few mocktails and splitting vegan snacks with Sam Bankman-Fried at a restaurant near my house. We touched on, among other things, his proposal to create a new publication featuring writers he liked, including me.
> I declined, which obviously in retrospect was the right choice. I told him that I like my Substack just fine and make plenty of money, though he was happy to offer more. But I also told him that given the extent to which we agree on a lot of important issues, I thought it was a lot more valuable to these causes for me to maintain credibility by not accepting any of his money.
Meanwhile the CEO of The Block received a $43M "loan" from SBF[1].
>> When I read what journalists were actually saying, they were quite negative about Bankman-Fried
I think the issue was there was no pressing follow up to his evasive replies. e.g Sorkin's interview. He was basically allowed to get away with "I didn't knowingly do it."
Sometimes they don't follow up because the statement is obviously evasive nonsense and readers will see it. Just letting them say damning things on the record is a win.
And if you don't confront them, maybe they'll say even more? It's like the military quote: "never interrupt your enemy when he's making a mistake."
What you say seem plausible but, as an observer not privy to things, I am not sure how one can differentiate when someone is being allowed to get away versus being goaded to say incriminating things.
But If you look at the written coverage at NYT about this, you will realize that in this case it is the former and not the latter. Yes one can argue that it might have been a plan to make him comfortable to talk at the interview - but yeah :).
crypto community seems to be trying really hard to deflect from the fallout of yet another major crypto scam
For the last few months, any time something bad happens with FTX, there are dozens of people who show up complaining that the media went easy on SBF. They most often use the word "puff" or the phrase "puff piece," as if the comments were all written by the same bot farm.
Then when someone calls them out on it, they're suddenly silent. Which makes me agree with you that this is people trying to deflect from the greed at the root of this, trying to portray themselves as victims, and if the big media had just given them some warning, they wouldn't have lost billions of dollars.
Agreed, it's eye-rollingly obvious how cadres of users have been parroting talking points for various circles, some as an attempt at distraction/deflection and others as an attempt at political gain. It all appears to boil down to beating the same "lamestream media" horse. Never let a good crisis go waste, as they say.
Your definition of "quite negative" and mine are very different. When it comes to situations like this (regarding a young man, his criminal misbehavior, and insitutional response to that behavior e.g., mass shooters), I generally go back to the New York Times' infamous characterization of Michael Brown - a black teenager shot dead in the street and in broad daylight, over a box of cigarillos, by a police officer with a checkered professional history - as "no angel" (among other declarations). If you can't muster something perhaps at least as critical for an older young man who has nuked a measure of wealth equivalent to about half the GDP of the country where his company was based (or, the total wealth of ~50,000 Americans at the median net worth; or, a few hundred million boxes of cigarillos), well... Maybe you're going easy on him.
It's naive to think that affinity is not influencing, if not driving, the way that journalists regard and write about their subjects.
SBF didn’t believe in his effective altruism slogan. He basically admitted in the texts to the reporter he thought would be private that the EA stuff was BS.
Also, I’m not sure what you mean by “treated kindly”.
If you’re talking about why he wasn’t arrested yet, it’s obvious because the SEC was building its case, and more so because he was voluntarily going on public forums and publicly admitting increasing levels of guilt.
I never understood the people complaining about why he wasn’t arrested yet. If you’re a prosecutor making a case against someone, why would you stop them from going to the media and publicly boasting about new crimes?
Rather than vaguely alluding, it seems simple enough to provide at least a handful of links to sources with references to the passages in question, no? Nothing that I have read seems to be as breathlessly gushing as commenters repeatedly claim them to be.
I sat down and read the NYT article. It's not that glamorous for SBF--at best, it paints him as someone in way over his head, but I'm not sure that's a fair characterization. It's somewhat humanizing, but largely in a "what is the CEO thinking as their business falls to ash around them?"--it intersperses the interview with notes about how the company was probably lying at times, and the most contentious questions are summarized as "interviewee doesn't want to talk about them." I wouldn't characterize it as a puff piece, but I think the complaints are largely that people wanted it to be a thorough evisceration of Crypto Enemy Number One.
> “Disgusting complicity on the part of the New York Times. He has ruined countless people's lives by theft and fraud, and NYT is now helping him to delay or evade justice by whitewashing him in their prestigious, influential newspaper. I doubt this is just a mistake on their part,” Zcash co-creator Zooko Wilcox said.
This is a dumb take. They did not help him delay or evade anything.
One could argue that the old way of journalism needs to be modernized for people who have challenges with context and understanding, like this quote demonstrates. Maybe expand on the concept of trigger warnings that detail things to consider while reading an article. Things that were common knowledge years ago, but seem to have been left in the dust.
You keep using the phrase "valued in elite circles".
I honestly don't think many of these traits are actually valued in elite circles. The perception of these traits is valuable. The values...I'm not so sure.
Quite a bit of energy in elite circles is spent on curating an image, rather than actually being decent. You have a whole set of social rules that you follow to distinguish you from the lesser people, and it's all about following the rules, not actually being genuine. Actually being genuine- well, you're kind of a naïve sucker, and even worse- you're unpredictable.
Honesty is only valued so far as you follow the rules, and are honest about your own rational self interest when doing business.
Hard work and high intelligence are definitely valued, but even more valuable is the person that is intelligent enough to not work hard.
In my armhchair opinion, the Illusion of these values is simply a descendant of the feudal concept of Chivalry- it's important to have rules and social norms to establish an in-group of trust, and just as important for the non-elite to know that the elites have their best interest in mind, via "effective altruism"- because the elites are also honest, hard-working people, that got there through their honest hard work. And hey, maybe you can join that club if you invest in the right trustworthy person.
I'll guess the word "elite" here is not really the best term to convey what parent meant. The phrase "valued in elite circles" at first made me think of George Soros types, in which case the values don't fit. But I think parent meant more of the avocado toast NPR/NYT column writer types when he said "elites", in which case the values described make more sense.
I'll disagree on the point about ability to explain crypto protocols/algorithms. You're either in tech and have a body of knowledge that preps you to understand the details and then you might care about it, or you don't really care about how it works. I don't think there's a group of "elites" of any kind that care too much about you explaining how crypto works.
> The most interest aspect in the FTX saga, for me, is that SBF was treated very gently by major news outlets (and maybe by government regulators too)...
He wasnt
> until regular individuals in social media started asking
And there is the crux ... until blah blah. "twitter" didnt get them over the line to arrest him. Neither I nor "twitter" can prove a counter factual but it is just a fantasy of people who have read and written too much shitty fan fiction that SBF was never going to get investigated
A lot of people have made this argument -- that he was treated gently -- but to me that looks like good old-fashioned journalism. People have become so acclimated to the decline of objective journalism that when they see it, something seems off.
Yeah. People seem to be bizarrely fixated on the bits of stories where they mention what SBF was famous for and quote his excuses and don't state that he's definitely guilty of this crime that we were waiting to see if he'd be charged with, and miss the point that the headline is that the guy is accused of a serious crime and articles on famous people accused of crimes usually mention what they're famous for even if that's good, quote a denial/excuse if there is one and don't announce what they're guilty of before they've even been charged with anything.
Sure, he did more full-blown interviews than most people accused of serious crimes, but that's mainly because most of them listen to their lawyers.
If media outlets actually felt particularly kindly disposed towards SBF, they'd be deploying the rhetorical tricks used to defend their favourite politicians
(can we trust the investigators? aren't the big losers in FX the sort of financial institutions that were taking calculated risks anyway? and how many of them go to jail when they lose their customers' money? aren't other crypto institutions much worse and what's their role in Alameda's collapse? maybe he actually he could win all that money back, he's made billions before?) not talking about how a one time darling of the Effective Altruism movement and former billionaire is under investigation after his brokerage collapsed after he allegedly transferred its customers' funds to prop up his other failing company. No matter how much biographical detail gets included beforehand, that's not a rosy picture.
I think it just took some parts of the media a few days to sort through the noise and pick up what the most important developments actually were, and perhaps get the necessary confirmations on the meaningful developments (and lack of confirmation on the wrong ones).
It takes any profession time to correct mistakes and get the story right, but the media have the unenviable task of trying to do that very very quickly.
Most of these seem to boil down to "he seemed like a smart guy who knew what he was doing and wanted to help people." That's basic grifting. It seems odd to say that it only works on elites.
Particularly the last. Elites love to help people, unlike common folks who are too selfish to fall for a con like this? That's the opposite of the usual stereotype.
Occam's razor. I think the explanation for this treatment is much simpler, investment. Lots of these mainstream media corps probably have some interest in dammage control in crypto's price.. or they were being persuaded to be gentle by influential contacts in finance with intrest in stability. For instance, we know now Black Rock had a very significant stake in FTX. Its not totally crazy to think they might have reached out to Bloomberg or the Financial Times to keep the pressure off SBF.
Consider the alternative where the media "slammed" SBF on the daily, it would further discredit crypto and lead to a faster decline in value, therefore it would be harder for financial institutions to efficiently devest from crypto without significant losses.
To me this is just one more nail in the coffin of institutional media. There is clearly bias baked into reporting at the institutional level now, and no desire to uproot it. This is what makes independent media so important today.
Agreed, I think it's institutional. Particularly, the reporters at the big news firms come from privileged backgrounds, are biased towards their own, and use the access that comes with their privilege to further their careers. Those who come from modest backgrounds aspire to join the ranks of the privileged, necessary to further their careers, by sucking up to those above them. "Access journalism" intrinsically favors privileged journalists and incentivizes journalists from less fortunate backgrounds to play along.
>The most interest aspect in the FTX saga, for me, is that SBF was treated very gently by major news outlets (and maybe by government regulators too)... until regular individuals in social media started asking: Why is SBF being treated so kindly? Why would journalists (and regulators) assume that SBF meant well?
More interesting to me is that the DoJ moved to arrest SBF the night before he was set to testify in Congress. When else have prosecutors moved so aggressively to stop a defendant from making self-incriminating statements? His testimony would be admissible and likely devastating at trial
> Why would journalists (and regulators) assume that SBF meant well?
On "meant well", this seems the mirror of attacking one's motive. I noticed that journalists loved to assume the worst of the people they don't like and assume the best of those they do like. Attacking one's motive is really a malicious logical fallacy, as it's practically impossible to defend against such attacks. I really hope journalists focus on what people do instead.
The only thing gentle about how he was treated pre-collapse is that they didn't preface every article with a comparison to MtGox and a disclaimer to avoid the scam.
Incidentally, here's the list of real estate in the Bahamas purchased with FTX funds.[1] Here's the "Albany resort", where most of those properties are.[2]
There was discussion earlier about prosecutors having to prove criminal intent. Did this happen by accident, or were those guys stealing the money for their own benefit? It doesn't matter much what Bankman-Fried has been saying. When the prosecutors have to convince a jury of criminal intent, expect those pictures of the Albany resort to be shown. They didn't buy all those luxury condos with FTX funds by accident.
Impressed no discussion here of his large donations to the Democratic Party. That’s the main talking point in conservative circles, whether accurate or not.
I hope that swiftness of these charges will slightly diminish all these voices that keep repeating everywhere that 'the man' is on it with him, that the media defend him etc.
It won’t, just like even in this thread you see the perennial “this is good, actually.”
At rock bottom the crypto world is held up by unadulterated greed and it shows on both ends: I am willing to make too-good-to-be-true “investments” because greed; when that unfolds the obvious way it was going to then it’s someone else’s fault and they’re not moving fast enough — also greed.
In short: “Why aren’t I rich yet, I’ll speculate” -> “why aren’t I whole yet, I’ll speculate again!”
> It won’t, just like even in this thread you see the perennial “this is good, actually.”
That's not quite what the grandparent poster was talking about.
One strain of thought on FTX/SBF has been conspiratorial. Allegedly, SBF was "a big Democratic donor" with connections in high places, so he would evade any serious US-based law enforcement action.
This view is likely related to FTX's (previous) attempts to present itself as the lawful-good crypto exchange, actively lobbying for US regulation. Such efforts necessarily come with a lot of political deal-making, making the idea of a corrupt bargain more superficially plausible.
Right, I'm aware of this. My claim (feel free to disagree) is that this conspiratorial thinking is coming from the exact same region of CryptoBrain as what built up crypto-land and FTX/SBF to begin with. It is the sensation that you are in on something special, everyone who is not in on it is either an antagonist or an idiot, and you deserve more than they deserve.
I would suspect it's also that crypto tends to attract "government bad" sort of folk with the whole "rebuild some decentralized world" or something, as well as folks whothink "government bad" because they don't want those pesky regulators getting in the way of ponzishop1000 as they can only see the next bull market in their mind.
I think a lot of people are in the second camp, but dress it up as the first. It's funny how tons of people who claim "I'm here for the tech, hodl" get mad whenever somebody shorts their coin or the price goes down
I don't any have any cent invested in all this crypto madness, but I would have expected bigger fish to fry as a result of all this shitshow.
For example the head of SEC itself to fall [1]. Or maybe the VC industry itself to see material consequences of its amateur-hour due-diligence, and I'm not talking about the couple of hundred million of not their money that Sequoia lost on this, but of withdrawals worth tens of billions out of an industry that is run by know-nothings (and who know-nothings bring our industry down as a whole as a result of their shitty resource allocation).
Yeah, now the charges are "too soon" or something.
I noticed the behavior living in oil country concerning gas prices. When gas prices go up, that's bad because it makes everything costs more. When gas prices go down, that's bad because it makes the oil and gas industry fire everyone and then no one has jobs.
Apparently there's a Platonic ideal price for gas, just no one can tell me what that is.
Also with various shootings. Right after, it's too soon to talk about current gun laws. Too long after, it's pointless to talk about because there hasn't been an incident in so long. We missed the window yet again. But no one will tell us when that window opens.
Same thing here, apparently there's a perfect amount of time for charges. The Goldilocks zone, the golden hour, when the planets align and you can charge criminals for crimes and you'll magically have enough evidence and not too much time has passed. But try to pin down anyone on a concrete time frame and you'll get almost as much deflection as SBF tried to give the world.
Now you're starting to understand. This is the way of the cynic. Everything is awful all of the time and it's all somebody's fault. If I blame everybody for everything, then I don't ever need to use my brain and think critically.
I hope he rots in jail like that other fraudster Madhoff.
I'm pretty sure he already saw this coming and moved his assets into his family circle. In addition he probably also set out to destroy incriminating evidence and contacting political proponents to call in favors.
It would be like giving a microphone to a nabbed thief who says 'I can understand why someone might construe breaking into a safe as a reason for concern. That's a reasonable criticism'.
"won't somebody /pleeease/ think of all those poor VC's"
Facetiousness aside, whatever results in seeing those responsible held accountable is a step in the right direction. I suspect that this was the easier case to prepare and that the customers will eventually see their day in court as well.
Theranos and Holmes have agreed to settle the fraud charges levied against them. Holmes agreed to pay a $500,000 penalty, be barred from serving as an officer or director of a public company for 10 years, return the remaining 18.9 million shares that she obtained during the fraud, and relinquish her voting control of Theranos by converting her super-majority Theranos Class B Common shares to Class A Common shares.
A key allegation: In or around May 2020, Bankman-Fried directed that Alameda be exempted from the “auto-liquidation” feature of FTX’s spot margin trading services.
You have it the other way around almost 100%. The reason crypto has the absurd valuations that it does have is entirely because of the centralized exchanges that were offering an easy way for lots of actual money to come into the space (and leave it).
As the larger exchanges collapse, it's also clear that many of these prices were simply invented. For example, it's pretty clear that FTX + Alameda alone invented at least a few billion dollars that simply never existed, but that were priced into BTC and others. Tether is almost certainly doing something very similar, as may be Binance and others.
And these are just some of the make-believe dollars in crypto. You then have all of the minor coins where someone buys one for a dollar and sells it back for two dollars, and someone else who had bought a thousand for a thousand dollars gets shown by some exchange that their funds doubled in value! And now they can leverage that to buy even more worthless coins, causing someone else to think their funds are increasing in value and so on.
It's all a house of cards propped up by savvy unscrupulous marketers.
Will BTC or ETH or Monero fall to 0 if the exchanges died? Probably not, as people actually do use them in some small measure (international payments with countries with failed banking systems, money laundering, evading sanctions, etc). But they would be back closer to where they were 10 years ago, a few dollars or maybe hundreds of dollars for 1 BTC. And most of the others would just die out.
> fact that FTX was selling coins without delivering them
I think you missed the point parent was making about the fraud of accepting money for $crypto_thing and not actually buying $crypto_thing and just moving the money to the Alameda hedge fund. All of that purchasing never impacted the prices of $crypto_thing.
The other thing that will be interesting is if they uncover fraud around $crypto_things that were supposedly tracking actual SEC regulated securities as a derivative and if any Wall Street finance firms were using those FTX derivatives as part of their business.
Even if that is how it worked, what do you think Alameda was doing with the money it got? It's not like Alameda was investing in the stock markets - it was still pouring it into crypto.
As for how the scam worked, my understanding is different - my understanding is that they both bought the token you asked for AND lent the same money to Alameda (who would then go on to buy it's own crypto) - because much of the buying was happening from other FTX accounts, which didn't actually require the dollars. So the same dollars were getting reflected both in the price of the crypto consumers asked for, and again in the prices of the crypto that Alameda was trading.
> not your keys, not your coins as the saying goes.
> Furthermore, the current "bad crypto news" is still suppressing the BTC price.
This is a contradiction. The high price of cryptocurrency is based in part on intermediated (ETF-style) and leveraged long bets.
If everyone took your advice and kept custody of their own keys, the crypto space would be much less speculative. That's probably not a bad thing, but it would not obviously herald a return to high prices.
More large crypto businesses are likely to collapse because they were highly leveraged and now with their debtors failing (other crypto firms like FTX) and their assets falling (crypto) they will be forced to sell their assets to cover losses (crypto) which will push the crypto market down even more.
Everyone who bought and held on to their bitcoins in their wallet instead of
storing the coins with a custodian (exchange or otherwise) is still in full
possession of said coins. not your keys, not your coins as the saying goes.
"Not your keys, not your coins" is probably the single largest blocker to crypto adoption, in my opinion. With every other financial asset, custodial accounts just work. Putting a hundred dollars into a bank account is, thanks to bank regulation and the FDIC, the same as putting a hundred dollar bill underneath my mattress. I've traded a bunch of stocks, and not once have I ever thought about acquiring an actual stock certificate, because thanks to regulations and the SIPC, having stock in a custodial account is the same as having a physical stock certificate in a safe at home.
"Not your keys, not your coins" is viable only in some kind of libertarian fantasy. In the real world, regulated, insured custodial accounts are useful and available for pretty much every security available to individual investors... save crypto.
Exactly. The vast majority of crypto "usage" is people trading on exchanges - which is pretty difficult to do when your crypto is stored in a wallet with the seed phrases etched on steel plates and buried in your yard...
As you noted the overwhelming majority of money worldwide is stored very safely in custodial fashion so people can actually /do something/ with it.
As I've also noted before we're going to see a drastic uptick in the coming weeks/months/years of people losing access to all of their crypto because of the UI/UX challenges inherent with self custody. I don't think many of the people who are rushing out to buy a Ledger or otherwise move to a non-custodial wallet fully understand that unlike everything else in the world there is no password reset option or customer service number to call when people inevitably do what people do and make a minor mistake.
There is going to be a lot of heartbreak from people losing everything because of forgotten passwords, wallets getting hacked, etc.
[0] https://apnews.com/article/technology-business-bahamas-unite... ("We expect to move to unseal the indictment in the morning and will have more to say at that time")