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Bitcoin

Did Sam Bankman-Fried Finally Admit the Obvious? (coindesk.com) 87

Posted by BeauHD from the deception-from-the-get-go dept.
CoinDesk's Daniel Kuhn writes in an opinion piece: Despite the focus on FTX following its catastrophic collapse, it's remarkable how little we know about how the crypto exchange and its in-house trading firm Alameda Research actually operated. New CEO John Jay Ray III has called Sam Bankman-Fried's crypto trading empire the "greatest failure of corporate controls" he's seen. Wednesday, Coffeezilla, a YouTuber with a rising star who has made a career of shining a light on sketchy projects in and out of crypto, pressed Bankman-Fried for information related to how different customer accounts were treated at the exchange. It turns out, there wasn't much differentiation -- at the very least during the final days the exchange was in business, Bankman-Fried admitted. "At the time, we wanted to treat customers equally," SBF said during a Twitter Spaces event. "That effectively meant that there was, you know, if you want to put it this way, like fungibility created" between the exchange's spot and derivatives business lines. For Coffeezilla, this looks like a smoking gun that fraud was committed.

At the very least, this is a contradiction of what Bankman-Fried had said just minutes before when first asked about the exchange's terms of service (ToS). "I do think we're treating them differently," Bankman-Fried said, referring to customer assets used for "margin versus staking versus spot versus futures collateral." All of those services come with different levels of risk, different promises made to customers and different responsibilities for the exchange. According to FTX's ToS, everyday users just looking to buy or store their cryptocurrencies on the centralized exchange could trust they were doing just that, buying and storing cryptographically unique digital assets. But now, thanks to skillful questioning by Coffeezilla, we know there were instead "omnibus" wallets and that spot and derivatives traders were essentially assuming the same level of risk.

We can also assume this was a longstanding practice at FTX. Bankman-Fried noted that during the "run on the exchange" (pardon the language), when people were attempting to get their assets off before withdrawals were shut down, FTX allowed "generalized withdrawals" from these omnibus wallets. But he also deflected, saying what, you wanted us to code up an entirely new process during a liquidity crisis? Before now, Bankman-Fried had been asked multiple times about the exchange's ToS and often managed to derail the conversation. He would often point to other sections of the document that stated clients using margin (taking out debt from FTX) could have their funds used by the exchange. Or he would bring up a vestigial wire process in place before FTX had banking relationships. Apparently, according to SBF, customers had sent money to Alameda to fund accounts on FTX and somewhere along the lines this capital ended up in a rarely seen subaccount. This also had the benefit of inflating Alameda's books, another dark corner of the empire. Further reading: FTX Founder Sam Bankman-Fried Is Said To Face Market Manipulation Inquiry
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Did Sam Bankman-Fried Finally Admit the Obvious? More

Did Sam Bankman-Fried Finally Admit the Obvious?

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  • Betteridge's law of headlines wrong in this case? (Score:5, Funny)

    by whoever57 ( 658626 ) on Thursday December 08, 2022 @09:11PM (#63115414) Journal

    And what about the title of this post?

    It's turtles all the way down.

  • Not a surprise. (Score:4, Insightful)

    by marcle ( 1575627 ) on Thursday December 08, 2022 @09:12PM (#63115418)

    In other words, he was just winging it with a big pot of money, high on amphetamines, totally sure that he would come out on top, and totally dismissive of the old skool way of keeping track of corporate assets.

    What could go wrong? Oh wait...

    • You also forgot the bit where the top leadership were constantly busy with orgies, but otherwise spot on.

    • Re: Not a surprise. (Score:2, Insightful)

      by guruevi ( 827432 )

      Heâ(TM)s not in jail, so to him nothing went wrong. He pulled off a Bernie Madoff but just happened to grease the wheels of the right people (https://fortune.com/2022/11/10/sam-bankman-fried-ftx-joe-biden-democratic-party-second-biggest-donor/)

      To him it is just another experiment in his goal of redistribution.

      • Re: Not a surprise. (Score:4, Insightful)

        by jonbryce ( 703250 ) on Friday December 09, 2022 @12:20PM (#63117004) Homepage

        He's not in jail yet.

        Bernie Madoff confessed to his crimes before anyone else knew what was going on.
        If you consider for example Jeff Sklling (Enron), he wasn't arrested until about 2 years after the event. It might be a bit quicker in this case, but probably not much.

    • Totally sure he would get away with stealing insane amounts of money. But, I guess that makes sense. After all, there's much more temptation to steal if you are sure you will get away with it!

    • But blockchains were supposed to be superior to the old-school way?

      Obviously, regardless of your opinion on the above question, this case isn't proof that it isn't.

    • I'm shocked, shocked to find that gambling is going on in here!

  • Admit what obvious? (Score:4, Funny)

    by Rosco P. Coltrane ( 209368 ) on Thursday December 08, 2022 @09:14PM (#63115420)

    That he bears the most outrageous name ever possible to bear when you cook up a financial scam of that magnitude?

    The investors must feel they've been massively trolled, having sunk their hard-earned into a company operated by a dude called Bankman Fried. If I was him, I'd tell the court "It's not like they didn't know what they were getting into" as a line of defense.

    • That he bears the most outrageous name ever possible to bear when you cook up a financial scam of that magnitude? ... Bankman Fried.

      And haircut ...

    • You have to admit, though, "Bankman fried" is a headline I'd love to see.

      Screw this, it's an event I'd buy a ticket for.

    • That he bears the most outrageous name ever possible to bear when you cook up a financial scam of that magnitude?

      I think we can go ahead and start referring to him as BankFried.

  • Why the hell hasn't this guy hired a lawyer (Score:5, Insightful)

    by rsilvergun ( 571051 ) on Thursday December 08, 2022 @09:23PM (#63115438)
    And shut the fuck up yet? I can't even imagine anyone so incredibly stupid that they would keep talking under these circumstances. Whether you're innocent or guilty in a situation like this you shut up.

    I'm honestly starting to think that he just got in way the hell over his head and that this is genuine incompetence here. Not that I'll prevent our legal system from nailing him to the wall for stealing from rich people. And he ripped off plenty of people in The tech community so I doubt he's going to get much sympathy here. Hell I doubt anyone would admit it but I'm willing to bet that some of the people reading this comment right now lost money to his scam.

    But still gave a completely incompetent kid billions of dollars to spend on pretend money. What the hell. I mean like I said I'm sure we're going to nail them to the wall but I honestly don't think we should. A functioning society wouldn't have let him get that far along into something this stupid. It's one of those situations that we really have ourselves to blame

    • Re: (Score:3)

      by caseih ( 160668 )

      Haha in fact he had a lawyer that told him to shut up. He fired the lawyer and now from what I hear a family member's law firm is representing him and running a PR machine for him. I think the only thing that might save him is that a lot of highly-placed people in political circles might end up implicated, so they are motivated to at least not completely prosecute him straight away.

      • Re:Why the hell hasn't this guy hired a lawyer (Score:5, Insightful)

        by caseih ( 160668 ) on Thursday December 08, 2022 @09:34PM (#63115464)

        And I think his PR blitz is working as it managed to convince you that he's just a poor confused child who got in way over his head. That's exactly what he wants people to think.

        This is certainly not the image he originally presented to investors, politicians, and regulators before everything blew up.

        • Dude that shit won't matter in court. Even if I was sitting on his jury it wouldn't matter because a skilled prosecutor would lay out the case such that I'd be forced to convict unless he also had one hell of a lawyer.

          The court of public opinion is not the court of law unless you're way way higher on the totem pole than this guy. Guys like Trump can break the law with impede. Same for Elon Musk. This guy was never really a billionaire or even had Romney level money. He's not a member of the ruling class

          • Nobody is prosecuting him, because he donated millions to the current party in charge of such investigations.

            • Nobody is prosecuting him, because he donated millions to the current party in charge of such investigations.

              Under that logic he will never be prosecuted, because he donated about the same amount to both parties.

            • He gave $30 million to the Dems and his VP gave $40 to the GOP. That's chicken shit to Congress. It's not nearly enough to buy immunity from law. Trump got immunity because he a) delivered SCOTUS to the GOP and b) can at any time run 3rd party and end the GOP.

              SBF's got none of that. He was hoping to buy one very, very specific law, which is being regulated as a commodities trader instead of a security. That way the weaker CFPB would regulate him and he'd be free to scam away. He failed not because of ju
        • It seems crypto is a perfect breeding ground for this. Low understanding of how crypto works plus an overall bad understanding of economic/financial fundamentals = "gee why not?". Unfortunately in the U.S. at least, it seems you don't gain a good working knowledge of just how rigged our economic and financial systems are until you've gained some success in them. But FOMO is huge among some segments of those who fancy themselves investor types, and there were probably also plenty of gullible people too.

          I'v

        • And I think his PR blitz is working as it managed to convince you that he's just a poor confused child who got in way over his head. That's exactly what he wants people to think.

          This is certainly not the image he originally presented to investors, politicians, and regulators before everything blew up.

          I don't think that's why he's trying to do.

          This guy spent the last few years as a relatively self-made billionaire who could chat with world leaders and was surrounded by folks telling him how brilliant he was.

          I'm sure he still believes that everything would be fine if he hadn't filed for bankruptcy and instead raised a few more billions to get through some unusual market conditions or something.

          And once this FTX thing goes away he thinks he'll just go and found another multi-billion dollar company.

          That's w

          • Re: (Score:2)

            by caseih ( 160668 )

            He duped people out of there money with a sham product and got rich. He knows exactly what he's doing. He played the part of a brilliant prodigy perfectly, and now he's playing a dumb child who got in over his head. He duped everyone, and is still doing it. He's a master manipulator. He's definitely not a naive inexperienced child who got in over his head. Doesn't say much for society in general for enabling sociopaths like him. Yes people will enable him to go on and make another company duping peo

      • Haha in fact he had a lawyer that told him to shut up. He fired the lawyer and now from what I hear a family member's law firm is representing him and running a PR machine for him.

        I imagine it would be very difficult for a lawyer to properly represent him now, given the amount that he's said publicly, which would surely be admissible in a court or hearing.

      • High people in political circles don't have a lot of sway over these things. What are they going to do, pass a law?

      • Implicated in what way? Nothing I've seen so far suggests that any of them would be more implicated than in for example Theranos, and most likely they would be less implicated than in Theranos.

    • I think this is deliberate. I don't know what he hopes to accomplish but it could be a deliberate approach.. get out there, seem like you're being transparent, keep repeating how you're trying to do right for all the people that lost their shirts. Maybe it's forestalling the arrest warrant that should have been issued weeks ago.

      Things will get really interesting when his ex girlfriend and him turn on each other. Between the two of them someone has to know where the fork those billions went.

      • But this is not an approach that has worked in the past, legally. First rule of being accused of a crime, big case or small case, guilty or innocent, is that you shut up. First thing a decent lawyer says is to just shut up. Talking to the public can never help your defense but it is highly likely to undermine the defense instead. The court of public opinion has no jurisdiction here.

        "Your honor, I move to dismiss the charges on the grounds that my client is polling well."

    • Maybe he's taking hints about how to deal with serious legal issues based upon certain politicians and celebrities who can't keep their own mouths shut? It's ego. Gotta talk, gotta say how great you are, gotta say how all the legal problems are fake news by people who are jealous, etc.

      Too many people think that a PR firm is the same as a legal team. The general public is not going to decide guilt or innocence, it's the jury and judge.

    • Why the hell hasn't this guy hired a lawyer...And shut the fuck up yet?

      Because he clearly thinks he's untouchable, and the fact he's wandering around free long after Bernie Maddoff was in handcuffs says he may be right.

      The FTX books were so poor maybe you can't even prove a crime was committed. :-)

      A functioning society wouldn't have let him get that far along into something this stupid.

      See: Central Banks, Federal Reserve, FX swaps, By this metric the U.S. has not been functioning for... maybe 50 years?

      Wait

  • Amazing how many distant synonyms there are for the word "stole". Very distant.

  • I was actually getting something out of the general crypto coverage blitz: an idea of which organizations and tokens were failing, and some conception of how they're related. Systems analysis - news for nerds.

    But does each and every stop on the apology tour of this particular dickweed really need its own article? I don't understand what the interest is.

  • Coffeezilla (Score:3)

    by The Evil Atheist ( 2484676 ) on Thursday December 08, 2022 @10:00PM (#63115508)
    Funnily enough, I just watched the video yesterday. It's good how he goes into examining why other journalists had trouble getting past SBF's constant diversions.

  • It's also amusing to watch. To put it more respectfully than deserved, greedy clueless imbeciles make the adult choice to bet stupidly and got burned.

    Fools merit ridicule not empathy.

    • I assume you are referring to the "depositors" (in quotes since FTX was neither a bank nor an exchange in any traditional sense). But those who were running the "exchanges" were not clueless. They knew exactly what they were doing and worked hard to maximize the amount of money they could steal.
  • Where did all the money go. It should be easy to trace, after all, it's all on the black-chain.

    • Where did all the money go. It should be easy to trace, after all, it's all on the black-chain.

      Not sure if you meant for it to be humorous but "black box chain" is exactly where it all went, once crypto is sent to a company like this it is technically in one giant company wallet, which then may send any amount on into a million directions, or just hold and make giant loans based on the amount...

    • Look at OpenSecrets under Joe Biden

    • It was exchanged for cash and used to pay for houses, boats, and hookers. I guess you could try to claw it back from whoever made those transactions. The crypto-wallets that hold the money can probably be found. The houses can be located. The boats probably dont' have much resale value. And the hookers, well, they snorted the money.
  • This was just bitcoin working as designed instead of as conceptualized. The whole thing is based on faith.

    • The whole thing is based on faith

      So is cash. If I borrow $5 off someone, I can faithfully assume that you will accept that as having a value of $5.

      It's like any god. If everybody stopped having faith in some certain god, it/s/he would cease to have value as an article of faith. Any physical items related to that faith lose value in the minds of the once faithful.

      • Hm, that is the lesson every 16 year old weed dealer has to learn: going down to park and giving 20 of your buddies 20$ worth of weed each for the promise of bringing money tomorrow is not the same as having 400$ in your pocket. And when big guys come for theirs, then "I sold it, I just didn't take the money yet" won't be good enough. That people with university degrees don't get at least the same level of wisdom makes me think something is fishy with educational system.

  • He's hoping the deal he wants looks reasonable (Score:3)

    by Babel-17 ( 1087541 ) on Friday December 09, 2022 @12:57AM (#63115748)

    He'll cooperate fully, implicate whoever the prosecutors want him to, reveal all, and in exchange the State goes along with selling the idea that he "drifted into" criminality rather than deliberately chose it, and thus no real jail time at other than a country club is mandatory for him.

    "Oh look, 'Sheldon Cooper' inadvertently committed fraud while getting in over his head with finance, instead of sticking with geeky stuff", could be what he hopes to sell to the public, in hopes that will make prosecutors not worry about the appearance of cutting him a deal.

  • I had to laugh at this article going into the weeds analyzing things and thinking they found the obvious (Sam was lying from the beginning) ... umm ... no the MOST OBVIOUS and basic thing is that it was a Ponzi Scheme, a fraud. Such schemes ALWAYS require dishonesty and fraud, so there's no need to put on a headlamp and helmet, assorted climbing gear, and then go spelunking for some deeper discovery. FTX was a very typical Ponzi Scheme, dressed up a lot with snazzy visual props and lots of buzz words (mainl

    • Re: (Score:1)

      by Anonymous Coward
      It's amazing to be part of this bitcoin revolution. It's like we have a secret knowledge that most people don't understand, and it's going to change the world in ways that they can't even imagine. I can't wait to see what the future holds for bitcoin, and I'm so glad to be a part of it. It's a shame that some people are so clueless and don't want to learn about it, but I guess that's just the way it goes. Let's just keep on being part of the bitcoin community and watching this amazing technology change the

  • rostand quote (Score:3)

    by e**(i pi)-1 ( 462311 ) on Friday December 09, 2022 @07:32AM (#63116190) Homepage Journal
    The fact that both parties were bought by contributions explains very well how little appears to be done to investigate this. Bending a quote of Rostand ("âoeKill one man, and you are a murderer. Kill millions of men, and you are a conqueror. Kill them all, and you are a god." ) one could say "steal a dollar and you are a thief, steal a million and you are an entrepreneur, steal billions and you are a god." At least both political parties must have believed in his philanthropy. Why the heck would you fund all parts of the party spectrum? Obviously it was to have no initiatives for regulations of this type of intermingled exchange/investing business with FTX/Alameda. The fact that SBF was celebrated in the main press like in a NYT interview after the entire debacle is just mind boggling. Bernie Madoff had been arrested quite quickly. Madoff just obviously must have missed the part to buy the politics first.
    • Bernie in his early years was also celebrated. Bernie's scam was conventional, regulated fi, Sam's was DeFi. The laws broken are going to be harder to prosecute. If anything, I imagine the justice dept is holding back giving Sam enough rope to hang himself with all his interviews letting Sam make their case. Interviews that will be played in court. The lawyers were right in saying Sam is an idiot for not shutting up.
    • The whole point of giving money to both sides was merely a hedge since SBF's endgame(and that which ultimately triggered Binance's decision to dump FTX's coin that toppled this house of cards) was to set up/be "the exchange" to give crypto a veneer of legitimacy. His competitors didn't appreciate that and so they liquidated their coin holdings, which started the good old fashion bank run. Whether the conflicts of interest and utter lack of controls were criminal or merely negligence are for a court of law t
  • It's like people never learn from history.

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