Sam Bankman-Fried (SBF) debacle with FTX (1 Viewer)

[massraider]

Rise, fall of Sam Bankman-Fried, FTX at center of Michael Lewis' new book | 60 Minutes

Author Michael Lewis met with FTX founder Sam Bankman-Fried more than 100 times. Lewis breaks down the crypto superstar’s rise and fall in his new book, “Goi...

www.youtube.com

60 Minutes interview with Michael Lewis ahead of his book.

 

[MTskibum]

He was not offered a plea deal. The prosecution will nail that cartoon villain good.

 

[Poke_4_Life]

I started listening to the 'Judging Sam' podcast noted earlier. I'm not sure I really like Lewis or the actual podcast. As noted above, Lewis seems a bit of a fanboy. I will probably continue with the podcast because I want daily audio updates, but it's not all that great either.

 

[CletiusMaximus]

I started listening to the 'Judging Sam' podcast noted earlier. I'm not sure I really like Lewis or the actual podcast. As noted above, Lewis seems a bit of a fanboy. I will probably continue with the podcast because I want daily audio updates, but it's not all that great either.

Yeah I'm looking for a better one and appreciate any recommendations. There's no way I'm going to stay engaged through the entire 6 weeks of trial but the short daily update format is something I'd follow. The 30 minute episodes mesh perfectly with my morning bike ride into work.

 

[Poke_4_Life]

I started listening to the 'Judging Sam' podcast noted earlier. I'm not sure I really like Lewis or the actual podcast. As noted above, Lewis seems a bit of a fanboy. I will probably continue with the podcast because I want daily audio updates, but it's not all that great either.

Yeah I'm looking for a better one and appreciate any recommendations. There's no way I'm going to stay engaged through the entire 6 weeks of trial but the short daily update format is something I'd follow. The 30 minute episodes mesh perfectly with my morning bike ride into work.

Looks like Spellcaster has been doing a series and had a 23-min update 12 hours ago. I know nothing about this series but I'll give it a try.

 

[massraider]

Lewis seems a bit of a fanboy

I thought the 60 minutes thing was painful.

Lol he dresses badly, lol he didn't know who Anna Wintour was, lol video games.

 

[massraider]

SBF Will Spend The Rest of His Life In Prison

In this video we go over some recent revelations in FTX founder Sam Bankman-Fried (SBF)'s ongoing criminal case. With the trial scheduled to start in October...

youtu.be

A very dry no fluff recap of what he did.

 

[Mrs. Rannous]

Lewis seems a bit of a fanboy

I thought the 60 minutes thing was painful.

Lol he dresses badly, lol he didn't know who Anna Wintour was, lol video games.

I think you may have missed all the points of that.

 

[massraider]

I think you may have missed all the points of that.

Definitely possible.

I think 60 minutes thought it was better TV to discuss what an eccentric rascal he was, rather than the really obvious financial crimes he committed.

 

[Mrs. Rannous]

I think you may have missed all the points of that.

Definitely possible.

I think 60 minutes thought it was better TV to discuss what an eccentric rascal he was, rather than the really obvious financial crimes he committed.

That info is available everywhere. They covered the stuff that pretty much only that guy knew.

 

[ILUVBEER99]

Listening to the book. Absolutely nuts legit investors were throwing multi millions, many 50+ million into FTX without doing any due diligence.

It was 15 very young people running the entire company. They were obv very smart but there was zero oversight and none of them had any business experience.

 

[Dezbelief]

Listening to the book. Absolutely nuts legit investors were throwing multi millions, many 50+ million into FTX without doing any due diligence.

It was 15 very young people running the entire company. They were obv very smart but there was zero oversight and none of them had any business experience.

For a good portion of people greed overrides everything, scammers know this well.

 

[Encyclopedia Brown]

As noted above, Lewis seems a bit of a fanboy

coffeezilla takes Lewis to the woodshed: https://www.youtube.com/watch?v=B2z8ikGLRh8

 

[massraider]

As noted above, Lewis seems a bit of a fanboy

coffeezilla takes Lewis to the woodshed: https://www.youtube.com/watch?v=B2z8ikGLRh8

He's embarrassing himself.

There was no run, they weren't a bank. They were an exchange. They weren't even paying back investors for years like Madoff, they just stole the money, and made crypto bets with it.

 

[massraider]

Michael Lewis’s Big Contrarian Bet

Almost everyone in the world believes that Sam Bankman-Fried is guilty. In “Going Infinite,” the writer takes the kind of risk that his characters often do, and asks us to question that assumption.

www.newyorker.com

 

[CletiusMaximus]

Listening to the book. Absolutely nuts legit investors were throwing multi millions, many 50+ million into FTX without doing any due diligence.

It was 15 very young people running the entire company. They were obv very smart but there was zero oversight and none of them had any business experience.

For a good portion of people greed overrides everything, scammers know this well.

My gut feeling is none of these people started this as a scam. I’m not sure it ever really even morphed into what I call a scam, more like just simple theft. FTX itself seems like a legit business but for the owners taking the money out and spending it on themselves or losing it on super risky bets through Alameda.

 

[FreeBaGeL]

As noted above, Lewis seems a bit of a fanboy

coffeezilla takes Lewis to the woodshed: https://www.youtube.com/watch?v=B2z8ikGLRh8

He's embarrassing himself.

There was no run, they weren't a bank. They were an exchange. They weren't even paying back investors for years like Madoff, they just stole the money, and made crypto bets with it.

But they were openly operating like a bank. Where did people think the yield was coming from? It was because FTX was making a larger yield on the money themselves....until they weren't.

 

[Major]

Listening to the book. Absolutely nuts legit investors were throwing multi millions, many 50+ million into FTX without doing any due diligence.

It was 15 very young people running the entire company. They were obv very smart but there was zero oversight and none of them had any business experience.

For a good portion of people greed overrides everything, scammers know this well.

My gut feeling is none of these people started this as a scam. I’m not sure it ever really even morphed into what I call a scam, more like just simple theft. FTX itself seems like a legit business but for the owners taking the money out and spending it on themselves or losing it on super risky bets through Alameda.

Most of these scams and ponzis don't initially start out with the intention of stealing money. Unfortunately, greed slowly sets in and once market conditions change, they often get exposed.

 

[massraider]

But they were openly operating like a bank. Where did people think the yield was coming from?

I am not sure I agree that they were openly operating like a bank, I don't think they were paying interest, etc.

Yield: From other investors making their crypto bets on the other side. FTX collects a fee.

Listening to the book. Absolutely nuts legit investors were throwing multi millions, many 50+ million into FTX without doing any due diligence.

Maybe not dollars this size, but this happens all the time. I cannot believe the amount of money people invest without doing due diligence. The reason is they can afford it, and it's like if you gave $10 to 100 people to startup a business. For you, it's only ten bucks, how much research you really gonna do? 50 mill is 10 bucks to some of these groups.

My company, we received 2 million from pretty much a complete stranger. He liked us, liked the industry, wanted to be involved, had a good feeling about us. We sent over some documents, pro forma, Gantt charts, estimates, etc. Expected a bunch of tough questions about projections, and so forth. Nope. Here you go fellas, first tranche of 500 grand deposited.

 

[FreeBaGeL]

But they were openly operating like a bank. Where did people think the yield was coming from?

I am not sure I agree that they were openly operating like a bank, I don't think they were paying interest, etc.

They were paying up to 8% interest, if I recall.

 

[massraider]

They were paying up to 8% interest, if I recall.

Thanks, I didn't know this.

Searching around, and was this reddit thread confirming your statement. Bit of a sad read.

Also,

Binance and CEO CZ Face Class-Action Lawsuit Alleging Conspiracy to Undermine FTX Competitor

Binance.US, and CEO Changpeng Zhao (CZ) of engaging in unfair competition, attempting to monopolize the market, and plotting to

azcoinnews.com

I imagine winning a lawsuit where you blame CZ for FTX's collapse is not a slam dunk of a case.

 

[Dezbelief]

They were paying up to 8% interest, if I recall.

Thanks, I didn't know this.

Searching around, and was this reddit thread confirming your statement. Bit of a sad read.

Also,

Binance and CEO CZ Face Class-Action Lawsuit Alleging Conspiracy to Undermine FTX Competitor

Binance.US, and CEO Changpeng Zhao (CZ) of engaging in unfair competition, attempting to monopolize the market, and plotting to

azcoinnews.com

I imagine winning a lawsuit where you blame CZ for FTX's collapse is not a slam

I know someone who was holding Ethereum on FTX for the 8%. He kept trying to get me in on the action too. He's normally conservative with his investments. He told me SBF was worth such n such and there was no way FTX was going to fall unless the bottom dropped out on crypto. Lol, he filed a claim and is awaiting bankruptcy court to determine what % of his Ethereum he might get back.

 

[massraider]

Lol, he filed a claim and is awaiting bankruptcy court to determine what % of his Ethereum he might get back

There's a real business buying people's claims for FTX.

 

[Desert_Power]

As noted above, Lewis seems a bit of a fanboy

coffeezilla takes Lewis to the woodshed: https://www.youtube.com/watch?v=B2z8ikGLRh8

He's embarrassing himself.

There was no run, they weren't a bank. They were an exchange. They weren't even paying back investors for years like Madoff, they just stole the money, and made crypto bets with it.

But they were openly operating like a bank. Where did people think the yield was coming from? It was because FTX was making a larger yield on the money themselves....until they weren't.

They probably didn’t think it was coming from outright fraud, although I thought that was the case.

 

[massraider]

Today the FTX jury suffered through a code review

What did Gary Wang commit?

www.theverge.com

The prosecution doesn’t just allege that Alameda had special, secret privileges — it claims they were used to obfuscate basic elements of FTX’s operations that exposed its supposed selling points as a lie.
For instance, FTX advertised that it had a good liquidation system. In many crypto networks, if someone lost enough money, the exchanges could stick other traders with the losses too. FTX touted its automated liquidation as a way to avoid this, so that one customer going bankrupt wouldn’t affect the others.

FTX lied about how much money was in the backstop fund
In the process of liquidating, FTX would try to sell the collateral on the open market, but if it couldn’t finish, then backstop liquidity providers would step in. These were market makers, including Alameda, which could be compensated for the losses they take from a “backstop fund,” Wang said.
But FTX lied about how much money was in the backstop fund, Wang said. In court we saw the code that generated the fake number published on the website: it took the daily trading volume on FTX, multiplied it by a random number, divided it by a billion, and added it to the existing number displayed on the site. It had nothing to do with the actual amount of money in the insurance fund.
And when there wasn’t enough money in the fund, money was moved there from Alameda’s accounts in order to pay the insurance out, Wang said.
In late 2019, Alameda had a negative balance on FTX. Because they sat in an open-plan office, Wang heard a trader ask Bankman-Fried if it was okay to keep withdrawing money from that account. Bankman-Fried said it was okay as long as it was lower than FTX’s total trading revenue. He was the CEO of both companies at the time.

 

[heckmanm]

I haven’t followed closely. This was a good listen.

 

[Desert_Power]

This piece bears repeating:

Most obviously, the stuff about customer deposits being rehypothecated makes sense, at some level, on its own, and I have told some version of it myself. FTX was an exchange that was especially welcoming to leveraged traders, its customers were there to borrow and lend crypto, so of course it used every part of the customer deposits. But that's not what it said! When the “run on the bank” started, Bankman-Fried tweeted (and then deleted) “FTX has enough to cover all client holdings. We don’t invest client assets (even in treasuries).” I can sit here and say “well it was an exchange for leveraged traders, of course everyone’s assets were being rehypothecated, they can’t really have expected otherwise.” But FTX was lying about it to the customers!

Or everyone who interviews Bankman-Fried points to the bit of the FTX terms of service saying that they won’t do that. From the Sorkin interview:

SORKIN: … It says, “None of the digital assets in your account are the property of, or shall or may be loaned to, FTX Trading. FTX Trading does not represent or treat digital assets in users’ accounts as belonging to FTX Trading.” So, how is it possible that Alameda had this loan of such a large size?
BANKMAN-FRIED: So, there is that piece from the terms of service. But there were a number of other parts of the terms of service and a number of other parts of the platform on top of that. There is the borrow/lending facility, where users were lending billions of dollars of assets to each other, collateralized by assets on the exchange. And you had, obviously, futures contracts where there were leveraged positions on.

That would be an okay-ish answer, if Bankman-Fried hadn’t also been tweeting “we don’t invest client assets” as the ship was going down, and if some customers’ funds had turned out to be segregated. Like if the story of FTX was “people who just bought crypto for cash got their assets back, because they were kept segregated and did not belong to FTX, but of course everyone with a margin or futures account got vaporized because that’s life in a risky crypto shadow bank,” then this distinction would make sense. The terms of service would be accurate, but limited. But in fact everybody’s accounts seem to be frozen, everybody’s assets seem to be getting treated as assets of the FTX bankruptcy estate, and there is no hint — in Ray’s exasperated complaints about FTX’s accounting and custody, in Bankman-Fried’s own spreadsheet of FTX assets and liabilities — that any customer assets were particularly segregated. If you bought Bitcoin on FTX and didn’t borrow or lend or margin or trade futures or anything else, and you show up now to ask for your money back, and you point to the terms of service, the answer is “meh, get in line.”

 

[Poke_4_Life]

Have to say, the 'Judging Sam' podcast was much better yesterday.
I will keep listening, in part because I can't find another podcast doing daily updates.

 

[massraider]

https://spotify.link/rNQLdKxdPDb

Recap of Caroline Ellison testimony.

 

[CletiusMaximus]

Looking at the FTX BK fee applications for the month of December and see FTX lead bankruptcy counsel - Sullivan & Cromwell - billed $15,407,509.50 in fees and $134,311.31 in expenses for December alone. 2022 law grads (admission "in process") at Sullivan & Cromwell are billed at $775/hr. Associates admitted in 2017 are at $1,440/hr. It looks like partners top out at $2,165.00/hr. One partner billed 342.20 hours in December, earning $740,863.00 in fees for one month by himself. At least a dozen more lawyers at the firm billed in the $300k-$600k range for December alone. They bill at 50% for "non-working travel" so for example one guy bills $1,083.00/hr while he's on a plane or a train ride but not working. Non-lawyer paralegals are billed at $595/hr.

S&C are just one of a dozen or so law firms billing the estate for legal services, in addition to the dozens of other professional firms billing the estate - investment banks, turnaround consultants, accounting firms, auditors, forensic firms, and other professionals.

Updating this - Sullivan and Cromwell alone are over $100m in fees for the 8 month period from when the case was filed in late November last year through the end of July. They are the main debtors counsel in the case, but are just one of dozens of professional forms being paid from the FTX bankruptcy estate.

most recent fee application is here — https://restructuring.ra.kroll.com/FTX/ExternalCall-DownloadPDF?id1=MjUyMzg1MQ==&id2=0&cid=0

 

[The Z Machine]

$100m in legal and management fees for 8 months? Must be nice work if you can get it.

 

[massraider]

FTX had a bunch of money tied up in a Chinese exchange, and bribed someone $150 mill to get it out. They were able to trade with the account, but not withdraw.

But before they agree to the bribe, they set up accounts under the names of Thai prostitutes, and tried to lose the money to those accounts. Didn't work, but that's hilarious.

 

[The Z Machine]

super geniuses all around

 

[thecatch]

Derek Thompson's podcast, Plain English, has a good interview this morning with a journalist who is covering the trial and wrote a book about FTX. They had some unflattering things to say about Michael Lewis and the way Lewis has fawned over SBF. I have to say, I used to love Lewis's work, but I think he may be washed.

 

[massraider]

Derek Thompson's podcast, Plain English, has a good interview this morning with a journalist who is covering the trial and wrote a book about FTX. They had some unflattering things to say about Michael Lewis and the way Lewis has fawned over SBF. I have to say, I used to love Lewis's work, but I think he may be washed.

I just listened to that podcast, and the 60 minutes thing was kind of cringey.

Lewis had a chance, if he didn't mind looking a little naive/trusting/whatever, to really write an amazing book. He could have written about how he was fooled. It would have been amazing to read his fawning commentary, and then halfway through the book, Lewis realizes the kid is just a slob who started making bad crypto bets, and how he fooled everyone, including the author. That would have been a great book.

Instead, he's on 60 minutes saying "there is a Sam Bankman-Fried hole in the world".

I mean.......cringe. Felt like chewing on aluminum foil just typing that.

 

[General Malaise]

I just can't understand being attracted to Ellison. She was with another boyfriend when she got raided, according to testimony. She's one of the strangest looking creatures I've ever seen.

 

[Dickies]

I just can't understand being attracted to Ellison. She was with another boyfriend when she got raided, according to testimony. She's one of the strangest looking creatures I've ever seen.

You couldn't draw up a more perfect caricature of a nerd.

 

[Ministry of Pain]

I just can't understand being attracted to Ellison. She was with another boyfriend when she got raided, according to testimony. She's one of the strangest looking creatures I've ever seen.

She's as ugly as a mud fence, there is nothing unusually attractive about her
She's so ugly she's cute?
Nope, not this one

 

[IvanKaramazov]

I just can't understand being attracted to Ellison. She was with another boyfriend when she got raided, according to testimony. She's one of the strangest looking creatures I've ever seen.

She was great in Lord of the Rings.

 

[General Malaise]

I just can't understand being attracted to Ellison. She was with another boyfriend when she got raided, according to testimony. She's one of the strangest looking creatures I've ever seen.

She's as ugly as a mud fence, there is nothing unusually attractive about her
She's so ugly she's cute?
Nope, not this one

No, it's just bizarre to me how she's some sort of sex pot in the nerd culture of crypto trading. I mean, most of the bad guys or Bond villains have pretty girls as their side-kicks. These dorks have Beaker from the Muppets. She looks like she smells like Accutane and Athletes' Foot.

 

[General Malaise]

I just can't understand being attracted to Ellison. She was with another boyfriend when she got raided, according to testimony. She's one of the strangest looking creatures I've ever seen.

She was great in Lord of the Rings.

Also outstanding as one of the Maharelle Sisters.

 

[ConstruxBoy]

I just can't understand being attracted to Ellison. She was with another boyfriend when she got raided, according to testimony. She's one of the strangest looking creatures I've ever seen.

She was great in Lord of the Rings.

Soon to be appearing in Orange is the New Black.

 

[Sand]

I just can't understand being attracted to Ellison. She was with another boyfriend when she got raided, according to testimony. She's one of the strangest looking creatures I've ever seen.

She's as ugly as a mud fence, there is nothing unusually attractive about her
She's so ugly she's cute?
Nope, not this one

No, it's just bizarre to me how she's some sort of sex pot in the nerd culture of crypto trading. I mean, most of the bad guys or Bond villains have pretty girls as their side-kicks. These dorks have Beaker from the Muppets. She looks like she smells like Accutane and Athletes' Foot.

This seems relevant.

https://twitter.com/DogecoinCuban/status/1711917146068922651?t=2Cez2p4L5cu1VEgCDXietQ&s=19

 

[massraider]

Everything to Know About Sam Bankman-Fried’s Second Week in Court

CoinDesk combed through trial documents, transcripts and reports for highlights about Caroline Ellison’s testimony, updates on FTX’s $400 million hack and more.

www.coindesk.com

CoinDesk has combed through recent reporting, court documents and transcripts to find the biggest highlights of the trial this week, including on how exchange token FTT was used to mislead investors, recent revelations about the $400 million attack of FTX and the most damning allegations so far.

• Sam Bankman-Fried considered shutting down his hedge fund Alameda Research in mid-2022 due to concerns over its “nefarious trading activity” and over-leveraged position on the nominally separate exchange, FTX, according to an unpublished blog post introduced in SBF’s trial.
• On Tuesday, former Alameda CEO Caroline Ellison testified the fund knowingly manipulated its balance sheet at SBF’s direction to look “less risky to investors.” The 28-year-old Ellison also said Alameda effectively stole billions of dollars from FTX customers to fund doomed investments and buy influence with politicians.
• SBF’s defense attorneys have argued Ellison, a former romantic partner of the defendant, was a negligent manager of Alameda who ignored instructions from Bankman-Fried to “hedge,” contributing to the businesses’ collapse. The suggested strategy allegedly involved buying S&P 500 options, which SBF (largely erroneously) believed was “uncorrelated” with the crypto market.
• On the stand Wednesday, Ellison revealed SBF was in talks with Saudi Prince Mohammed Bin Salman about backstopping FTX losses before it declared bankruptcy. SBF, allegedly, was regularly briefed on the amount of money Alameda had drawn against FTX customer accounts.
• In an attempt to recover $1 billion in frozen funds on Huobi and OKX exchanges, which were locked up in a money laundering investigation in China, Ellison testified Alameda had attempted to bribe Chinese government officials into releasing the capital. The claim was stricken from the record.
• Ellison also said Alameda paid Thai prostitutes to open accounts on those exchanges so they can run trading strategies meant to slowly drain the locked funds, which represented a significant percentage of the hedge fund’s assets at the time.
• Ellison’s infamous “Things Sam is freaking out about” list was introduced as evidence, a Google Doc she updated “often” detailing her on-again-off-again boyfriend’s growing anxieties. Included on the list were “bad press” coverage and SBF’s scheme to sic regulators on rival Binance, on the belief that FTX would absorb Binance’s customers, which would help fill in its missing $8 billion.
• SBF is accused of cultivating “a culture of secrecy” among higher-ups. This included using encrypted messaging app Signal (and setting messages to delete within a week), and preferably holding in-person meetings. Execs also used “coded” language — like referring to “our Korean friend” to refer to the alleged “backdoor” used to siphon funds from FTX.
• SBF has argued this behavior was recommended by FTX’s hired counsel, in particular law firm Sullivan & Cromwell. Several FTX executives began saving messages during the exchange’s liquidity crisis in November that led to the firm filing for bankruptcy protections.

 

[culdeus]

Actually floored Boyle didn't do a video on Ellison this week.

 

[massraider]

SBF himself will be testifying the next two days, He'll be up there, vibrating in the witness box.

 

[massraider]

Actually floored Boyle didn't do a video on Ellison this week.

I just discovered him, he's funny.

 

[Encyclopedia Brown]

SBF himself will be testifying the next two days, He'll be up there, vibrating in the witness box.

Every sentence this guy speaks usually begins with "So...um, like you know...."

The court stenographer should program that into her hotkeys.

 

[fatness]

I just can't understand being attracted to Ellison. She was with another boyfriend when she got raided, according to testimony. She's one of the strangest looking creatures I've ever seen.

You couldn't draw up a more perfect caricature of a nerd.

That's what's attractive. She knows things.

 

[drummer]

Here is a great YouTube cast with Ben McKenzie - yeah that guy who starred on "The OC" as Ryan Atwood - talking about his book "Cryptocurrency: Casino Capitalism and the Golden Age of Fraud" as well as crypto overall (and some quips about The OC) with Tim Miller and Jonathan V. Last of The Bulwark. McKenzie is sharp, very impressive and intelligent. It's worth the 54 minutes of your time:

Is Crypto a Scam? (w/ Ben McKenzie) | The Next Level

Ben McKenzie (The O.C., Gotham) joins Tim and JVL to talk his new book, "Easy Money: Cryptocurrency, Casino Capitalism, and the Golden Age of Fraud." They di...

www.youtube.com