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SumChristianus
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FTX Crypto Business Crash & Ponzi Scheme?

Sat Nov 12, 2022 11:58 pm

So I know next to nothing about crypto, but this much-reported business crash this week and today's hack of most of the remaining funds seems like a big deal:

https://www.wsj.com/articles/sec-invest ... 1668020379
https://www.marketwatch.com/story/tom-b ... 1668205535
https://www.reuters.com/markets/currenc ... 022-11-12/
(plus thousands of other articles online)

I gather from the little I read that Sam Bankman-Fried is accused running some kind of banking platform for crypto assets (although I don't understand yet what crypto even is) and was either stealing or mismanaging or misaccounting them or hard cash funds to prop up another company owned by a friend. Also something having to do with being unsustainable and a Ponzi scheme from the get-go... But I'm confused by it all.

Anyone have a quick summary of how FTX worked and what's going on?

If its true that billions of dollars were stolen then this seems kind of like a big deal (and worryingly to me like an Enron-esque prelude to another recession)
 
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NIKV69
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Re: FTX Crypto Business Crash & Ponzi Scheme?

Sun Nov 13, 2022 12:29 am

The DNC's 2nd largest donor goes poof! I thought we were not trying to take the money from big corporations? Anyway Crypto is ripe for this crap.
 
bennett123
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Re: FTX Crypto Business Crash & Ponzi Scheme?

Sun Nov 13, 2022 1:27 am

My first rule of investment.

Do you understand what the business does.

Second rule.

Why invest in a business where no one is in control.
 
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Aesma
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Re: FTX Crypto Business Crash & Ponzi Scheme?

Sun Nov 13, 2022 2:25 am

If you don't understand crypto you're right to not be into it.

FTX was sketchy but spent a lot on ads, sponsoring, donations to both US political sides, and thanks to that appeared legit to millions.

It was a crypto exchange like there are a dime a dozens, and most of them are also sketchy. The first rule of crypto is "not your keys, not your coins".

Bitcoin was invented to bypass banks. These crypto exchanges act like banks, and thus are not really in the crypto spirit. They're needed though, as onramps and offramps, to go from fiat money to crypto (although there are crypto only exchanges, in that case you need to find another way to get coins first) and back. What is prudent is to never keep all or most of your crypto on exchanges. Do what you have to do on them, but keep most of your crypto on a wallet you control, meaning one you own the keys to.

Exchanges get hacked or fold regularly, people should know this and act accordingly, but millions don't.
 
Newark727
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Re: FTX Crypto Business Crash & Ponzi Scheme?

Sun Nov 13, 2022 3:46 am

Crypto is a scam top to bottom. All the millions in advertising dollars meant was that it needed some new marks.
 
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zkojq
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Re: FTX Crypto Business Crash & Ponzi Scheme?

Sun Nov 13, 2022 8:35 am

Not looking good:

New York, Nov 11 (Reuters) - At least $1 billion of customer funds have vanished from collapsed crypto exchange FTX, according to two people familiar with the matter.

The exchange's founder Sam Bankman-Fried secretly transferred $10 billion of customer funds from FTX to Bankman-Fried's trading company Alameda Research, the people told Reuters.


In text messages to Reuters, Bankman-Fried said he "disagreed with the characterization" of the $10 billion transfer.

"We didn't secretly transfer," he said. "We had confusing internal labeling and misread it," he added, without elaborating.


https://www.reuters.com/markets/currenc ... reddit.com

Honestly, I couldn't be happier. Have become so tired of all the people trying to convince me that crypto isn't a scam and that cryptos and NFTs do somehow have some tangible value. I love that all the crypto-bros have suddenly gone quiet about it. May their silence be eternal.

Crypto Confidence Soars After CEO Defrauds Customers Just Like Real Bank https://bit.ly/3UyxO7u


https://twitter.com/TheOnion/status/1591151312808427520


Also, I guess Larry David was right after all.

https://youtu.be/BH5-rSxilxo?t=130

Newark727 wrote:
Crypto is a scam top to bottom. All the millions in advertising dollars meant was that it needed some new marks.


:checkmark: It really is that simple.
 
leader1
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Re: FTX Crypto Business Crash & Ponzi Scheme?

Sun Nov 13, 2022 2:44 pm

NIKV69 wrote:
The DNC's 2nd largest donor goes poof! I thought we were not trying to take the money from big corporations? Anyway Crypto is ripe for this crap.


Lol. What a joke. Ryan Salame, SBF’s partner, was one of the biggest Republican donors. A bit of research goes a long way.

https://www.businessinsider.com/ryan-sa ... nes-2022-9
 
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NIKV69
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Re: FTX Crypto Business Crash & Ponzi Scheme?

Sun Nov 13, 2022 3:12 pm

bennett123 wrote:
My first rule of investment.

Do you understand what the business does.

Second rule.

Why invest in a business where no one is in control.


Or where the currency doesn't exist.

Newark727 wrote:
Crypto is a scam top to bottom. All the millions in advertising dollars meant was that it needed some new marks.


Crypto has potential but in it's current state with little to no regulation what do you expect?
 
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readytotaxi
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Re: FTX Crypto Business Crash & Ponzi Scheme?

Sun Nov 13, 2022 3:37 pm

Greed has its own reward.
 
ReverseFlow
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Re: FTX Crypto Business Crash & Ponzi Scheme?

Sun Nov 13, 2022 6:08 pm

I believe in another thread someone described NFTs as such:

" Imagine being married but every guy in the world is allowed to have sex with your wife. Yet you have the marriage certificate...that's the NFT."
 
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Tugger
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Re: FTX Crypto Business Crash & Ponzi Scheme?

Sun Nov 13, 2022 6:20 pm

The problem is the people that view crypto as an investment and enter it expecting gain money. And most have used it as such, mining Bitcoin and Ethereum (classic) and even Dogecoin. The idea being they are creating something that can't be duplicated and will make them money in the future as others use the coin as currency. But the run up in valuation has become the goal, not the currency. And crypto fails on this.

The entire purpose of currency, the most important thing it must have in order to be functional and usable by people is STABILITY. Wild swings in valuation make it a bad currency. Increasing valuation makes it an unwise currency for people to use as you go forward as the higher value traps people who don't have it outside of it's only current use and benefit (a pyramid-scheme investment). It's a cute idea but the idea that at a certain point one can no longer be mined is where it fails. The only people that have and will benefit are those that "got in early" (the top of the pyramid) and have effectively taken money from later entrants.

Digital currency will come and will be used around the world, but it won't use the current crypto-coins. It will be a digitization connected to and with the blessing of a current existing currency.

Tugg
 
QF7
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Re: FTX Crypto Business Crash & Ponzi Scheme?

Sun Nov 13, 2022 7:03 pm

Tugger wrote:
Digital currency will come and will be used around the world, but it won't use the current crypto-coins. It will be a digitization connected to and with the blessing of a current existing currency.

The vast majority of current existing currency in the world already exists only in electronic form. Only around an estimated 8% exists in physical form of coins and banknotes.

Every time you swipe or tap a credit card you’re using digitized currency. The trick is, it is regulated currency issued and controlled by sovereign governments, not a free-for-all run by a bunch of cowboys.

QF7
 
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SumChristianus
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Re: FTX Crypto Business Crash & Ponzi Scheme?

Sun Nov 13, 2022 7:39 pm

leader1 wrote:
NIKV69 wrote:
The DNC's 2nd largest donor goes poof! I thought we were not trying to take the money from big corporations? Anyway Crypto is ripe for this crap.


Lol. What a joke. Ryan Salame, SBF’s partner, was one of the biggest Republican donors. A bit of research goes a long way.

https://www.businessinsider.com/ryan-sa ... nes-2022-9


Pay-to-Play...

Not surprised. Both parties are unfortunately practically a thoroughly corrupt and aligned "uniparty" and are often far more friendly to each other behind the scenes than they are when they "debate" and "grandstand" for a few months in public every two years.

The idealists are either running as independents or avoiding politics (and big business/banking altogether).

QF7 wrote:
not a free-for-all run by a bunch of cowboys.


Why did people ever think FTX was a safe and good idea, let alone next big thing, anyway? That is, except for a pretty incredible Super Bowl marketing campaign: https://www.youtube.com/watch?v=BH5-rSxilxo
 
ObadiahPlainman
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Re: FTX Crypto Business Crash & Ponzi Scheme?

Sun Nov 13, 2022 7:47 pm

leader1 wrote:
NIKV69 wrote:
The DNC's 2nd largest donor goes poof! I thought we were not trying to take the money from big corporations? Anyway Crypto is ripe for this crap.


Lol. What a joke. Ryan Salame, SBF’s partner, was one of the biggest Republican donors. A bit of research goes a long way.

https://www.businessinsider.com/ryan-sa ... nes-2022-9


FTX donated $201k to R and $37MM to D.
 
Vintage
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Re: FTX Crypto Business Crash & Ponzi Scheme?

Sun Nov 13, 2022 7:52 pm

QF7 wrote:
The vast majority of current existing currency in the world already exists only in electronic form. Only around an estimated 8% exists in physical form of coins and banknotes.

Every time you swipe or tap a credit card you’re using digitized currency. The trick is, it is regulated currency issued and controlled by sovereign governments, not a free-for-all run by a bunch of cowboys.QF7
"Regulated" currency is backed by gold or silver or a nation. Crypto is backed by nothing, or a collective agreement, if you think that's something.
 
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Aesma
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Re: FTX Crypto Business Crash & Ponzi Scheme?

Sun Nov 13, 2022 11:32 pm

ObadiahPlainman wrote:
leader1 wrote:
NIKV69 wrote:
The DNC's 2nd largest donor goes poof! I thought we were not trying to take the money from big corporations? Anyway Crypto is ripe for this crap.


Lol. What a joke. Ryan Salame, SBF’s partner, was one of the biggest Republican donors. A bit of research goes a long way.

https://www.businessinsider.com/ryan-sa ... nes-2022-9


FTX donated $201k to R and $37MM to D.


No. Read the article.
 
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Aesma
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Re: FTX Crypto Business Crash & Ponzi Scheme?

Sun Nov 13, 2022 11:34 pm

Vintage wrote:
QF7 wrote:
The vast majority of current existing currency in the world already exists only in electronic form. Only around an estimated 8% exists in physical form of coins and banknotes.

Every time you swipe or tap a credit card you’re using digitized currency. The trick is, it is regulated currency issued and controlled by sovereign governments, not a free-for-all run by a bunch of cowboys.QF7
"Regulated" currency is backed by gold or silver or a nation. Crypto is backed by nothing, or a collective agreement, if you think that's something.


The gold and silver don't matter. The ability to repay debt is all that matters. And not printing the money like mad. The latter one is the current issue (since 2008) that has given rise to Bitcoin, a currency you can't print like mad. It's not regulated, it's not controlled, yet it's doing exactly what it's supposed to do. Meanwhile central banks are losing control of their fiat currencies.
 
Vintage
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Re: FTX Crypto Business Crash & Ponzi Scheme?

Sun Nov 13, 2022 11:53 pm

Aesma wrote:
The ability to repay debt is all that matters. And not printing the money like mad. The latter one is the current issue (since 2008) that has given rise to Bitcoin, a currency you can't print like mad. It's not regulated, it's not controlled, yet it's doing exactly what it's supposed to do. Meanwhile central banks are losing control of their fiat currencies.
We have a difference of opinion, IMO the reason for Bitcoin is that computers became available to everyone and someone wrote a program creating an unbreakable system allowing Bitcoin to be deployed.

Sure you can 'print' bitcoin like mad, all you have to do is introduce another Bitcoin market with plenty of advertising and endorsements, and voila! another trillion dollars worth of bitcoin is available for purchase.

If one believes that a country has been printing too much of its money, they have the opportunity of divesting themselves of that currency, and if enough people do that, guess what happens.
 
GalaxyFlyer
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Re: FTX Crypto Business Crash & Ponzi Scheme?

Mon Nov 14, 2022 1:06 am

leader1 wrote:
NIKV69 wrote:
The DNC's 2nd largest donor goes poof! I thought we were not trying to take the money from big corporations? Anyway Crypto is ripe for this crap.


Lol. What a joke. Ryan Salame, SBF’s partner, was one of the biggest Republican donors. A bit of research goes a long way.

https://www.businessinsider.com/ryan-sa ... nes-2022-9


Once again proving campaign money is protection racket by politicians and their parasites the regulators. Everyone preaches regulation by the Feds and every time they fail MISERABLY.

The US can stand a lot of things but not 2% money
 
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Aesma
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Re: FTX Crypto Business Crash & Ponzi Scheme?

Mon Nov 14, 2022 2:35 am

The first regulation needed in the US is to get private money out of politics.

Vintage : what you describe isn't Bitcoin. A feature of Bitcoin is the public blockchain, where every transaction is stored, and every coin is accounted for. It's true that you can create all kinds of scams, but if people do what they should, that is get Bitcoins (or other crypto assets) on their own wallets as soon as they acquire them, then these scams would last a few days before collapsing.
 
bhill
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Re: FTX Crypto Business Crash & Ponzi Scheme?

Tue Nov 15, 2022 10:41 pm

Fine, let it crash and burn. Folks wanted it unregulated...there ya go...
 
LCDFlight
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Re: FTX Crypto Business Crash & Ponzi Scheme?

Tue Nov 15, 2022 11:36 pm

Aesma wrote:
If you don't understand crypto you're right to not be into it.

FTX was sketchy but spent a lot on ads, sponsoring, donations to both US political sides, and thanks to that appeared legit to millions.

It was a crypto exchange like there are a dime a dozens, and most of them are also sketchy. The first rule of crypto is "not your keys, not your coins".

Bitcoin was invented to bypass banks. These crypto exchanges act like banks, and thus are not really in the crypto spirit. They're needed though, as onramps and offramps, to go from fiat money to crypto (although there are crypto only exchanges, in that case you need to find another way to get coins first) and back. What is prudent is to never keep all or most of your crypto on exchanges. Do what you have to do on them, but keep most of your crypto on a wallet you control, meaning one you own the keys to.

Exchanges get hacked or fold regularly, people should know this and act accordingly, but millions don't.


The government has banking regulations for good reason. People who engage in illegal banking activities belong in prison.

This guy just did a Madoff.
 
MohawkWeekend
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Re: FTX Crypto Business Crash & Ponzi Scheme?

Wed Nov 16, 2022 12:27 am

yeah it is.

"FTX crash is eerily similar to the Bernie Madoff scandal, ex-regulator Sheila Bair says". https://www.cnn.com/2022/11/15/business ... index.html

The more stories you read about him and his cohorts - Bair is spot on in the article. All those investors and "'stars" who bought the hype. Greed is an ugly thing.

I am surprised this hasn't had a contagion effect. Even today - crypto was up in value. Crazy. Those old guys Buffett and Munger were right again.
 
StarAC17
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Re: FTX Crypto Business Crash & Ponzi Scheme?

Wed Nov 16, 2022 2:53 pm

Let them fail and it will be regulated when it comes back, if it does.

I see crypto as a means for a few cowboys to get rich and skirt regulations. Now there is no consumer protection for anyone who got screwed over. Elon Musk can run his mouth and change the markets in a matter of seconds with no repercussions. He does that with Tesla and he is rightfully dragged in front of the SEC.

This has happened many times in the past which is why there is securities and trading laws. The fateful regulation is in place because someone tried to manipulate a currency or some other investment.

All regulations come about because of unforeseen accidents or people trying to manipulate the system. This being an aviation website all the regulations that govern air travel are in place because of accidents or close calls of the past. The same applies to the banking and trading industry. Your typical financial advisor has tons of regulations and compliance behind the scenes to ensure that they aren't screwing with your money.

What needs to improve is that regulations have to be transparent and easy to understand and not mired in bureaucracy.
 
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zkojq
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Re: FTX Crypto Business Crash & Ponzi Scheme?

Wed Nov 16, 2022 2:55 pm

StarAC17 wrote:
I see crypto as a means for a few cowboys to get rich and skirt regulations.


Don't forget Money Laundering!
 
meecrob
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Re: FTX Crypto Business Crash & Ponzi Scheme?

Wed Nov 16, 2022 5:16 pm

StarAC17 wrote:
Let them fail and it will be regulated when it comes back, if it does.

I see crypto as a means for a few cowboys to get rich and skirt regulations. Now there is no consumer protection for anyone who got screwed over. Elon Musk can run his mouth and change the markets in a matter of seconds with no repercussions. He does that with Tesla and he is rightfully dragged in front of the SEC.

This has happened many times in the past which is why there is securities and trading laws. The fateful regulation is in place because someone tried to manipulate a currency or some other investment.

All regulations come about because of unforeseen accidents or people trying to manipulate the system. This being an aviation website all the regulations that govern air travel are in place because of accidents or close calls of the past. The same applies to the banking and trading industry. Your typical financial advisor has tons of regulations and compliance behind the scenes to ensure that they aren't screwing with your money.

What needs to improve is that regulations have to be transparent and easy to understand and not mired in bureaucracy.


The problem is that even with all these regulations, mainstream banking is pretty much set up to make a small minority obscenely rich, hence the popularity of crypto to avoid using "the system." Where I completely agree with you though, is that the answer is not LESS regulations.
 
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NIKV69
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Re: FTX Crypto Business Crash & Ponzi Scheme?

Fri Nov 18, 2022 1:52 pm

LCDFlight wrote:

The government has banking regulations for good reason. People who engage in illegal banking activities belong in prison.

This guy just did a Madoff.


This was very Elizabeth Holmes like, no pedigree, no resume, nothing. In fact people in the money business asked him where he made his money and he couldn't answer. Should have been a red flag.
 
StarAC17
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Re: FTX Crypto Business Crash & Ponzi Scheme?

Fri Nov 18, 2022 2:34 pm

LCDFlight wrote:
Aesma wrote:
If you don't understand crypto you're right to not be into it.

FTX was sketchy but spent a lot on ads, sponsoring, donations to both US political sides, and thanks to that appeared legit to millions.

It was a crypto exchange like there are a dime a dozens, and most of them are also sketchy. The first rule of crypto is "not your keys, not your coins".

Bitcoin was invented to bypass banks. These crypto exchanges act like banks, and thus are not really in the crypto spirit. They're needed though, as onramps and offramps, to go from fiat money to crypto (although there are crypto only exchanges, in that case you need to find another way to get coins first) and back. What is prudent is to never keep all or most of your crypto on exchanges. Do what you have to do on them, but keep most of your crypto on a wallet you control, meaning one you own the keys to.

Exchanges get hacked or fold regularly, people should know this and act accordingly, but millions don't.


The government has banking regulations for good reason. People who engage in illegal banking activities belong in prison.

This guy just did a Madoff.


Nowhere on this scale but there was a 23 year old in the Toronto area who promised absolutely insane returns (10-20% bi-weekly compounded). He is in the middle of a $40 million bankruptcy suit and trying to avoid jail.

https://www.cbc.ca/news/canada/toronto/ ... -1.6629423

https://www.cbc.ca/news/canada/toronto/ ... -1.6583982

This guy had booked appointments with me numerous times to try to get into the private banking and wealth management divisions of the bank I work at (I have changed roles since). He also allegedly opened account at other banks and the one I work at he did meet with a financial planner but when due diligence was done he was told to be de-marketed. Rumours are that he used to ball around the Toronto area in a lime green McLaren.

I know there are exceptions to this rule but when someone who isn't born into money or doesn't have an immense talent (actor, musician, athlete etc) hits it big before the age of 25 and even 30 I grow suspicions of what is going on. Usually people become self-made millionaire in their 40's and 50's.
 
StarAC17
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Re: FTX Crypto Business Crash & Ponzi Scheme?

Fri Nov 18, 2022 2:36 pm

meecrob wrote:
What needs to improve is that regulations have to be transparent and easy to understand and not mired in bureaucracy.
The problem is that even with all these regulations, mainstream banking is pretty much set up to make a small minority obscenely rich, hence the popularity of crypto to avoid using "the system." Where I completely agree with you though, is that the answer is not LESS regulations.


I come from Canada which has some pretty stringent banking regulations, they are among the strongest on the planet. How does banking regulations make a small minority filthy rich?
 
LCDFlight
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Re: FTX Crypto Business Crash & Ponzi Scheme?

Fri Nov 18, 2022 4:14 pm

StarAC17 wrote:
Let them fail and it will be regulated when it comes back, if it does.

I see crypto as a means for a few cowboys to get rich and skirt regulations. Now there is no consumer protection for anyone who got screwed over. Elon Musk can run his mouth and change the markets in a matter of seconds with no repercussions. He does that with Tesla and he is rightfully dragged in front of the SEC.

This has happened many times in the past which is why there is securities and trading laws. The fateful regulation is in place because someone tried to manipulate a currency or some other investment.

All regulations come about because of unforeseen accidents or people trying to manipulate the system. This being an aviation website all the regulations that govern air travel are in place because of accidents or close calls of the past. The same applies to the banking and trading industry. Your typical financial advisor has tons of regulations and compliance behind the scenes to ensure that they aren't screwing with your money.

What needs to improve is that regulations have to be transparent and easy to understand and not mired in bureaucracy.


Exactly, and this again is how con men operate. They use hype and the trappings of legitimacy to sell to people who don’t know what is going on. Madoff posed as a “Wall Street mastermind,” which he was not. Donald Trump posed as a “real estate genius and tasteful gentleman,” which he is not. And this kid posed as a crypto “altruistic billionaire crypto god,” not because it was true, but because that is the very most prestigious lie he could think up in order to steal money from honest people who work.

You know this kid (and most crypto boys) don’t have any credibility, because YOU know about the actual financial world. They were preying on people who do not. This is all con man stuff. This was every bit mechanically what Madoff did, updated with fake altruism for TikTok clout, which is similar to why Madoff went sailing. For clout, to create an image. Con men.
 
StarAC17
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Re: FTX Crypto Business Crash & Ponzi Scheme?

Fri Nov 18, 2022 4:25 pm

LCDFlight wrote:

Exactly, and this again is how con men operate. They use hype and the trappings of legitimacy to sell to people who don’t know what is going on. Madoff posed as a “Wall Street mastermind,” which he was not. Donald Trump posed as a “real estate genius and tasteful gentleman,” which he is not. And this kid posed as a crypto “altruistic billionaire crypto god,” not because it was true, but because that is the very most prestigious lie he could think up in order to steal money from honest people who work.



I don't know how coercive Madoff was but I would look at Donald Trump and after two minutes I would be able to tell how full of it he is.

I wouldn't trust any crypto bro because I am naturally cynical and as I posted previously unless you are supremely talented I am suspect of anyone who went from rags to riches at a really young age or quickly.
 
meecrob
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Re: FTX Crypto Business Crash & Ponzi Scheme?

Fri Nov 18, 2022 11:18 pm

StarAC17 wrote:
meecrob wrote:
What needs to improve is that regulations have to be transparent and easy to understand and not mired in bureaucracy.
The problem is that even with all these regulations, mainstream banking is pretty much set up to make a small minority obscenely rich, hence the popularity of crypto to avoid using "the system." Where I completely agree with you though, is that the answer is not LESS regulations.


I come from Canada which has some pretty stringent banking regulations, they are among the strongest on the planet. How does banking regulations make a small minority filthy rich?


Our system comparatively has more regulations, but we still got hit in 2008, Canadians all over the place lost trust in banks and bought into bitcoin. Just because other countries got hit harder does not mean we deserve a pat on the back.
Banking regulations do not make bankers filthy rich. I was referring to the fact that even with regulations, events like the sub-prime mortgage crisis occur with alarming frequency when compared to an average human lifespan, and that is because bankers know how to step around the regulations. Or simply lobby to have them removed. Many people have lost faith in traditional banks. It seems to me these crypto scammers are preying on financially illiterate people who just want to avoid traditional banks. If we can improve trust in banks (via regulations, etc.), we can remove some of the pressure pushing people towards crypto and thus make running a crypto scam less lucrative. Of course, I support regulations on crypto, I just think that placing all the blame on them and letting banks off the hook is short sighted. Crypto is the response to traditional banking, not something that was birthed in a vacuum.
 
johns624
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Re: FTX Crypto Business Crash & Ponzi Scheme?

Sat Nov 19, 2022 12:06 am

I'm of two minds on these schemes, whether crypto, Madoff, Ponzi or the others. While these conmen stole peoples' money, the people who invested were greedy. Any rational thinking person knows that those kinds of returns can't be real.
 
ThePointblank
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Re: FTX Crypto Business Crash & Ponzi Scheme?

Sat Nov 19, 2022 12:32 am

Recommend people read the bankruptcy filings from the new CEO:

https://pacer-documents.s3.amazonaws.co ... 648197.pdf

The new CEO is an insolvency specialist, and previously was the CEO of Enron during its bankruptcy filings. His declarations in the filing is quite shocking:

I have over 40 years of legal and restructuring experience. I have been the Chief Restructuring Officer or Chief Executive Officer in several of the largest corporate failures in history. I have supervised situations involving allegations of criminal activity and malfeasance (Enron). I have supervised situations involving novel financial structures (Enron and Residential Capital) and cross-border asset recovery and maximization (Nortel and Overseas Shipholding). Nearly every situation in which I have been involved has been characterized by defects of some sort in internal controls, regulatory compliance, human resources and systems integrity.

Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here. From compromised systems integrity and faulty regulatory oversight abroad, to the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals, this situation is unprecedented.


I have been provided with an unaudited consolidated balance sheet for the WRS Silo as of September 30, 2022, which is the latest balance sheet available. The balance sheet shows $1.36 billion in total assets as of that date. However, because this balance sheet was produced while the Debtors were controlled by Mr. Bankman-Fried, I do not have confidence in it, and the information therein may not be correct as of the date stated.



The FTX Group did not maintain centralized control of its cash. Cash management procedural failures included the absence of an accurate list of bank accounts and account signatories, as well as insufficient attention to the creditworthiness of banking partners around the world. Under my direction, the Debtors are establishing a centralized cash management system with proper controls and reporting mechanisms.


Because of historical cash management failures, the Debtors do not yet know the exact amount of cash that the FTX Group held as of the Petition Date. The Debtors are working with Alvarez & Marsal to verify all cash positions.


The FTX Group received audit opinions on consolidated financial statements for two of the Silos – the WRS Silo and the Dotcom Silo – for the period ended December 31, 2021. The audit firm for the WRS Silo, Armanino LLP, was a firm with which I am professionally familiar. The audit firm for the Dotcom Silo was Prager Metis, a firm with which I am not familiar and whose website indicates that they are the “first-ever CPA firm to officially open its Metaverse headquarters in the metaverse platform Decentraland.”

I have substantial concerns as to the information presented in these audited financial statements, especially with respect to the Dotcom Silo. As a practical matter, I do not believe it appropriate for stakeholders or the Court to rely on the audited financial statements as a reliable indication of the financial circumstances of these Silos.

The Debtors have not yet been able to locate any audited financial statements with respect to the Alameda Silo or the Ventures Silo.

The Debtors are locating and securing all available financial records but expect it will be some time before reliable historical financial statements can be prepared for the FTX Group with which I am comfortable as Chief Executive Officer. The Debtors do not have an accounting department and outsource this function.


The FTX Group’s approach to human resources combined employees of various entities and outside contractors, with unclear records and lines of responsibility. At this time, the Debtors have been unable to prepare a complete list of who worked for the FTX Group as of the Petition Date, or the terms of their employment. Repeated attempts to locate certain presumed employees to confirm their status have been unsuccessful to date.


The Debtors did not have the type of disbursement controls that I believe are appropriate for a business enterprise. For example, employees of the FTX Group submitted payment requests through an on-line ‘chat’ platform where a disparate group of supervisors approved disbursements by responding with personalized emojis.

In the Bahamas, I understand that corporate funds of the FTX Group were used to purchase homes and other personal items for employees and advisors. I understand that there does not appear to be documentation for certain of these transactions as loans, and that certain real estate was recorded in the personal name of these employees and advisors on the records of the Bahamas.

The Debtors now are implementing a centralized disbursement approval process that reports to me as Chief Executive Officer.


The FTX Group did not keep appropriate books and records, or security controls, with respect to its digital assets. Mr. Bankman-Fried and Mr. Wang controlled access to digital assets of the main businesses in the FTX Group (with the exception of LedgerX, regulated by the CFTC, and certain other regulated and/or licensed subsidiaries). Unacceptable management practices included the use of an unsecured group email account as the root user to access confidential private keys and critically sensitive data for the FTX Group companies around the world, the absence of daily reconciliation of positions on the blockchain, the use of software to conceal the misuse of customer funds, the secret exemption of Alameda from certain aspects of FTX.com’s auto-liquidation protocol, and the absence of independent governance as between Alameda (owned 90% by Mr. Bankman-Fried and 10% by Mr. Wang) and the Dotcom Silo (in which third parties had invested).


One of the most pervasive failures of the FTX.com business in particular is the absence of lasting records of decision-making. Mr. Bankman-Fried often communicated by using applications that were set to auto-delete after a short period of time, and encouraged employees to do the same.



​Finally, and critically, the Debtors have made clear to employees and the public that Mr. Bankman-Fried is not employed by the Debtors and does not speak for them. Mr. Bankman-Fried, currently in the Bahamas, continues to make erratic and misleading public statements. Mr. Bankman-Fried, whose connections and financial holdings in the Bahamas remain unclear to me, recently stated to a reporter on Twitter: “F*** regulators they make everything worse” and suggested the next step for him was to “win a jurisdictional battle vs. Delaware”.


And this is the guy that cleaned up Enron, and he says this is the worst case of corporate incompetence and malfeasance he's ever seen in his career.
 
MohawkWeekend
Posts: 2238
Joined: Tue Jan 08, 2019 2:06 pm

Re: FTX Crypto Business Crash & Ponzi Scheme?

Sat Nov 19, 2022 1:03 am

Today Elizabeth Holmes got a sentence of 11 years in prison. And she's a new mom who is pregnant with baby #2. This guy is in a world of hurt.

It is amazing how all these smart people get bamboozled by these time and time again. Just watched the story on the Nikola truck scam. Along with VC and Wall Street firms, that dude fooled Siemens, General Motors and a whole bunch of billion dollar trucking companies who placed orders for a truck that didn't exist. The founder is facing 25 years in prison. At one time Nikola was worth more than Ford.
 
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Aesma
Posts: 16187
Joined: Sat Nov 14, 2009 6:14 am

Re: FTX Crypto Business Crash & Ponzi Scheme?

Sat Nov 19, 2022 1:28 am

Her and Nikola are bad but it's more something that started legit, their product/research didn't work and instead of folding (and probably keeping a few millions) they got greedy with all the VC cash and went with it.

FTX's beginnings seem sketchy, and their practices show that at no point were they trying to do things the right way.
 
GDB
Posts: 16573
Joined: Wed May 23, 2001 6:25 pm

Re: FTX Crypto Business Crash & Ponzi Scheme?

Sat Nov 19, 2022 9:31 am

johns624 wrote:
I'm of two minds on these schemes, whether crypto, Madoff, Ponzi or the others. While these conmen stole peoples' money, the people who invested were greedy. Any rational thinking person knows that those kinds of returns can't be real.


Mostly I would agree, some however just poor or crooked financial advice, usually the non rich and famous.
A mix of the two was apparent when after 2008 Kevin Bacon started appearing in TV adverts here, not for multi nationals either, what was a Hollywood star doing advertising relatively small companies like communication ones?
Turns out his money, pretty much all of it, had been put with Madoff.

He’s admitted he was foolish, never asked for sympathy saying it was a life lesson.
 
MaverickM11
Posts: 19067
Joined: Thu Apr 06, 2000 1:59 pm

Re: FTX Crypto Business Crash & Ponzi Scheme?

Sat Nov 19, 2022 3:59 pm

GalaxyFlyer wrote:
leader1 wrote:
NIKV69 wrote:
The DNC's 2nd largest donor goes poof! I thought we were not trying to take the money from big corporations? Anyway Crypto is ripe for this crap.


Lol. What a joke. Ryan Salame, SBF’s partner, was one of the biggest Republican donors. A bit of research goes a long way.

https://www.businessinsider.com/ryan-sa ... nes-2022-9


Once again proving campaign money is protection racket by politicians and their parasites the regulators. Everyone preaches regulation by the Feds and every time they fail MISERABLY.

The US can stand a lot of things but not 2% money

When has the right ever preached regulation, let alone financial regulation?

StarAC17 wrote:
LCDFlight wrote:

Exactly, and this again is how con men operate. They use hype and the trappings of legitimacy to sell to people who don’t know what is going on. Madoff posed as a “Wall Street mastermind,” which he was not. Donald Trump posed as a “real estate genius and tasteful gentleman,” which he is not. And this kid posed as a crypto “altruistic billionaire crypto god,” not because it was true, but because that is the very most prestigious lie he could think up in order to steal money from honest people who work.



I don't know how coercive Madoff was but I would look at Donald Trump and after two minutes I would be able to tell how full of it he is.

What's so infuriating for all of us who grew up in NY or FL is we've known what a lazy, thinly veiled con man--and not even a good one at that--Trump has been for probably half a century. Madoff, on the other hand, cultivated relationships personally and by word of mouth through the Jewish community, particularly on the golf courses of FL. I honestly knew nothing about him until his scheme blew up, but I know several people who invested with him because of the Jewish connection.
 
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c933103
Posts: 6979
Joined: Wed May 18, 2016 7:23 pm

Re: FTX Crypto Business Crash & Ponzi Scheme?

Sat Nov 19, 2022 4:32 pm

LCDFlight wrote:
Aesma wrote:
If you don't understand crypto you're right to not be into it.

FTX was sketchy but spent a lot on ads, sponsoring, donations to both US political sides, and thanks to that appeared legit to millions.

It was a crypto exchange like there are a dime a dozens, and most of them are also sketchy. The first rule of crypto is "not your keys, not your coins".

Bitcoin was invented to bypass banks. These crypto exchanges act like banks, and thus are not really in the crypto spirit. They're needed though, as onramps and offramps, to go from fiat money to crypto (although there are crypto only exchanges, in that case you need to find another way to get coins first) and back. What is prudent is to never keep all or most of your crypto on exchanges. Do what you have to do on them, but keep most of your crypto on a wallet you control, meaning one you own the keys to.

Exchanges get hacked or fold regularly, people should know this and act accordingly, but millions don't.


The government has banking regulations for good reason. People who engage in illegal banking activities belong in prison.

This guy just did a Madoff.

The entire idea of crypto is to not trust and not rely on what government put out as money, and put out their own money instead.
In reality it mean they are used by people who do not trust government, either because of their ideal, their circumstances and their local government action, or that they are actually doing criminal things not allowed by law. These usecases are also things that are supporting the value of cryptos right now.
But no matter which of these types, I do not understand why one would want to trade and store their crypto onto a third party unverifiable trade platform, which go against the entire demise of not trusting external entities.
 
User avatar
NIKV69
Posts: 15473
Joined: Wed Jan 28, 2004 4:27 am

Re: FTX Crypto Business Crash & Ponzi Scheme?

Sun Nov 20, 2022 6:53 pm

MohawkWeekend wrote:
This guy is in a world of hurt.


Got to catch him first.
 
GalaxyFlyer
Posts: 10347
Joined: Fri Jan 01, 2016 4:44 am

Re: FTX Crypto Business Crash & Ponzi Scheme?

Mon Nov 21, 2022 1:42 am

MaverickM11 wrote:
GalaxyFlyer wrote:
leader1 wrote:

Lol. What a joke. Ryan Salame, SBF’s partner, was one of the biggest Republican donors. A bit of research goes a long way.

https://www.businessinsider.com/ryan-sa ... nes-2022-9


Once again proving campaign money is protection racket by politicians and their parasites the regulators. Everyone preaches regulation by the Feds and every time they fail MISERABLY.

The US can stand a lot of things but not 2% money

When has the right ever preached regulation, let alone financial regulation?

StarAC17 wrote:
LCDFlight wrote:

Exactly, and this again is how con men operate. They use hype and the trappings of legitimacy to sell to people who don’t know what is going on. Madoff posed as a “Wall Street mastermind,” which he was not. Donald Trump posed as a “real estate genius and tasteful gentleman,” which he is not. And this kid posed as a crypto “altruistic billionaire crypto god,” not because it was true, but because that is the very most prestigious lie he could think up in order to steal money from honest people who work.



I don't know how coercive Madoff was but I would look at Donald Trump and after two minutes I would be able to tell how full of it he is.

What's so infuriating for all of us who grew up in NY or FL is we've known what a lazy, thinly veiled con man--and not even a good one at that--Trump has been for probably half a century. Madoff, on the other hand, cultivated relationships personally and by word of mouth through the Jewish community, particularly on the golf courses of FL. I honestly knew nothing about him until his scheme blew up, but I know several people who invested with him because of the Jewish connection.


Pay attention, politicians of EITHER party are given money for protection from government regulation. The administrative state, that is, the Executive branch, promulgates in the Federal Register laws everyday. Campaign money buys protection from regulation or buys access to expenditures regardless of party affiliation. If anyone thinks the government, run by either party, is “on their side”; they’re a fool. Stop giving those 537 idiots money and power.
 
Vintage
Posts: 1003
Joined: Tue Mar 15, 2022 10:48 pm

Re: FTX Crypto Business Crash & Ponzi Scheme?

Mon Nov 21, 2022 1:59 am

GalaxyFlyer wrote:
Pay attention, politicians of EITHER party are given money for protection from government regulation. The administrative state, that is, the Executive branch, promulgates in the Federal Register laws everyday. Campaign money buys protection from regulation or buys access to expenditures regardless of party affiliation. If anyone thinks the government, run by either party, is “on their side”; they’re a fool. Stop giving those 537 idiots money and power.
You're presenting the exception as if it were the rule. Sure such things do happen, but comparable things happen in private business too.

You leave the impression that you would prefer total anarchy. Is this true?
 
Newark727
Posts: 3230
Joined: Tue Dec 29, 2009 6:42 pm

Re: FTX Crypto Business Crash & Ponzi Scheme?

Mon Nov 21, 2022 3:06 am

GalaxyFlyer wrote:
Pay attention, politicians of EITHER party are given money for protection from government regulation. The administrative state, that is, the Executive branch, promulgates in the Federal Register laws everyday. Campaign money buys protection from regulation or buys access to expenditures regardless of party affiliation. If anyone thinks the government, run by either party, is “on their side”; they’re a fool. Stop giving those 537 idiots money and power.


Okay. Who steps into the power vacuum and how is it not the same people buying protection and access to expenditures right now?
 
Vintage
Posts: 1003
Joined: Tue Mar 15, 2022 10:48 pm

Re: FTX Crypto Business Crash & Ponzi Scheme?

Mon Nov 21, 2022 4:27 am

Newark727 wrote:
Okay. Who steps into the power vacuum and how is it not the same people buying protection and access to expenditures right now?
In total anarchy everybody gets along fine. The good guys always have all the power, society becomes very virtuous; only lazy people go hungry.


/s
 
GalaxyFlyer
Posts: 10347
Joined: Fri Jan 01, 2016 4:44 am

Re: FTX Crypto Business Crash & Ponzi Scheme?

Wed Nov 23, 2022 1:26 am

Vintage wrote:
GalaxyFlyer wrote:
Pay attention, politicians of EITHER party are given money for protection from government regulation. The administrative state, that is, the Executive branch, promulgates in the Federal Register laws everyday. Campaign money buys protection from regulation or buys access to expenditures regardless of party affiliation. If anyone thinks the government, run by either party, is “on their side”; they’re a fool. Stop giving those 537 idiots money and power.
You're presenting the exception as if it were the rule. Sure such things do happen, but comparable things happen in private business too.

You leave the impression that you would prefer total anarchy. Is this true?


No, not anarchy, but less government than now and certainly one incentivized to be competent. The USG needs to less, more competently. It’s too big, too involved in business, but mostly TOO INCOMPETENT. Politicians are in it for themselves, basic public choice economics.
 
GalaxyFlyer
Posts: 10347
Joined: Fri Jan 01, 2016 4:44 am

Re: FTX Crypto Business Crash & Ponzi Scheme?

Wed Nov 23, 2022 1:27 am

Newark727 wrote:
GalaxyFlyer wrote:
Pay attention, politicians of EITHER party are given money for protection from government regulation. The administrative state, that is, the Executive branch, promulgates in the Federal Register laws everyday. Campaign money buys protection from regulation or buys access to expenditures regardless of party affiliation. If anyone thinks the government, run by either party, is “on their side”; they’re a fool. Stop giving those 537 idiots money and power.


Okay. Who steps into the power vacuum and how is it not the same people buying protection and access to expenditures right now?


Who steps in? Individuals using their power of their dollar.
 
Newark727
Posts: 3230
Joined: Tue Dec 29, 2009 6:42 pm

Re: FTX Crypto Business Crash & Ponzi Scheme?

Wed Nov 23, 2022 1:34 am

GalaxyFlyer wrote:
Who steps in? Individuals using their power of their dollar.


We kind of already tried this, for most of the 19th century. It turns out most people don't make their shirt-buying decisions based on whether or not the factory chains the fire escape doors shut. More importantly, they pretty much can't.
 
Newark727
Posts: 3230
Joined: Tue Dec 29, 2009 6:42 pm

Re: FTX Crypto Business Crash & Ponzi Scheme?

Wed Nov 23, 2022 1:47 am

GalaxyFlyer wrote:
No, not anarchy, but less government than now and certainly one incentivized to be competent. The USG needs to less, more competently. It’s too big, too involved in business, but mostly TOO INCOMPETENT. Politicians are in it for themselves, basic public choice economics.


It is deeply naive to posit a smaller government as a less corrupt government. Wealthy interests were buying politicians long before the present regulatory state existed - in fact they often did it even more openly than they do now. It's ironic that this discussion should come up in a thread about crypto, because there are plenty of examples of individuals using the power of their dollars to rob each other blind in the crypto space before the SEC had even heard the word "bitcoin."

"We bought the son of a bitch and he didn't stay bought." - Henry Clay Frick on Theodore Roosevelt, before the nationwide income tax, the SEC, and the Government Accountability Office, among many, many other regulatory bodies, even existed.
 
Vintage
Posts: 1003
Joined: Tue Mar 15, 2022 10:48 pm

Re: FTX Crypto Business Crash & Ponzi Scheme?

Wed Nov 23, 2022 2:13 am

Anybody who thinks the US government is predominantly, or even significantly, corrupt or incompetent is naive as well as unimaginative, and not very well traveled either. Note that traveling from one US military base to another is not traveling in the sense I'm talking about. You can travel back in time and take note of the prior corruption that took place everywhere or you can look at the current globe. The US and its closest allies are run pretty clean. Talk to anybody with experience with African, Arabic or Latin American systems: and then there's Russia or most or the other ex-Soviet Union states for shining examples. Isn't Asia run mostly by back door deals?

There is some loss of efficiency that is necessary in a government system in order to prevent corruption of various kinds, but the relatively minor loss of efficiency is a bargain compared to having our commons run by a group of mafias, or even worse, a single mafia. Keep in mind that the private system isn't all that perfect all the time either.

One thing that is for sure, the US government can never be as all knowing and efficient as what lives in some people's fantasy filled imaginations.
 
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Aesma
Posts: 16187
Joined: Sat Nov 14, 2009 6:14 am

Re: FTX Crypto Business Crash & Ponzi Scheme?

Wed Nov 23, 2022 9:19 am

The word corruption implies some level of shadiness. In the US it's done in the open, it's perfectly accepted that companies can finance politicians and their campaigns.

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