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.

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

Newark727 wrote:

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

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.

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.

Newark727 wrote:

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

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.

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

QF7 wrote:

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

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

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

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.

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.

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.

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

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.

StarAC17 wrote:

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

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.

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.

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.

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.

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.

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.

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?

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”.

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.

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

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.

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.

MohawkWeekend wrote:

This guy is in a world of hurt.

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.

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.

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.

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?

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?

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?

GalaxyFlyer wrote:

Who steps in? Individuals using their power of their dollar.

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.