News BITCOIN, Heists, Thefts, Hacks, Scams, and Losses

[Astronuc]

Apparently one hacker got a chunk, and one article suggested an insider.
https://www.benzinga.com/markets/cr...om-ftx-wallets-as-exchange-potentially-hacked

More than $600 million in cryptocurrency mysteriously vanished from the wallets of the bankrupt exchange FTX.

In the aftermath, FTX on its official Telegram channel announced that the exchange had been hacked and advised users not to install any new updates and to delete all FTX apps.

https://www.msn.com/en-us/money/mar...becomes-35th-largest-ether-holder/ar-AA148Bpi

During morning European hours on Tuesday, over 21,555 ETH, valued at around $27 million, were transferred from various addresses associated with the accounts of the drainer to a single address.

Blockchain data revealed that they were eventually changed to the stablecoin DAI on the trading platform CowSwap.

In the course of multiple transactions, the addresses accumulated over $48 million in DAI and exchanged it all for 37,000 Ether.

Not only is/was FTX unsecure, but the whole system is unsecure if anyone can take hacked (illegally obtained) bitcons or tokens or whatever and simply exchange them on some other exchange.Meanwhile -

“You should not invest in crypto if you’re using money that you need for next week or next month, you should only be using discretionary cash that you don’t need for a long time,” Changpeng Zhao, CEO of Binance, the largest cryptocurrency exchange, said in an Ask Me Anything session broadcasted live on Twitter Monday.

Zhao warned that, after the FTX collapse and plummeting confidence in crypto, the market is in a period of “high volatility and unpredictableness” that makes it particularly unfavorable for inexperienced investors or those without ample funds.

“Unless you’re very experienced, very mature, very confident, and can handle the risk, I would recommend most people just hold for this period of time,” he said.

https://www.msn.com/en-us/money/sav...people-shouldn-t-invest-right-now/ar-AA1492pF

 

[russ_watters]

Not sure what you mean by "avoid native tokens", it doesn't seem to make much sense to me. Native tokens would be bitcoins, ethers, etc.

He means tokens created by and for the exchanges. BNB, FTT, etc. I believe they're called "utility tokens", but I'm not certain of the terminology either.

 

[Office_Shredder]

It's not just crypto - consider Fall of the World’s Hottest Stock Cost Sea Founders $32 Billion
https://www.msn.com/en-us/money/new...tock-cost-sea-founders-32-billion/ar-AA144pc6
Over-confidence? Or as Alan Greenspan would belatedly admit, 'Irrational Exuberance'?

I don't agree that these are the same thing. Anyone who invested in sea Ltd was primarily taking a risk that the gaming industry would do well, and knew it (or at least should have known it). That ended up not working out, but losing a bunch of money on a downturn is openly what they signed up for.

Ftx is way different, nobody involved in ftx thought they were signing up to give 0 interest loans to a distressed hedge fund, but that's what they ended up getting.

 

[Astronuc]

Not sure what you mean by "avoid native tokens", it doesn't seem to make much sense to me. Native tokens would be bitcoins, ethers, etc. A non native token would be something like DAI, which "lives" in Ethereum's blockchain. There's no reason one would want to avoid a native token, as opposed to a non native one.

As Russ inidcated, native tokens are specific to an exchange. I went looking for a clear definition, which is hard to find, but found the following.

A representation of a digital or physical asset on a blockchain. Native tokens are the native currency on a blockchain. For example, BTC is the native crypto, or native currency, on Bitcoin, and ETH is the native crypto on Ethereum. There are other native cryptos, such as SOL on the Solana blockchain and ADA on the Cardano chain.

https://www.pcmag.com/encyclopedia/term/crypto-token

'native cryptocurrency'

A blockchain's inherent digital currency. Also called a "native token," "protocol token," "intrinsic token" or "built-in token." In the case of Bitcoin, its only purpose is a cryptocurrency, and its native symbol is BTC. Ethereum's native crypto is ether (ETH); however, along with NFTs and numerous other smart contract-based tokens, Ethereum hosts countless non-native cryptocurrencies. Every independent blockchain has its own native crypto that is used to reward miners and validators for adding blocks to the blockchain and as a payment medium for transaction fees. See Bitcoin, Ethereum and Ethereum token.

https://www.pcmag.com/encyclopedia/term/native-cryptocurrency

https://www.pcmag.com/encyclopedia/term/bitcoin
https://www.pcmag.com/encyclopedia/term/ethereum
https://www.pcmag.com/encyclopedia/term/ethereum-token

A token is a representation of something in the digital or physical world that resides on an exchange. Managed by a smart contract, which is a program on an exchange, a token can represent just about anything. It can be fungible such as a cryptocurrency, and there are plenty of them, "most of which are worthless," or it can be non-fungible such as a work of art (see NFT). Adapted from PCMag's definition for Ethereum token.

So a token is a 'representation' of some cryptocurrency, but not the cryptocurrency itself, which could become worthless if the underlying asset becomes worthless, or disappears. Sounds like a promissory note.

https://www.pcmag.com/encyclopedia/term/blockchain

All it takes is one stray muon . . .

Furthermore, I'm reminded of a post when Luna crashed.
https://www.physicsforums.com/threa...ts-hacks-scams-and-losses.740560/post-6634098

 

[Astronuc]

SBF was working the phones to find capital support for FTX.
https://www.reuters.com/technology/...e-revealed-huge-holes-firms-books-2022-11-16/

(Reuters) - As customers withdrew billions of dollars from crypto exchange FTX one frantic Sunday this month, founder Sam Bankman-Fried worked the phones in a futile bid to raise $7 billion in emergency funds.

Hunkered in his Bahamas apartment, Bankman-Fried toiled through the night, calling some of the world's biggest investors, including Sequoia Capital, Apollo Global Management Inc and TPG Inc, according to three people with knowledge of the matter.

Sequoia was among investors that lined up only months before to pump money into Bankman-Fried's empire. But not now. Sequoia was shocked at the amount of money Bankman-Fried needed to save FTX, according to the sources, while Apollo first asked for more information, only to later decline. Both firms and TPG declined to comment for this article.

In the end, the calls came to naught and FTX filed for bankruptcy on Nov. 11, leaving an estimated 1 million customers and other investors facing total losses in the billions of dollars. The collapse reverberated across the crypto world and sent bitcoin and other digital assets plummeting.

Red flags -

In presentations to investors, some of the same assets appeared simultaneously on the balance sheets of FTX and of Bankman-Fried's trading firm, Alameda Research – despite claims by FTX that Alameda operated independently.

One of Bankman-Fried's close aides tweaked FTX's accounting software. This enabled Bankman-Fried to hide the transfer of customer money from FTX to Alameda. . . . .

The Reuters article provides an extensive overview of FTX's evolution. Apparently the accounting methods confused even SBF to the point he was unaware of how vulnerable FTX had become. It didn't help that FTX had transferred customers' funds to Alameda.

https://news.yahoo.com/ftx-collapse-slow-motion-train-202852980.html
FTX collapse is ‘slow-motion train wreck running into a dumpster fire full of black swans’: Analyst

If one invests in cryptocurrency, buy bitcoin, but be your own custodian/bank.

 

[kyphysics]

Why? Because every new generation thinks they discovered sex and leverage.

Sex? You think SBF did shady stuff to make "enough" money to "buy" sex?

Maybe. Presumably, he was decently above average in wealth already and could "buy sex" if he needed to w/o having to turn FTX-Alameda into a Ponzi-gambling charade.

Oh well. . .Let's see if he goes to prison or just gets an SEC, etc. slap on the wrist. . . .maybe some fines and 3 years of probation?

 

[gmax137]

If I could know one thing, it'd be: why?

You've got a seemingly upper middle-class life (at min., if not higher) with great academic credentials. You can live a comfortable successful life. Was it worth going to prison (where he seems headed) and losing everything (including your freedom and reputation) just to live like a billionaire for a short while.

I know...he obviously never thought he'd likely get caught or he wouldn't do it. But, you have to know there is always some risk - no matter how small. Why make this horrible trade/gamble?

Netflix should do a documentary on Elizabeth Holmes, Bernie Madoff, SBF, etc. type con artists and get into their psychology. I'd love to know what's going on in their brains when they tried to pull this stuff off.

The easiest person to fool is yourself.

 

[Astronuc]

The Wall Street Journal reported that BlockFi, which had halted withdrawals over the weekend following FTX’s bankruptcy, is now actively considering bankruptcy and plans to lay off its staff. In previous public comments, BlockFi's management made it clear that FTX's failure had pushed the company towards being out of business. FTX had provided financial aid to BlockFi this summer, including a $400 million credit facility backed by its own balance sheet.

“We are shocked and dismayed by the news regarding FTX and Alameda,” BlockFi said Saturday, referring to FTX and Bankman-Fried's hedge fund Alameda Research. “Given the lack of clarity on the status of FTX.com, FTX US and Alameda, we are not able to operate business as usual.”

Another crypto firm, crypto lending firm SALT Blockchain, also appeared to be on the verge of failure. The company Bnk to the Future pulled out of its agreement to buy SALT, citing its exposure to FTX. In tweets, SALT's CEO Shawn Oren said he is “fully committed still to recover from the damages as victims.”

https://www.msn.com/en-us/money/new...-gets-clearer-as-users-fear-worst/ar-AA149x2J

Dramatic fallout and repercussions. SBF and celebrity crypto promoters are being sued.

https://finance.yahoo.com/news/ftx-founder-bankman-fried-sued-143403339.html

Cronos (CRO) which is the cryptocurrency issued by Crypto.com, is down 33% in the last seven days according to CoinGecko. The total decline is 93% since its all-time high on Nov. 24, 2021. While the cryptocurrency market has lost more than $2 trillion over the past year, CRO is much more down than bitcoin (BTC), the most popular of the digital currencies, which has lost 76% compared to its peak of November 2021.

https://www.thestreet.com/investing/cryptocurrency/crypto-com-ceos-past-comes-back-to-haunt-himAnd afterall that - Fortune reports "Disgraced FTX founder Sam Bankman-Fried still sees path to rebuilding his bankrupt empire and believes he can make his customers whole"
https://finance.yahoo.com/news/disgraced-ftx-founder-sam-bankman-131610233.html

 

[fluidistic]

As Russ inidcated, native tokens are specific to an exchange. I went looking for a clear definition, which is hard to find, but found the following.

I don't think that's what Russ said. Russ is very likely right though, you actually meant to be cautious with cryptocurrencies "created" by exchanges, like BNB (for Binance), FTT (for the now defunct FTX), CRO (for crypto.com), etc. In that case, yes, I agree, it is very risky. But these have nothing to do with "native tokens" per se, which is a different thing, and you yourself found a rather good definition of it.

A token is a representation of something in the digital or physical world that resides on an exchange. Managed by a smart contract, which is a program on an exchange, a token can represent just about anything. It can be fungible such as a cryptocurrency, and there are plenty of them, "most of which are worthless," or it can be non-fungible such as a work of art (see NFT). Adapted from PCMag's definition for Ethereum token.

Not really. A smart contract is not a program on an exchange. It is a program on a blockchain. This stuff is better explained in Wikipedia than in your link, apparently.

 

[nsaspook]

Sex? You think SBF did shady stuff to make "enough" money to "buy" sex?

Maybe. Presumably, he was decently above average in wealth already and could "buy sex" if he needed to w/o having to turn FTX-Alameda into a Ponzi-gambling charade.

Oh well. . .Let's see if he goes to prison or just gets an SEC, etc. slap on the wrist. . . .maybe some fines and 3 years of probation?

It's not about buying sex or even making "enough" money IMO. It's the thrill and adventure of having power, the power trip, being 'King' of the world and winning the 'game'.

"well played; you won"
Sam Bankman-Fried referencing Changpeng Zhao, the Binance CEO.

 

[morrobay]

FTX/SBF transferred $ 10 billion to Alameda Research. It has been reported that $ 2 billion is missing and unaccounted for. Is there any information about where and what happened to the remaining $ 8 billion?
https://www.dailymail.co.uk/news/ar...s-missing-failed-crypto-firm-FTX-sources.html

 

[Vanadium 50]

celebrity crypto promoters are being sued.

That may be tricky - do we sue actors on commercials for dodgy products?

 

[Astronuc]

That may be tricky - do we sue actors on commercials for dodgy products?

Apparently some people do. I ignore such commercials, and I particularly ignore celebrities and commercials in general. But advertising is about influencing, or manipulating those who are susceptible to manipulation.

Who would take the word of an athlete or entertainer on financial instruments or healthcare?

 

[Vanadium 50]

So if Priceline screws up my reservation, I can sue William Shatner? If I get a lousy sandwich at Arby's, I can sue James Earl Jones?

What a country!

 

[Office_Shredder]

If you make a reservation on priceline and it turns out the hotel never existed and William Shatner knew the hotels didn't exist but he was running commercials for them anyway, would it be ok to sue him?

I'm not claiming Tom Brady knew what was happening at ftx, but he was an investor and a spokesperson. The idea that you should at least do discovery to find out if he was intentionally committed to the fraud doesn't seem like the wildest legal theory.

 

[Astronuc]

So if Priceline screws up my reservation, I can sue William Shatner? If I get a lousy sandwich at Arby's, I can sue James Earl Jones?

My guess is such lawsuits would be dismissed as frivolous, but one could certainly try. Hasn't that always been the case? Somehow, I don't think celebrity endorsers are responsible for the operation or performance of corporations/company for which they are hired to advertise.

I think FTX is a different matter based on the apparent information available. The question would be how involved were outsiders like Tom Brady and others, and what the knew and when.

Many staff didn't know how bad the situation had become.
FTX Employees Were Encouraged to Keep Life Savings in the Now-Bankrupt Exchange, Sources Say
https://www.yahoo.com/finance/news/ftx-employees-were-encouraged-keep-224536271.html

Bahamian liquidators report indications of "serious fraud and mismanagement" at FTX.
https://www.coindesk.com/policy/202...ous-fraud-and-mismanagement-in-court-filings/https://www.vanityfair.com/news/2022/11/sam-bankman-fried-sbf-ftx-alameda-doj-investigation

The Wall Street Journal reports that the Manhattan US attorney’s office has launched an investigation into FTX’s implosion, according to people familiar with the matter. At present, one thread prosecutors are likely focusing on, per the Journal, is that FTX reportedly lent billions in customer money to Alameda Research—a crypto trading firm that also happens to be owned by SBF—to fund risky trades. As the Journal notes, “Using customer funds for proprietary trading or lending them out—without an investor’s consent—is generally forbidden in the regulated securities and derivatives markets.” While such protections do not exist in the unregulated crypto market, as the Journal points out, FTX’s terms of service explicitly told users that they owned the cryptocurrencies in their accounts;

According to prosecutors, using customer money for a purpose that was not clearly communicated can be the basis for fraud or embezzlement charges. “What this will boil down to is, were there deliberate lies to convince depositors or investors to part with their assets?” Samson Enzer, a former Manhattan federal prosecutor, told the Journal. “Were there statements made that were false, and the maker of those statements knew they were false, and made with the intent to deceive the investor?” The Feds could also point to SBF’s tweets last week, just before the company collapsed, in which he wrote that FTX was “fine” and so were its assets, particularly in light of the fact that he later deleted such claims.

I can see a basis for suing FTX, Alameda, SBF and the management who participated in the diversion of client funds into Alameda without their consent, in apparent violation of TOS. But were ousiders involved? Did some users expect Tom Brady et al to do some due diligence rather than doing due diligence themselves?

 

[Astronuc]

A video by someone with exposure to FTX.

Drip, drip, drip, . . . .

https://www.msn.com/en-us/money/com...-horror-when-he-learned-the-truth/ar-AA14e05R

Due diligence includes checking the balance sheet before investing in a crypto exchange. Startling new evidence each day.Another Edit/Update: (Bloomberg) -- FTX co-founder Samuel Bankman-Fried, one of his related companies, and two other top executives at the collapsed cryptocurrency exchange received massive loans from affiliated trading arm, Alameda Research, according to a bankruptcy court filing Thursday.
https://finance.yahoo.com/news/ftx-bankman-fried-received-1-163958767.htmlUnder the category of
https://www.msn.com/en-us/money/com...kman-fried-s-haphazard-management/ar-AA14dw1R

“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.”

 

[nsaspook]

Many staff didn't know how bad the situation had become.
FTX Employees Were Encouraged to Keep Life Savings in the Now-Bankrupt Exchange, Sources Say
https://www.yahoo.com/finance/news/ftx-employees-were-encouraged-keep-224536271.html

Enron again.

It's always a bad idea to tie up your savings in the same company that you rely on for your employment.

 

[BWV]

Everyone comparing this to Enron, but FTX is insignificant. Enron began as a company in the real economy and embodied the wide, systemic corruption of a great swath of public corporations in the 90s, with similar, if less egregious, looting by corporate management occurring at companies like Tyco, WorldCom, General Electric etc. FTX is just a fraud built on a scam built on another scam - (ponzi on top of crypto lending on top of crypto) its analogous to a ponzi scheme promoting fictitious interests in a Madoff feeder fund. The whole sad case is fortunately irrelevant to the real economy, and fortunately the biggest losers in FTX are largely a bunch of crypto grifters, so F---- them.

Claims on FTX deposits are already trading at about 8 cents on the dollar BTW

 

[nsaspook]

https://www.cnbc.com/2022/11/17/ftx...d-never-seen-such-a-failure-of-controls-.html

Never seen ‘such a complete failure’ of corporate controls, says new FTX CEO who also oversaw Enron bankruptcy​

Ray formerly served as CEO of Enron after the implosion of the energy titan. He promised to work with regulators to investigate FTX founder Sam Bankman-Fried.

In the filing, Ray disclosed that he did “not have confidence” in the accuracy of the balance sheets for FTX and its sister company Alameda Research, writing that they were “unaudited and produced while the Debtors [FTX] were controlled by Mr. Bankman-Fried.”
...
“The concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals” was unprecedented, the former Enron recovery boss said.

Ray said a “substantial portion” of assets held with FTX may be “missing or stolen,” following widespread reports on social media of the theft of hundreds of millions in cryptocurrencies.

 

[russ_watters]

I'm not claiming Tom Brady knew what was happening at ftx, but he was an investor and a spokesperson. The idea that you should at least do discovery to find out if he was intentionally committed to the fraud doesn't seem like the wildest legal theory.

Does Brady run some financial investigative service I'm unaware of? The BSEC? BFBI? I mean, I suppose he could just email SBF and ask him if his company's legit, and SBF would answer him honestly?

 

[Office_Shredder]

Does Brady run some financial investigative service I'm unaware of? The BSEC? BFBI? I mean, I suppose he could just email SBF and ask him if his company's legit, and SBF would answer him honestly?

SBF doesn't run a financial investigative service either, but I think we all agree he's culpable here.

Again, Tom Brady owns FTX, told people to invest in FTX, and then all the money disappeared. Why are you so adamant that no one is even allowed to ask him questions about what he knew about the operations? Being sued doesn't mean he'll lose. I'm not arguing he's legally liable for anything, I'm just arguing that it's not unreasonablewhen someone who owned a company, told everyone to invest in that company, then that company got all of its money stolen, to at least have a judge consider the facts and decide if something sketchy happened.

 

[russ_watters]

Everyone comparing this to Enron, but FTX is insignificant. Enron began as a company in the real economy and embodied the wide, systemic corruption of a great swath of public corporations in the 90s, with similar, if less egregious, looting by corporate management occurring at companies like Tyco, WorldCom, General Electric etc. FTX is just a fraud built on a scam built on another scam - (ponzi on top of crypto lending on top of crypto) its analogous to a ponzi scheme promoting fictitious interests in a Madoff feeder fund. The whole sad case is fortunately irrelevant to the real economy, and fortunately the biggest losers in FTX are largely a bunch of crypto grifters, so F---- them.

Agreed. Enron had 20,000 employees and did real stuff. And let's not forget they had Arthur Andersen, the premiere accounting firm with almost 30,000 employees auditing them. It was hard to see that collapse coming.

But Ponzi schemes are fairly simple, taking just a handful of people to run. They are a confidence grift; you trust the guy at the top so you give him your money. Madoff had some track record as a money manager, which made him easier to trust. And his targets were rich but unsophisticated investors who look more impressive than they really are. "Hey, the Mets trust him with their money, so maybe I should too?" But professionals knew he was a fraud. His company only had 3 employees. It couldn't possibly have been real. FTX/SBF is more like that.

SBF is a kid with no financial background who had no business running a financial company. "But cyrpto!" ...and so people sent him money. But it probably makes people he grifted feel better to believe it was more sophisticated.

 

[russ_watters]

SBF doesn't run a financial investigative service either, but I think we all agree he's culpable here.

What? It's his company. He's almost certainly the head fraudster. I'm not sure what you are trying to say or if you're misunderstanding the situation here.

Again, Tom Brady owns FTX...

Tom Brady owns FTX in the same way I own Meta. And trust me, if I had the power to shut down the metaverse I'd have done it already.

Why are you so adamant that no one is even allowed to ask him questions about what he knew about the operations?

I'm trying hard to be polite here. Brady is a highly paid contractor, and that's it. There's a good chance he's never even spoken to SBF. There's no way Brady knew anything, no way he could have, and no reason he should have. The idea is...to use your word, unreasonable. To put it mildly.

Being sued doesn't mean he'll lose. I'm not arguing he's legally liable for anything, I'm just arguing that it's not unreasonable when someone who owned a company, told everyone to invest in that company, then that company got all of its money stolen, to at least have a judge consider the facts and decide if something sketchy happened.

It is unreasonable, and nobody is going to sue Brady because it's unreasonable - to put it mildly.

 

[Office_Shredder]

What? It's his company. He's almost certainly the head fraudster. I'm not sure what you are trying to say or if you're misunderstanding the situation here.

I'm not misunderstanding the situation. But the justice system doesn't run off of media reports and reddit investigations.

Tom Brady owns FTX in the same way I own Meta. And trust me, if I had the power to shut down the metaverse I'd have done it already.

Yeah, i don't buy this for a second. Is meta going around putting you in commercials? Have you personally met Mark Zuckerberg?

I'm trying hard to be polite here. Brady is a highly paid contractor, and that's it. There's a good chance he's never even spoken to SBF. There's no way Brady knew anything, no way he could have, and no reason he should have. The idea is...to use your word, unreasonable. To put it mildly.

What are you talking about. They never spoke? This is why a lawsuit should be allowed to proceed, instead of making assumptions before gathering evidence.

Another example sbf and brady's then wife on stage talking about how they are going to give away sbf's money, which we now know was actually customer money

https://www.dailymail.co.uk/news/ar...n-Fried-welcomed-Bill-Clinton-Katy-Perry.html

Did she know? Probably not, but that doesn't seem like enough does it? Letting some legal discovery go on and find out exactly who was doing what seems totally reasonable here.

It is unreasonable, and nobody is going to sue Brady because it's unreasonable - to put it mildly.

He's already been sued, so ok.

 

[russ_watters]

I'm not misunderstanding the situation. But the justice system doesn't run off of media reports and reddit investigations.

Then please explain what you meant by this: "SBF doesn't run a financial investigative service either". Who would he investigate? He's the target of the investigation, not the investigator.

Yeah, i don't buy this for a second. Is meta going around putting you in commercials? Have you personally met Mark Zuckerberg?

No, I haven't. Neither of those imply he knows anything real about the functioning of the company - or that he should. No more than his Uber driver or personal chef (if he has one).

What are you talking about. They never spoke?

Fair enough, they met in person. Doesn't mean anything. (but it is better for marketing)

This is why a lawsuit should be allowed to proceed, instead of making assumptions before gathering evidence...He's already been sued, so ok.

Fair enough - anyone can write a name on a lawsuit. Does not mean it's going anywhere. I mean, I guess it isn't impossible that Brady was actually a functioning part of the company, but it is so exceptionally unlikely and there is no known evidence for it, so it's silly to even speculate about what it might have been.

I'll sum up, because this got messy: There is no reason to believe Brady knew anything real about the functioning of FTX and no reason why he should. By that I mean neither evidence nor logic would suggest it.
[edit]
Also, financial liability is different from legal culpability in any crimes, but nobody would write a contract for appearances/commercials that didn't include protection from indemnification.

 

[Astronuc]

Again, Tom Brady owns FTX, . . .

It appears Brady may have invested in FTX. Did he own a stake? Was he a board member? Or was he simply hired to market the company?Edit/update: The celebrities FTX used to build trust are being sued, but can they really be held accountable?
https://finance.yahoo.com/news/celebrities-ftx-used-build-trust-190000370.html

Adding to the irony of David’s comedic distaste for FTX, the television star is now being sued, along with many other celebrities, for their involvement as paid endorsers of FTX. Also named in the class action lawsuit, filed in Miami by an FTX customer on Nov. 16, are other celebrities who publicly endorsed FTX, including Tom Brady, Gisele Bundchen, Shaquille O’Neal, Shohei Ohtani, Trevor Lawrence, Naomi Osaka, Stephen Curry, David Ortiz, Udonis Haslem, and Kevin O’Leary. The National Basketball Association’s Golden State Warriors, which entered a deal with FTX in 2021 making it the team’s official cryptocurrency platform was also named.

“Although the defendants disclosed their partnerships with the FTX entities,” reads one section of the lawsuit, “they have never disclosed the nature, scope, and amount of compensation they personally received in exchange for the promotion of the deceptive FTX platform, which the SEC has explained that a failure to disclose this information would be a violation of the anti-touting provision of the federal securities laws.”

It’s true the FTC prohibits misleading advertisements and endorsements. “Advertisers are subject to liability for false or unsubstantiated statements made through endorsements, or for failing to disclose material connections between themselves and their endorsers,” reads the Federal Trade Commission’s website (pdf). “Endorsers also may be liable for statements made in the course of their endorsements.” But Garrison and his potential co-plaintiffs may find it difficult to hold the sports celebrities liable for FTX’s alleged unscrupulous dealings.

Proving that celebrity endorsers knew of unscrupulous or illegal activities may be difficult unless there is a text message exchange in which the celebrity acknowledges some illicit activity.

Should they have known? Maybe the were in the dark as much as everyone else. People hired to do commercials or make appearances may not have done any diligence, unless they personally invested or acquired some stake in a company. Even then, if they are awarded something, they may not do any investigation. If an endorser makes a claim of legitimacy, then perhaps they have invited a liability.

I'm sorry that unsuspecting investors got burned, but they should have known into what they were investing. All these 'tokens' look dodgy, especially where cryptocurrency is being exchanged for 'tokens' and the cryptocurrency invested in unknown investments of dubious nature.

 

[fluidistic]

FTX is just a fraud built on a scam built on another scam - (ponzi on top of crypto lending on top of crypto) its analogous to a ponzi scheme promoting fictitious interests in a Madoff feeder fund. The whole sad case is fortunately irrelevant to the real economy, and fortunately the biggest losers in FTX are largely a bunch of crypto grifters, so F---- them.

Many cryptos are a scam, yes, but not all of them.
Most users of big exchanges are honest noobs investing for a reason or another. FTX was a bit different and geared towards more experienced financially people. I do feel bad for them, somehow. It's not like bad actors were punished. And they might not have known about Sam Banked something, maybe they just get to know of FTX through youtube by a recommendation and that's it.

 

[russ_watters]

It appears Brady may have invested in FTX. Did he own a stake? Was he a board member? Or was he simply hired to market the company?

Google tells me that together he and his ex-wife owned 0.24%. That's probably their payment for their endorsements. It does not imply to me any knowledge of the inner-workings of the company.

 

[Astronuc]

Fortune on Yahoo - The Enron man in charge of restructuring FTX has one big takeaway from this bankruptcy: There is no paper trail
https://finance.yahoo.com/news/enron-man-charge-restructuring-ftx-215252158.html

Corporate bankruptcies are usually pretty dull affairs. That's not the case with FTX, which until two weeks ago was seen as the golden child of cryptocurrency, but now appears to have been a giant Ponzi scheme.

All this has led FTX's new caretaker CEO, John Ray III, to declare this the worst trainwreck he has ever seen. And that's really saying something, since Ray is a restructuring expert who has presided over some of the most infamous bankruptcies in history—including energy giant Enron in 2001, a comparison that some onlookers have made, notably including former Treasury Secretary Larry Summers.

The damning words came from Ray's so-called first day declaration. (It is a sign of how chaotic this bankruptcy has been that the filing usually filed on the first day is being filed on the sixth day of the process.)

It would appear that no outsider did any kind of due diligence regarding the 'balance sheet' or supporting documentation that seems to be lacking!

Ray notes that FTX does not have an accounting department and that it has "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."

As chartered accountant Genevieve Roch-Dector has noted, FTX made large personal loans to its executive and made major corporate decisions by chat with many messages deleted soon after. Ray's disbelief screams from the page: "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."

Wow! This will be a classic case history in business schools.