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

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Astronuc said:
So make all cryptocurrency traceable, so if stolen, it's immediately worthless. But then that would disrupt/undermine some illegitimate business models.
Such a strategy often operates. Some tokens declared as stolen often get blacklisted by exchanges. Many cryptos have a public blockchain, so it is traceable in some way.

For Bitcoin it's a bit hard. There can be several inputs and output addresses for a transaction. I don't really see a way to make sense of ''that fraudulent bitcoin started here and is currently spreaded there''.
 
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I agree with @russ_watters and @Vanadium 50 , crypto investors shouldn't get bailed out, much like we don't bail out gamblers when they lose millions in a poker match just because someone's suspected of counting cards.

That being said I still believe theft and fraud should be investigated and punished irrespective of how and where it happens.
That means SBF and his friends should get actual jail sentences because what they did was commit fraud and theft on a large scale.
 
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artis said:
That means SBF and his friends should get actual jail sentences because what they did was commit fraud and theft on a large scale.
They will. (Well, likely.)

If fraud happens on an unregulated market it still remains a fraud. Just no charges for breaking regulations, no supervision from authorities to prevent fraud and no (far less) tracking/securing for the hijacked money.
 
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John Ray, FTX's new CEO, handled the bankruptcies of Enron and Nortel. But he says the mess he has inherited is "unprecedented."
I listened to the commentary this morning. A transcript should be available later today.
Meanwhile - Wringing its hands over FTX's collapse, Washington hopes to prevent more crypto pain
and from Bloomberg on Yahoo - Bankman-Fried Says Collateral Crashed by $51 Billion as FTX Fell
https://finance.yahoo.com/news/bankman-fried-says-collateral-crashed-002936253.html

I don't think he planned this (except for diverting customer funds to cover his poor decisions), as much as a drunk driver doesn't plan to crash his/her vehicle. But the evidence, e.g., lack of corporate governance (no effective outside/independent board of directors), lack of practice of basic financial and accounting standards (including detailed maintenance of accurate records), lack of outside auditing, points to a gross negligence.
 
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Astronuc said:
I don't think he planned this (except for diverting customer funds to cover his poor decisions), as much as a drunk driver doesn't plan to crash his/her vehicle. But the evidence, e.g., lack of corporate governance (no effective outside/independent board of directors), lack of practice of basic financial and accounting standards (including detailed maintenance of accurate records), lack of outside auditing, points to a gross negligence.
Well I agree, I too don't think he planned to crash his own company, I bet he loved that money that he made. We now know all that altruism and driving a cheap toyota and wearing clothes that make him look like an average Joe cheapo was just a facade.
But taking investors money to cover your personal losses and funneling money away from the company to unknown places is still theft and fraud.
Even if FTX did not crash they would still need to investigate and charge him , at least according to theory and good practice.

Also I bet all that million dollar donor money to democrats was also part of his strategy to appeal and possibly buy some friends with benefits in Washington.

I doubt SBF cares about US politics at all, I mean why should he as he lived and worked in Bahamas, most likely he was well informed that if sh*t goes south that's the better place to be at.
 
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Let's avoid the political talk please. People with money use it to influence policy. We all know it/get it. There's no need to discuss it, and PF isn't the place for it.
 
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The Economist has had a number of articles about crypto recently. Their take is that the problems are not over. A brief excerpt from one article (bolding is mine):
The events also reveal just how interconnected crypto is, and the vulnerability this brings. When one large project (the Terra-Luna stablecoin system) blew up in the summer, it was enough to bring down a hedge fund and two lending platforms, which was in turn enough to bankrupt one of crypto’s biggest exchanges. This dynamic has been supercharged by the failure of ftx, which already seems to have taken out three smaller exchanges, aax, BlockFi and Liquid, as well as a lending platform, Genesis. Other exchanges faced enormous withdrawals (see chart 2). Given that it took around six months for the fallout of the summer’s blow-up to hit ftx, the stage is now set for more blow-ups.
 
phinds said:
The Economist has had a number of articles about crypto recently. Their take is that the problems are not over. A brief excerpt from one article (bolding is mine):
I guess the idea that one can make a currency that would be perfectly stable, decentralized and wide spread is a unattainable fantasy, because money irrespective of it's physical form is a object that is used on a mass scale and that means it is subject to all the influences and short comings of all other items of assigned value used on a mass scale.

So basically the way I see it crypto is re-inventing America just to find out that it has the same problems as the original America, so eventually they will settle the wild west by regulation and law, or it will go bust because even greedy and fraudulent people don't like to lose all the time to even greedier and more fraudulent folks.
 
artis said:
So basically the way I see it crypto is re-inventing America just to find out that it has the same problems as the original America, so eventually they will settle the wild west by regulation and law, or it will go bust because even greedy and fraudulent people don't like to lose all the time to even greedier and more fraudulent folks.
Cryptocurrency is not exclusive to America - it's global/international, and the markets are transnational. It would appear the legal issues are found in each nation, and nations may have different regulations and financial structures.

MSN/NBC - FTX’s regulatory chief had 4 job titles in 2 years. What was he really doing?
https://www.msn.com/en-us/money/com...-2-years-what-was-he-really-doing/ar-AA14qCh4

Apparent conflicts of interest abound at FTX. The Chief Regulatory Officer, FTX, was apparently previously involved in an online gaming/gambling company based in Toronto, CA, which was eventually bought by a company based in Malta. That company was involved in a cheating scandal. A LinkedIn profile, which has apparently disappeared (after the FTX crash) did not include the involvement with online gaming/gambling.
 
Astronuc said:
The Chief Regulatory Officer, FTX, was apparently previously involved in an online gaming/gambling company based in Toronto, CA, which was eventually bought by a company based in Malta. That company was involved in a cheating scandal. A LinkedIn profile, which has apparently disappeared (after the FTX crash) did not include the involvement with online gaming/gambling.
 
Astronuc said:
Cryptocurrency is not exclusive to America - it's global/international, and the markets are transnational. It would appear the legal issues are found in each nation, and nations may have different regulations and financial structures.
I think you misunderstood my analogy, I meant to say that reinventing America as in "reinventing the wheel"

Wrote my post too early in the morning , my bad anyways
 
Casablanca

One of Claude Rains best. Sure, he's famous for The Invisible Man, but I dunno. I just could never see him in that part.

o0)
 
Business Insider - FTX owned an $11.5 million stake in a tiny rural bank in Washington state with just 3 employees, bankruptcy hearing shows. The bank was initially valued at $5.7 million, and it specializes in agricultural loans to farmers.
https://www.msn.com/en-us/money/com...mployees-bankruptcy-hearing-shows/ar-AA14uG3x

Ties between the farmers' bank and the crypto exchange began in March this year, when FTX's sister company, Alameda Research, invested in Farmington's parent company, FBH. The purchase was led by Ramnik Arora, one of Sam Bankman-Fried's inner circle, who was often responsible for much larger deals.

For a decade, Farmington's bank held around $10 million in deposits. In the third quarter this year, deposits jumped to $84 million – 85% of which came from just four accounts, according to FDIC data cited by the Times.

Online, the bank now appears as "Moonstone Bank," a name which was trademarked a few days before FTX's investment. Moonstone doesn't mention cryptocurrency, but does say it wants to "support the evolution of next generation finance."

Farmington, Washington (pop. 146) touches the border with Idaho in a fairly remote area.

Some folks are wondering how FTX/Alameda got federal approval to buy its stake in Farmington. Some banking veterans believe that regulators would have not have knowingly allowed the crypto firm to make such a purchase. I guess that will be part the governments probe into how Alameda and FTX made deals.
 
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Astronuc said:
Some folks are wondering how FTX/Alameda got federal approval to buy its stake in Farmington. Some banking veterans believe that regulators would have not have knowingly allowed the crypto firm to make such a purchase. I guess that will be part the governments probe into how Alameda and FTX made deals.
Is there any implication SBF used/influenced the bank to process illicit transactions for FTX/Alameda-related stuff?
 
Chapter 11 seems optimistic w $276M on hand against several billion in liabilities

Also a joke the FTX filed an 11

Does anyone believe these entities will exist post- bankruptcy?
 
Another quick one from The Economist
Bitfront, an American crypto exchange, said it would cease operations, though it claimed that the move was unrelated to the collapse of FTX, the platform that went bankrupt earlier this month. Separately, BlockFi, a one-time darling of the industry, filed for bankruptcy and Kraken, another exchange, agreed to pay more than $360,000 to America’s Treasury for allowing transactions with users in Iran.
 
WSJ - Years before Sam Bankman-Fried’s crypto empire collapsed, a group of employees quit in a power struggle—after becoming concerned about what they say was his cavalier approach to risk, compliance and accounting. The employees worked at his trading firm, Alameda Research, and were some of his earliest colleagues, including Alameda’s co-founder, Tara Mac Aulay.
https://finance.yahoo.com/m/97e57b37-7d9b-306f-8114-645244acff51/early-alameda-staffers-quit.html
That should have been a red flag, or at least a yellow flag.

Bloomberg - FTX's LedgerX, a Solvent Corner of SBF's Fallen Empire, Will Put Millions in Bankruptcy Pot
https://finance.yahoo.com/news/ftx-ledgerx-175-million-available-021838863.html

LedgerX -- one of the few corners of Sam Bankman-Fried’s crumbled crypto empire that remain solvent -- is preparing to make available $175 million for use in FTX’s bankruptcy proceedings, according to people with knowledge of the matter.

The money, which could be transferred as soon as Wednesday, comes from a $250 million fund that LedgerX had set aside for a bid to get regulatory approval to clear crypto derivatives trades without intermediaries. The firm, which is known as FTX US Derivatives, withdrew its application with the US Commodity Futures Trading Commission as more than 100 FTX entities filed for bankruptcy on Nov. 11.

A spokesman for the CFTC, which regulates LedgerX, said that the agency is aware of a planned transfer. Representatives for LedgerX and FTX didn’t immediately respond to requests for comment.

Bloomberg - FTX's Sam Bankman-Fried Still Hasn't Answered These Questions Ahead of DealBook Summit Interview
https://finance.yahoo.com/news/sam-bankman-fried-set-face-221649350.html

Regarding the question of whether or not FTX (SBF) improperly used customer/depositor funds, I believe the answer is 'yes' based on the use of customer funds without expressed permission/consent.

The Securities and Exchange Commission and the Commodity Futures Trading Commission are investigating whether FTX misused customer funds, and it’s been reported that the company lent clients’ money to Alameda Research, the crypto trading firm co-founded by Bankman-Fried. The two companies shared close ties and FTX received some customer deposits through bank accounts held by Alameda. If FTX did misappropriate customers’ money, the next question would focus on what the funds were used for. Options include covering Alameda’s liabilities, as well as fueling venture investments, Bankman-Fried’s $1 billion bailout spree over the summer or purchases like his acquisition of a 7.6% stake in Robinhood Markets Inc. Bankruptcy records show that Alameda is owed $4.1 billion for loans it extended to “related parties,” including $1 billion to Bankman-Fried.

Interesting development in Japan
Bloomberg - FTX’s Japan Unit Drafts Plan to Return Client Funds
https://finance.yahoo.com/news/ftx-japan-unit-drafts-plan-124544036.html
 
Astronuc said:
should have been a red flag
To whom?

There seem to be too groups of people: Group A says this is risky, with no underlying value, a fiat currency made by people without the power to fiat. Group B says Group A is a bunch of old fuddy-duddies, don't understand the New Economy, and will be left behind when the windfall profits come.

Has anything changed?
 
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Vanadium 50 said:
To whom?
To those doing 'due diligence'.

Vanadium 50 said:
Has anything changed?
Apparently not? Maybe? Until the next time?
 
Interesting blog post from AWS insider on how they could not find any real world use for blockchain

the level 1 crypto skepticism is 'I am wary of cryptocurrencies, but blockchain is a revolutionary technology'

but 10+ years on, nothing has been built with blockchain that anyone would miss, other than the money they gambled on cryptocurrencies, so not only is crypto a bust, blockchain is as well.

https://www.tbray.org/ongoing/When/202x/2022/11/19/AWS-Blockchain
We really only had two questions, both for the big-finance players and for the startups. “What is it you want to do?” and “How does blockchain help?”

The answers, to our disappointment, failed to shatter any preconceptions. The things they wanted to do were perfectly reasonable. Some of them were damn exciting. They all needed databases. They could all make use of ledger-like data structures, also cryptographic hashing and signing. But, um, why did they need blockchain? Severe lack of clarity on that.

The key moment was when we got in a room with the CTO of this one startup, in Tribeca I think. When I heard their VC funding number I thought it was the valuation, not the investment dollars. The customer list was blue ****ing ribbon and don’t you forget it. These guys were razor-sharp.

They presented some of the systems they’d built and yep, we were impressed. Then, with the startup CTO in the room, one of my fellow engineers asked the key question: “All these systems, are there any that wouldn’t work without blockchain?” The guy didn’t even hesitate: “No, not really.”

And that was about that.
 
Poor baby.
https://www.msn.com/en-us/money/com...n-to-dollar100000-in-bank-account/ar-AA14JInS
"Am I allowed to say a negative number?" he told the outlet, when asked about his personal finances. "I mean, I have no idea. I don't know. I had $100,000 in my bank account last I checked," he said.

Bankman-Fried said "basically everything" he had was tied up in the now-failed company, making his financial situation "complicated."
 
artis said:
I don't believe that, there must be some money put aside in a safe place. This guy doesn't seem like the type of person to forget about himself...

The fact that he lost his robinhood stock makes me think he might have just been paying 0 attention.

That said he is supposed to own like 100 million dollars of real estate in the Bahamas. Who knows if that's being sold for the bankruptcy or if he's just keeping it.
 
https://www.cnbc.com/2022/11/30/for...ed-says-i-didnt-ever-try-to-commit-fraud.html
Former FTX CEO Sam Bankman-Fried, in possibly the understatement of 2022, said Wednesday, “I’ve had a bad month.”
...
“I wasn’t running Alameda, I didn’t know exactly what was going on, I didn’t know the size of their position,” Bankman-Fried said. “A lot of these are things I’ve learned over the last month [in the days leading up to bankruptcy.]”

New leadership at FTX said that Bankman-Fried exercised significant control over the entire empire.
I've heard this before.

"I'm just a poor boy nobody loves me. He's just a poor boy from a poor family"

https://www.businessinsider.com/sam-bankman-fried-ftx-bahamas-house-parents-name-for-staff-2022-12
Reuters reported last week that a $16.4 million house in a gated community with beach access in the Bahamas listed Bankman-Fried's parents, Joseph Bankman and Barbara Fried, as signatories and was described in property records as a "vacation home."

A spokesperson for his parents, both Stanford University law professors, previously told Reuters that they had been trying to return the deeds to the company "since before the bankruptcy proceedings."
 
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Coinbase Global Inc. Chief Executive Brian Armstrong expressed skepticism about SBF's explanation about the movement of US$8 billion from his crypto exchange FTX to brokerage arm Alameda Research.
Coinbase Global Inc. Chief Executive Brian Armstrong said Sam Bankman-Fried’s explanation of sloppy accounting as the reason US$8 billion moved from his crypto exchange FTX to brokerage arm Alameda Research doesn’t stand up to scrutiny. Bankman-Fried gave the reasoning in an interview with Bloomberg published on Friday.
https://finance.yahoo.com/news/coinbase-ceo-armstrong-says-bankman-055501313.html

“I don’t care how messy your accounting is (or how rich you are) – you’re definitely going to notice if you find an extra $8B to spend,” Armstrong tweeted on Sunday, in reference to the funds showing up at Alameda. “Even the most gullible person should not believe Sam’s claim that this was an accounting error.”

A “substantial amount of assets” of collapsed cryptocurrency exchange FTX have either been stolen or are missing, an attorney for FTX said on Nov. 22 at its first hearing in the federal bankruptcy court in Delaware, U.S.
 
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1670447508378.png
 
Did Sam Bankman-Fried Finally Admit the Obvious?

Daniel Kuhn, CoinDesk
Thu, December 8, 2022, 1:30 PM

https://www.coindesk.com/consensus-...-sam-bankman-fried-finally-admit-the-obvious/

Interesting read.
Despite the focus on FTX following its catastrophic collapse, it’s remarkable how little we know about how the crypto exchange and its in-house trading firm Alameda Research actually operated. New CEO John Jay Ray III has called Sam Bankman-Fried’s crypto trading empire the “greatest failure of corporate controls” he’s seen.

Wednesday, Coffeezilla, a YouTuber with a rising star who has made a career of shining a light on sketchy projects in and out of crypto, pressed Bankman-Fried for information related to how different customer accounts were treated at the exchange. It turns out, there wasn’t much differentiation – at the very least during the final days the exchange was in business, Bankman-Fried admitted.

"At the time, we wanted to treat customers equally,” SBF said during a Twitter Spaces event. “That effectively meant that there was, you know, if you want to put it this way, like fungibility created” between the exchange’s spot and derivatives business lines. For Coffeezilla, this looks like a smoking gun that fraud was committed.

At the very least, this is a contradiction of what Bankman-Fried had said just minutes before when first asked about the exchange’s terms of service (ToS). “I do think we're treating them differently,” Bankman-Fried said, referring to customer assets used for “margin versus staking versus spot versus futures collateral.” All of those services come with different levels of risk, different promises made to customers and different responsibilities for the exchange.

According to FTX’s ToS, everyday users just looking to buy or store their cryptocurrencies on the centralized exchange could trust they were doing just that, buying and storing cryptographically unique digital assets. But now, thanks to skillful questioning by Coffeezilla, we know there were instead “omnibus” wallets and that spot and derivatives traders were essentially assuming the same level of risk.

We can also assume this was a longstanding practice at FTX. Bankman-Fried noted that during the “run on the exchange”, when people were attempting to get their assets off before withdrawals were shut down, FTX allowed “generalized withdrawals” from these omnibus wallets. But he also deflected, saying what, you wanted us to code up an entirely new process during a liquidity crisis?

SBF has apparently deflected questions on FTX's ToS, since he would have to admit that FTX agreed not to use customer cryptocurrency without expressed consent, but then he proceeded to use customer funds without their expressed consent. More details in the article.

There would be a “chargeable fraud case” if spot assets weren’t backed 1:1 as promised, or were used as collateral for loans or other purposes, Renato Mariotti, a former federal prosecutor, told CNBC. Bankman-Fried has said previously that “dollars” on the exchange and hedge fund were “generally fungible,” being used to reportedly fund personal loans to emloyees and make venture deals. Now, too, did he admit client funds were "effectively" interchange – at least in the final hours.