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

[nsaspook]

 

[Vanadium 50]

So, what have I learned from that video? Apart from when Tiffany Fong pees (and I could have gone my whole life without that bit of oversharing)? The Big Dumb Puppy defense isn't even fooling Bankman-Fried's friends.

However, the lovely and possibly pollakiurian Ms. Fong has missed a critical problem with this plan. If Bankman-Fried argues "My lawyers told me it was OK and I always listen to my lawyers" that's contradicted by appearing on the stand against his lawyers' advice.

Then there is the absurdity of it all "I could afford to hire the best lawyers in the world, and they told me it was perfectly OK to take my clients' deposits and spend them myself - and no, you can't talk to them that conversation is privileged."

 

[Astronuc]

Some more insight into to the dysfunction that was FTX/Alameda.

https://www.theverge.com/2023/10/25...ried-trial-sbf-language-yolo-yup-stuff-things

oof!

 

[Vanadium 50]

oof!

<cringe>

 

[berkeman]

https://www.theverge.com/2023/10/25...ried-trial-sbf-language-yolo-yup-stuff-things

https://getyarn.io/yarn-clip/91188d86-c84d-4ed4-8d97-f7bdf2f7d3e9/gif

 

[Astronuc]

Bankman-Fried says he knew little about cryptocurrencies before starting FTX​

https://www.msn.com/en-us/money/mar...ptocurrencies-before-starting-ftx/ar-AA1iXOWJ

"I had absolutely no idea how they worked," Bankman-Fried said in court on Friday. "I just knew they were things you could trade."

Bankman-Fried said he gave the exchange about a 20% chance of being successful when he partnered with Gary Wang, who has testified against Bankman-Fried in the trial.

Bankman-Fried said that he was not aware of the so-called digital back door that Alameda Research, his other company, used to withdraw FTX customer funds. That access is part of the key charges by prosecutors.

That's kind of a bewildering statement. Why would people invest $millions with a guy who knew little about the investment vehicle? So what happened with 'due diligence'?

 

[Astronuc]

<cringe>

It reminded me of Sgt Oddball (Donald Sutherland) in Kelly's Heroes.

 

[Vanadium 50]

So I checked out the delightful yet overhydrated Ms. Fong. She claims to have lost $200K in Celsius, but couldn't pass up the interest rate,

At a time when short-term Treasuries were paying 1.5%, Celsius was paying up to 17%. In "regular" economics, increased interest compensates for increased risk. (In "crypto economics", "what do those old fuddy-duddies in their tweed blazers know? That's so 20th century! This time it's different. Boomer.")

To put that in perspective, that's about 2/3 the rate banks to charge for credit cards to people who are already bankrupt.

Those of us who remember the S&L crisis of the 1980's (i.e. "Boomers") also remember that there is a flip side to skyrocketing yields.

 

[Vanadium 50]

Amusing fact of the day - FTX apparently had seven balance sheets. "How much did we make?" "Take your pick - how much would you like to have made?"

 

[russ_watters]

So I checked out the delightful yet overhydrated Ms. Fong. She claims to have lost $200K in Celsius, but couldn't pass up the interest rate,

At a time when short-term Treasuries were paying 1.5%, Celsius was paying up to 17%. In "regular" economics, increased interest compensates for increased risk. (In "crypto economics", "what do those old fuddy-duddies in their tweed blazers know? That's so 20th century! This time it's different. Boomer.")

Somewhere in my house I have a 25 year old copy of "The Only Investment Guide You'll Ever Need" that talks about a similar deal people went after in Mexican savings accounts in I think the '80s. But that one had less reward and less risk. They didn't lose all their money just most of it. But what does he (the author) know, he's a boomer.

Amusing fact of the day - FTX apparently had seven balance sheets. "How much did we make?" "Take your pick - how much would you like to have made?"

If Bernie Madoff had written a book, that would have been Chapter 2.

 

[berkeman]

She claims to have lost $200K in Celsius

My brain just short-circuited...

 

[Vanadium 50]

I've been accused of being an irrational hater of crypto, as well as a boomer, which I guess is much the same thing. That's not true. I think there is a utility to crypto, apart from (*as previously discussed) paying Tony Soprano to have one's girlfriend whacked.

A currency has two functions (some would say three, but I think the thirtd is subsumed into the 2nd)

1. A medium of exchange
2. A stable store of value

At its core, it allows goods and services to be traded across space and actoss time. ("I'll give you this pen now if you give me a cupcake on Tuesday/")

Note that "like stonks, crypto can only go up" not only not a necessary function of currencies, but it conflicts with requirement #2.

So, where might it be used? Where national currencies are failing. The Argentine peso, for example, arguably the Venezuelan Bolivar and Turkish lira, and previously the Zimbabwe dollar. One might even imagine that all the countries with distressed currencies use the same one, as a means of spreading risk.

However, this is unlikely to happen:

(1) Currencies don't collapse in a vacuum. Policies of the government issuing them drive them to collapse. Argentina used to be prosperous. Adopting another currency has political implications, and effectively reduce the power of the governments: they can no longer print money to fund whatever they want.

This is a criticism of the Central African Franc. it has curbed inflation, but it has prevented governments from addressing "urgent needs of society" by printing more money.

(2) There isn't enough crypto out there. The three countries I mentioned together need about 4x the total value of Bitcoin.

(3) While in theory diversification reduces risk, there's also a risk of
contagion. If one currency tanks, it might take the others with it.

(4) There are simpler alternatives. Ecuador just uses the US Dollar. Liechtenstein the Swiss Franc. San Marino uses the Euro, and so on.

So while in theory one can shore up troubled national currencies this way, it's not very practical, and most people in these countries worried about it just buy more stable currencies (when they can) to protect themselves.

 

[Vanadium 50]

My brain just short-circuited...

I think her statement needs some clarification. If she bought 30,00 at a quarter (total $7500), watched it rise to $7, and then watched it fall down to a difficult-to-redeem quarter, has she lost $200,000? Or $7500? Or nothing it all?

 

[phinds]

I think her statement needs some clarification. If she bought 30,00 at a quarter (total $7500), watched it rise to $7, and then watched it fall down to a difficult-to-redeem quarter, has she lost $200,000? Or $7500? Or nothing it all?

As you well know, as far as the IRS is concerned, she hasn't lost anything. Yet. She has to redeem them before such a call can be made.

 

[Vanadium 50]

Reports of the last day of testimony described Bankman-Fried as "evasive", "arrogant", "dishonest" and "unlikable". While "unlikable" shouldn't matter, if the facts are against you, your only hope is for one of the jurors to thiink "let's give thge Big Dumb Puppy a break." You don't want them getting the message "Who the heck are you to pass judgment on me? Heck, I am so smart I stole 8 billion dollars! What have you twelve ever done?"

I have been debating mentioning this, but at MIT Bankman-Friend and Wang both lived at Epsilon Theta. MIT's living groups all have their own culture, even within the dorms, where people associate with a floor, side of the building and/or entryway. Your extra-academic life revolves around the 30-100 people in your living group. Each living group has its own unique culture.

EΘ is, even by MIT standards, a nerd house. As a rule, they are nice people, but they know The One True Best Way To Do Things. While most people would say "Yeah, we do such and such differently, but it works well for us", the EΘ philosophy is more "Our way is simply the best" (well, they would probably say something more like "inherently superior", but you get my drift.)

The various living groups don't make a student's personality, but they each attract a certain personality. When I learned where Bankman-Friend and Wang lived, my reaction wqas "Yeah, I can see that." And whan I read about how today's testimony went, it was "Yeah, I can see that too."

 

[nsaspook]

https://www.npr.org/2023/10/31/1209498750/sam-bankman-fried-trial-ftx-alameda-testimony-defense

Sam Bankman-Fried took a big risk by testifying in his own trial. It did not go well​

 

[Vanadium 50]

While it does look like his goose was cooked, it was pretty well cooked before he testified. It's not clear he had anything to lose.

I think his biggest setback today was actually the discussion of the jury instructions. The jury will be told that even if he did not know something, he is still guilty if he should have known and avoided knowing. That pretty much renders the "I don't recalls" ineffective.

Also, since he's been on the stand, BTC and ETH have been rising. I'm not sure what message the market is sending. It sure sounds like "Yeah, they're crooks, but not as crooked as we thought they were last week."

 

[fluidistic]

I've been accused of being an irrational hater of crypto, as well as a boomer, which I guess is much the same thing. That's not true. I think there is a utility to crypto, apart from (*as previously discussed) paying Tony Soprano to have one's girlfriend whacked.

A currency has two functions (some would say three, but I think the thirtd is subsumed into the 2nd)

1. A medium of exchange
2. A stable store of value

At its core, it allows goods and services to be traded across space and actoss time. ("I'll give you this pen now if you give me a cupcake on Tuesday/")

Note that "like stonks, crypto can only go up" not only not a necessary function of currencies, but it conflicts with requirement #2.

So, where might it be used? Where national currencies are failing. The Argentine peso, for example, arguably the Venezuelan Bolivar and Turkish lira, and previously the Zimbabwe dollar. One might even imagine that all the countries with distressed currencies use the same one, as a means of spreading risk.

However, this is unlikely to happen:

(1) Currencies don't collapse in a vacuum. Policies of the government issuing them drive them to collapse. Argentina used to be prosperous. Adopting another currency has political implications, and effectively reduce the power of the governments: they can no longer print money to fund whatever they want.

This is a criticism of the Central African Franc. it has curbed inflation, but it has prevented governments from addressing "urgent needs of society" by printing more money.

(2) There isn't enough crypto out there. The three countries I mentioned together need about 4x the total value of Bitcoin.

(3) While in theory diversification reduces risk, there's also a risk of
contagion. If one currency tanks, it might take the others with it.

(4) There are simpler alternatives. Ecuador just uses the US Dollar. Liechtenstein the Swiss Franc. San Marino uses the Euro, and so on.

So while in theory one can shore up troubled national currencies this way, it's not very practical, and most people in these countries worried about it just buy more stable currencies (when they can) to protect themselves.

I really like your informative post, honesty and so on. There's one thing that's "lacking" in your critics, in my opinion. It is looking for flaws in dissecting cryptocurrencies. I.e. how they work. Can they be "hacked", and under which circumstances. What would happen if they get hacked in a certain way. An analysis about the balance between scalability, security and decentralization (the famous trilemma). A discussion about privacy, and things like that.
What to think about their development? I.e. their updating codes on Github done by a handful of devs. For some cryptos like Bitcoin, the users (miners in that case) aren't required to update, they only do if they agree, but then it creates forks I believe, I'm not even sure. What about those things?
If someone gives strong arguments that X, Y, and Z cryptos have huge flaws in their inner-workings, then that would be worth much more than their popularity, at least to me.

 

[Vanadium 50]

I don't see hacking as inherently different from counterfeiting. It's true that the US government spends more effort on preventing this than RandomCrypto, but they also have much more exposure than RandomCrypto.

I consider privacy a separate issue, but it's probably worth mentioning that not everyone thinks this is a good idea. Some governments want to check on what their citizenry is up to. Some corporations want to collect and sell your information. This is true for crypto and for national currencies. It may be an issue, but it's a separate issue.

It's also not entirely a new issue. There is the stone money of the island of Yap. These stones are too big to put in your pocket (or lift, for that matter) and the way they are exchanged is that the recipient adds his name to a memorized list of transactions. (Bon gave this to Joe in exchange for four pigs, and then Joe gave it to Warren in exchange...." Sound familiar?

 

[Bandersnatch]

Not only have the Yapese been doing crypto since before it was cool, they even use their blockchain profits to live on a tropical island. What a bunch of promethean trailblazing legends.

 

[Vanadium 50]

It gets better. Where is Yap? The Caroline Islands.
Coincidence? I think not.

 

[Astronuc]

As the trial of Sam Bankman-Fried nears its conclusion, the disgraced crypto founder took the stand one final time on Tuesday to face cross-examination under Assistant U.S. Attorney Danielle Sassoon.

The first few hours of Sassoon's scrutiny came on Monday, with Bankman-Fried claiming ignorance as she confronted him with past statements he'd made to reporters and coworkers, all revealing that he'd allowed Alameda, the trading firm for his exchange FTX, to have special privileges, eventually leading to the collapse of his crypto empire in November 2022.

https://www.yahoo.com/finance/news/bankman-fried-lieutenants-directed-them-164332140.html

Crypto-currency or klepto-currency?

 

[Vanadium 50]

The most ominous statement was "Bankman-Fried's first criminal trial is expected to conclude in early November, with a second set of charges set to be presented in 2024."

That is not good for him.

Normally, however, (disregarding the 'dual sovreignty' argument) one cannot be tried twice on the same set of facts, though. I wonder what the plan is.

 

[phinds]

Normally, however, (disregarding the 'dual sovreignty' argument) one cannot be tried twice on the same set of facts, though. I wonder what the plan is.

One cannot be tried for the same CRIME. If the facts were to indicate a crime for which he has never been tried or even indicted then using the same facts is not a problem.

 

[Vanadium 50]

One cannot be tried twice for the same "elements" of a crime. If I shoot and kill you, and am convicted of (or plead guilty to) manslaughter, I cannot be retried for your murder. Double jeopardy relates to the guilty as well as the innocent. (Probably even more so)

Assuming Bankman-Fried is found guilty, the government can say "OK, you committed crimes in October that you've been convicted of. We're now going to try you for different actions committed in December." What they cannot do is say "Your actions defrauded New Yorkers; now we're going to try you again because those same actions also defrauded Vermonters."

 

[nsaspook]

4.5 hours.

 

[nsaspook]

 

[Astronuc]

On Nov. 2, a New York jury found Bankman-Fried guilty on all seven counts he was charged with by the Department of Justice, including defrauding customers and investors of his crypto exchange FTX. Bankman-Fried, the jurors decided, was part of a conspiracy to extract more than $8 billion from FTX customers and funnel it to his trading firm Alameda Research, which then spent it on Bahamian real estate, startup investments and political donations.

The jury’s decision comes exactly one year after Bankman-Fried’s empire first started to crumble, when the crypto outlet Coindesk published a leaked balance sheet from Alameda Research. The balance sheet appeared to show that Alameda was in much worse financial shape than it had let on. Fears about FTX’s solvency quickly mounted, with customers withdrawing billions of dollars. But FTX, it turned out, did not have the funds to pay them back, and the company declared bankruptcy less than two weeks later.

Since then, Bankman-Fried has consistently denied that he misused customer funds. He pleaded not guilty and testified of his innocence last week in a Manhattan courthouse. But the jury was not convinced. It took them less than five hours for them to find him guilty on all counts.

https://www.yahoo.com/finance/news/biggest-bombshell-allegations-sam-bankman-133410648.html

Edit/Update:

FTX is bankrupt and SBF was on trial, so why are people still buying FTT tokens?​

Experts say the coin likely has no long-term value, but it could prove lucrative for professional traders who can quickly flip it.

 

[Vanadium 50]

That sure didn't take long to deliberate, did it?

I don't know how crypto tokens work for bankrupt issuers. I would imagine they are liabilities, but they could be picked up by some other company in the restructuring plan.

There is money to be made in trading stocks for bankrupt companies (symbol ends in Q). I did this, mostly by mistake. I bought a small amount to ensure access to the annual meeting. Thing is, these stocks are really volatile, and it went up so much I couldn't resist selling it.

While I blundered into this by accident, I assume Wall Street has hired people to do this full time, and i imagine they get good at it.

 

[Vanadium 50]

Some more of DOJs strategy is becoming clear.

One of the things that Bankman-Fried will be charged with in the next trial is "bribing a foreign official". That's more complicated, and nuanced - with Bankman-Fried's lifetime this was not just allowed, it was tax deductible!

But suppose he gets, say 57 years. Half the max, and 5x what Elizabeth Holmes got for stealing an order of magnitude less. The DOJ can go to him and say "If you plead guilty to all these new crimes, we'll give you 20 years - to run concurrently" Barnkman-Fried has little to lose by accepting, so a whole stack of other charges can be quickly and cheaply disposed of.

Maybe he gets to go to Pensacola and not Leavenworth if he doesn't put up much of a fight.

His lawyers made an interesting statement: "We respect the jury's decision. But we are very disappointed with the result. Mr. Bankman Fried maintains his innocence and will continue to vigorously fight the charges against him." Note that they did not say that they would continue to vigorously fight the charges against him.

 

[nsaspook]

A pretty good overview of this SBF entire saga.


If he had just been happy with the first Billion and walked away it's unlikely he'd be in the slammer now.
I know

 

[morrobay]

Indeed SBF was disingaged from the very real possibility of being arrested. From November 2022 when FTX imploded to his arrest December 2022 he had a month in the Bahamas to get a fast boat to Cuba. Seems it is unknown how much real money/cash he had access to. But sure it was enough to be very wealthy in Cuba.

 

[Vanadium 50]

I think I said it before - Dubai is a nice place if you have money, and perhaps more tolerant of rich Americans than Cuba. If he prefers Europe, there is always Montenegro. They not only have no extradition with the US, they also have something called citizenship through investment, which is absolutely Not A Bribe.

 

[Vanadium 50]

Now that that bit of drama is on pause - with more to come I am sure (I do not think Mr. Bankman-Fried will do well in prison, even Camp Cupcake) there is something I don't get.

National currencies rise and fall depending on their balance of trade. Canada sends the US maple syrup, and the US sends Canada semiconductors. The relative demand for each of those items sets the relative value of the USD and the CAD. Ultimately, the maple syrup producers want to be paid in CAD and Intel in USD, (Although this is usually handled out of view by importers and banks)

So why do cryptocurrencies fluctuate among each other? Is there anything one can buy with one that cannot be bought with another? We saw the case of the doctor who wanted his girlfriend whacked, and he paid in crypto rather than USD. Fine...but which crypto. Do hit-men not take Etherium?

 

[Vanadium 50]

My brain just short-circuited...

Bored, I looked into it. She claims to have lost 3 bitcoins and 11 ether....etheriums? Etheria? When Celsius reached...um...absolute zero. Today, this is a little more than half the stated $200K. It was less at the time, so she's probably calculating from the peak.

Of course, this does prompt the question of how losing a bundle qualifies one to be what they call an "influencer". It sounds a lot like "I lost my shirt - you can too!"

 

[Astronuc]

Column: Silicon Valley VCs wanted to believe SBF's lies. Now they want you to believe their excuses.
https://finance.yahoo.com/news/column-silicon-valley-vcs-wanted-110021949.html

What's more important is examining how Bankman-Fried managed to gull the nation's ostensibly most sophisticated investors into bankrolling his firm — which, as testimony at his trial and discoveries by FTX's post-bankruptcy chief executive have shown, was built on quicksand.

Sequoia was not alone. Public pension funds in Alaska, Washington State and Ontario, Canada, had direct or indirect investments in FTX. So did respected money managers and venture investment firms such as BlackRock, Tiger Global Management, Lightspeed and Softbank.

There's scant evidence that any of them performed the due diligence — a focused inquiry into a prospective investment — that would have exposed the discrepancies between Bankman-Fried's claims about his firm's operations and the reality.

It's not merely that these investors were snowed by Bankman-Fried's unique variety of what the veteran and vigilant short-seller James Chanos calls "techno-gibberish"; it's that something spurred them to plunge without looking. To some extent it may have been "FOMO," or "fear of missing out."

As Alan Greenspan mentioned - "irrational exuberance".

 

[russ_watters]

Due diligence? He said "blockchain" - give him whatever he wants before someone else does!

I'll just leave my Juicero here if anyone wants it and show myself out.

 

[Vanadium 50]

You mean, like, we shouldn't take financial advice from Giselle Bundchen?

I mean, she's no Kardashian, but still....

 

[nsaspook]

This is how you hack code.

 

[Vanadium 50]

Can you give us a synopsis of what you found new and important in that rather lengthy video?

 

[nsaspook]

Can you give us a synopsis of what you found new and important in that rather lengthy video?

Important? Not much. New? The Python software hack using stock indexes, multiplying by some random number and dividing a billion tells me everything I need to know about what a grifting clown show this was.

 

[Vanadium 50]

Would you feel better if the fudge factor were generated the old-fashioned way, by hand, and not the new-fangled computer-generated ones?

"Bob's handcrafted cons!
Tired of mass-produced grift? Try Bob's handcrafted cons. Just the way Mom used to make - provided your Mom was Ma Barker. No computer-generated grift here. At Bob's we carry only the finest locally-sourced cons, No computers. No Nigerian Princesses.
Try Bob's!"

 

[nsaspook]

Would you feel better if the fudge factor were generated the old-fashioned way, by hand, and not the new-fangled computer-generated ones?

"Bob's handcrafted cons!
Tired of mass-produced grift? Try Bob's handcrafted cons. Just the way Mom used to make - provided your Mom was Ma Barker. No computer-generated grift here. At Bob's we carry only the finest locally-sourced cons, No computers. No Nigerian Princesses.
Try Bob's!"

Yes, I would feel something but I don't know if better is the correct term.

There's a high probability this grift method and others from FTX will be recommended by some AI chatbot once it digests the transcripts of the trial. Not just fraudulent code, but bad fraudulent code.

https://newsletter.mollywhite.net/p/the-fraud-was-in-the-code

Numpy.random is not cryptographically secure or as FTX proved, Numpy.random is not financially secure either.

 

[Vanadium 50]

The story of this con is not complicated. As I said, this is a bank that took customer deposits, and then spent them.

To cover it up, they inflated their assets with magic beans...er...Dutch tulip futures...no wait, "SamCoins". They liked using the word "illiquid", but the better word is "worthless" or maybe "made up".

The balance sheets were clearly just lies.

I think the more interesting question is who was scammed - does this include any members of The Outfit? Mexican drug cartels? African warlords? If any of these people were taken in, Mr. Bankman-Fried might consider prison a better option than being "Made a 'zample of".

Many years ago, Chicago mob boss Tony "Big Tuna" Accardo was robbed. Over the next few months, parts of the gang that did it were found all over town. And by parts, I mean parts.

 

[Vanadium 50]

Many years ago, Chicago mob boss Tony "Big Tuna" Accardo was robbed. Over the next few months, parts of the gang that did it were found all over town. And by parts, I mean parts.

Ack! I missed a pun!
They used to be members of the gang that knocked over The Big Boss. And then they were dis-membered.

Back to Bitcoin. The FTX sacm sounds a lot like the MF Global collapse, where customer deposits were used to pay back loans. The customers ultimately got their money back, and the CEO (and former US Senator and NJ Governor) Jon Corzine was never convicted of anything.,

 

[kyphysics]

Beating S&P 500. . .how high will its market cap get? Crypto is equivalent to a Google/Alphabet. . .Amazon. . .Nvidia, etc. - the greatest American (global too) companies not named Apple and Microsoft (the latter two with $2.75T market caps).

 

[nsaspook]

What is the Total Crypto market?

Every coin that's been mined?
https://www.coingecko.com/en/coins/plutonian-dao
https://www.coingecko.com/en/coins/ftx-token

 

[kyphysics]

What is the Total Crypto market?

Every coin that's been mined?
https://www.coingecko.com/en/coins/plutonian-dao
https://www.coingecko.com/en/coins/ftx-token

Sum of all [coins x price]? I assume its market cap is defined something like that.

To think total crypto is worth more than Amazon or Google is pretty amazing. Those holding crypto presumably think it'll go up a lot more. But that would mean it could get into Apple/Microsoft territory and more.

 

[nsaspook]

Sum of all [coins x price]? I assume its market cap is defined something like that.

To think total crypto is worth more than Amazon or Google is pretty amazing. Those holding crypto presumably think it'll go up a lot more. But that would mean it could get into Apple/Microsoft territory and more.

Actually more in value is IMO questionable.

​

Market cap doesn’t = value​

It’s essential to find out what a company or asset you are investing in is worth when making an investment. If you understand what something is worth (its value), it’s possible to judge whether an investment is over or underpriced.

Herein lies the problem. Market cap is about price, not value. It does not reflect the value of the company or crypto asset you’re investing in. This is a fundamental distinction that is often overlooked. Price is what you pay for a coin or token, it has nothing to do with what you actually get aka value. It’s an indication of what people are paying for something, and this is usually driven by irrational sentiment, which has little connection to an asset’s real value. Assuming that whatever the market is willing to charge for an asset is equal to what it’s worth is a big mistake.

 

[nsaspook]

https://www.404media.co/hello-sir-m...-asks-fbi-for-his-seized-cryptocurrency-back/

‘Hello Sir/Ma’am’: Person Linked to Scam Asks FBI for His Seized Cryptocurrency Back​