Normal banks do loan out their deposits, so just because they loaned out money that was deposited doesn’t automatically mean that it’s fraudulent.
Furthermore, I will point out, if FTX did engage in fraud here, it was clearly in fact not a good idea in this case: I think the lasting consequences to EA—and the damage caused by FTX to all of their customers and employees—will likely outweigh the altruistic funding already provided by FTX to effective causes.
I don’t think that argument would convince anyone who thinks about it, because they took a risk for such an outcome and did not expect this outcome to be the most likely outcome.
Friedman said in one of his interviews that he thinks that paying 50 utility to get 110 utility with 50% probability and 50% 0 utility is something that one should always do. If every dollar would have the same value, betting 50 billion with a 50% of getting 110 billion and 50% chance to get zero, is something one should do according to his view of the world. This was partly in describing how he believes that it’s worthwhile to take risks as an entrepreneur.
He likely lost a risky bet he made. If what he was saying was true out likely outcomes, I think he said that he thought that there was a 5% likelihood of losing his fortune. In his likely overconfident view, he would expect that he thought what happened now was something like a 5% probability event. His model probably also had more than 5% probability of his plan producing >100 billion for EA causes (and no customers losing money).
You can still argue that he shouldn’t have made that bet, but arguing that he shouldn’t have because this outcome is bad doesn’t really address why he did what he did.
Their terms of service had explicit clauses about using customer funds “as belonging to FTX trading”. Unsure if it also applied to using customer funds as loan collateral but that would make sense.
(B) None of the Digital Assets in your Account are the property of, or shall or may be loaned to, FTX Trading; FTX Trading does not represent or treat Digital Assets in User’s Accounts as belonging to FTX Trading.
That an exchange doesn’t go play poker on the stock market with client money is so far beyond a thing needing to be promised. It’s like asking whether or not a garage had “made a promise” to you that they wouldn’t total your car in a drag race over the weekend. SBF secretly and without customer knowledge used their funds to finance trades, which is theft.
In addition to the terms of service issue Kerkko mentioned in a neighbouring comment, Will MacAskell claims in this thread on Twitter there was a “(later deleted) tweet from Sam claiming customer deposits are never invested.”
What exactly did FTX promise its customers?
Normal banks do loan out their deposits, so just because they loaned out money that was deposited doesn’t automatically mean that it’s fraudulent.
I don’t think that argument would convince anyone who thinks about it, because they took a risk for such an outcome and did not expect this outcome to be the most likely outcome.
Friedman said in one of his interviews that he thinks that paying 50 utility to get 110 utility with 50% probability and 50% 0 utility is something that one should always do. If every dollar would have the same value, betting 50 billion with a 50% of getting 110 billion and 50% chance to get zero, is something one should do according to his view of the world. This was partly in describing how he believes that it’s worthwhile to take risks as an entrepreneur.
He likely lost a risky bet he made. If what he was saying was true out likely outcomes, I think he said that he thought that there was a 5% likelihood of losing his fortune. In his likely overconfident view, he would expect that he thought what happened now was something like a 5% probability event. His model probably also had more than 5% probability of his plan producing >100 billion for EA causes (and no customers losing money).
You can still argue that he shouldn’t have made that bet, but arguing that he shouldn’t have because this outcome is bad doesn’t really address why he did what he did.
They weren’t a bank. They were an exchange.
Did they have a document where they described the promise they made about what they did?
I think how bad what they did happened to be depends a lot on the specific promises they made.
Their terms of service had explicit clauses about using customer funds “as belonging to FTX trading”. Unsure if it also applied to using customer funds as loan collateral but that would make sense.
(B) None of the Digital Assets in your Account are the property of, or shall or may be loaned to, FTX Trading; FTX Trading does not represent or treat Digital Assets in User’s Accounts as belonging to FTX Trading.
(Terms of service PDF available here https://help.ftx.com/hc/en-us/articles/360024788391-FTX-Terms-of-Service )
Okay, in that case it seems they clearly broke them.
That an exchange doesn’t go play poker on the stock market with client money is so far beyond a thing needing to be promised. It’s like asking whether or not a garage had “made a promise” to you that they wouldn’t total your car in a drag race over the weekend. SBF secretly and without customer knowledge used their funds to finance trades, which is theft.
In addition to the terms of service issue Kerkko mentioned in a neighbouring comment, Will MacAskell claims in this thread on Twitter there was a “(later deleted) tweet from Sam claiming customer deposits are never invested.”