There’s mounting evidence that FTX was engaged in theft/fraud, which would be straightforwardly unethical.
I think it’s way too early to decide anything remotely like that. As far as I understand, we have a single leaked balance sheet from Alameda and a handful of tweets from CZ (CEO of Binance) who presumably got to look at some aspect of FTX internals when deciding whether to acquire. Do we have any other real information?
Exchanges are NEVER supposed to lend out customer funds without their consent, and it’s clear FTX did that. What’s more, they should not accept their own “stock” as collateral. Accepting your own stock as collateral is like opening the book of world-ending spells and randomly chanting incantations; there’s a reason no one does it.
Normally it’s impossible to bankrupt a company by shorting its stock. But if the company in question holds its own stock as collateral, that changes. You can crash the price of stock (or a token in this case) by borrowing a ton of it and then selling it on the market. And now the company has a major problem: they’ve lent out user funds, but the collateral that was supposed to protect them in case the borrower defaulted is now worthless.
If users become aware of the situation, a bank panic will ensue as everyone tries to get their money out before the bank (or exchange in this case) runs out. After that, all they will have left is their useless stock, which they can’t redeem for assets they owe to users.
If you have huge reserves, this wouldn’t really matter much because you could pay them off with those other reserves. But when you’ve lent out over half of all user funds to this one borrower in particular without their knowledge, accepted collateral that is now worth nothing, and lied about it publicly on Twitter...
You’re in for a world of pain. Sam Bankman Fried did commit fraud, and knowingly lied about it to the public. I will happily eat my shorts if he turns out to be innocent.
I think what he did is a crying shame. I deeply admired him before this all went down. He had created a money printing machine and was using it to fund some of the causes I hold most dear.
I still don’t really understand why he did what he did. He did not strike me as a dishonest person, though maybe I am just naive. My best guess is his hedge fund made some really bad investments, and instead of taking the L, he raided the piggy bank thinking he could make it all back before anyone found out.
Are you saying that it’s too early to claim “SBF committed fraud”, or “SBF did something unethical”, or “if SBF committed fraud, then he did something unethical”?
I think we have enough evidence to assert all three.
The direct information I’m aware of is (1) CZ’s tweets about not acquiring, (2) SBF’s own tweets yesterday, (3) the leaked P&L doc from Alameda. I don’t think any of these are sufficient to decide “SBF committed fraud” or “SBF did something unethical”. Perhaps there is additional information that I haven’t seen, though.
(I do think that if SBF committed fraud, then he did something unethical.)
Perhaps there is additional information that I haven’t seen, though.
You have to be confident that no such information is available to say that it’s too early for others to have made up their mind. It sounds like it’s too early for you, but you don’t know how much time others have spent following the situation. Obviously nothing is slam-dunk certain when the situation’s still developing, but it’s often the case that you can draw fairly strong conclusions based on a few unusual data points. You can’t assess whether that’s the case if you’re not aware of all the data points that are out there.
I think it’s way too early to decide anything remotely like that. As far as I understand, we have a single leaked balance sheet from Alameda and a handful of tweets from CZ (CEO of Binance) who presumably got to look at some aspect of FTX internals when deciding whether to acquire. Do we have any other real information?
Having spent the better part of the last three days looking into this, I disagree.
FTX lent $10 billion out of $16 billion in customer assets to a hedge fund in which its CEO owned a 50% stake.
It accepted at least $4 billion in collateral of its own token, FTT. The total circulating supply at the time was less than that.
Exchanges are NEVER supposed to lend out customer funds without their consent, and it’s clear FTX did that. What’s more, they should not accept their own “stock” as collateral. Accepting your own stock as collateral is like opening the book of world-ending spells and randomly chanting incantations; there’s a reason no one does it.
Normally it’s impossible to bankrupt a company by shorting its stock. But if the company in question holds its own stock as collateral, that changes. You can crash the price of stock (or a token in this case) by borrowing a ton of it and then selling it on the market. And now the company has a major problem: they’ve lent out user funds, but the collateral that was supposed to protect them in case the borrower defaulted is now worthless.
If users become aware of the situation, a bank panic will ensue as everyone tries to get their money out before the bank (or exchange in this case) runs out. After that, all they will have left is their useless stock, which they can’t redeem for assets they owe to users.
If you have huge reserves, this wouldn’t really matter much because you could pay them off with those other reserves. But when you’ve lent out over half of all user funds to this one borrower in particular without their knowledge, accepted collateral that is now worth nothing, and lied about it publicly on Twitter...
You’re in for a world of pain. Sam Bankman Fried did commit fraud, and knowingly lied about it to the public. I will happily eat my shorts if he turns out to be innocent.
I think what he did is a crying shame. I deeply admired him before this all went down. He had created a money printing machine and was using it to fund some of the causes I hold most dear.
I still don’t really understand why he did what he did. He did not strike me as a dishonest person, though maybe I am just naive. My best guess is his hedge fund made some really bad investments, and instead of taking the L, he raided the piggy bank thinking he could make it all back before anyone found out.
Are you saying that it’s too early to claim “SBF committed fraud”, or “SBF did something unethical”, or “if SBF committed fraud, then he did something unethical”?
I think we have enough evidence to assert all three.
The direct information I’m aware of is (1) CZ’s tweets about not acquiring, (2) SBF’s own tweets yesterday, (3) the leaked P&L doc from Alameda. I don’t think any of these are sufficient to decide “SBF committed fraud” or “SBF did something unethical”. Perhaps there is additional information that I haven’t seen, though.
(I do think that if SBF committed fraud, then he did something unethical.)
You have to be confident that no such information is available to say that it’s too early for others to have made up their mind. It sounds like it’s too early for you, but you don’t know how much time others have spent following the situation. Obviously nothing is slam-dunk certain when the situation’s still developing, but it’s often the case that you can draw fairly strong conclusions based on a few unusual data points. You can’t assess whether that’s the case if you’re not aware of all the data points that are out there.