Bitcoin is still early

[CM]

so both FTX and FTX US filed for bankruptcy today.

i expect a huge amount of fraud and bad behavior in the crypto field to become public in the next 12 months.

this industry is rife with BS with little to no oversight.

it's going to be somewhat fun to watch, as someone on the outside. crypto isn't a huge part of the economy so i am not terribly worried about systemic risk from crypto being exposed as largely fraudulent.

I won't be surprised to learn of fraud, but it wasn't fraud that caused the collapse. FTX lent customer funds to Alameda so Alameda could invest them, then couldn't return the funds due to a "bank" run. Did this run afoul of language in a customer agreement?

As far as I know, unlike standard brokerage firms, crypto firms are not bound by law to segregate client assets from company assets. And although Alameda no doubt invested in vehicles riskier than those used by standard banks, your bank takes your funds and loans them out in order to earn a return. It's only the FDIC that saves those conventional banks from the bank runs that plagued banks for generations.

[jacoavlu]

I won't be surprised to learn of fraud, but it wasn't fraud that caused the collapse. FTX lent customer funds to Alameda so Alameda could invest them, then couldn't return the funds do to a "bank" run. Did this run afoul of language in a customer agreement?

As far as I know, unlike standard brokerage firms, crypto firms are not bound by law to segregate client assets from company assets. And although Alameda no doubt invested in vehicles riskier than those used by standard banks, your bank takes your funds and loans them out in order to earn a return. It's only the FDIC that saves those conventional banks from the bank runs that plagued banks for generations.

it’s absolutely fraud. Which directly caused the collapse. He bailed out their trading firm (as if an exchange should also have a trading firm, massive conflict of interest) with customer funds. Which was entirely against their TOS.

Dude lied in front of congress.

[HikingDO]

because it went up and then back down to the same exchange rate?

Ok, then how do you define early?

[Tim]

I won't be surprised to learn of fraud, but it wasn't fraud that caused the collapse. FTX lent customer funds to Alameda so Alameda could invest them, then couldn't return the funds do to a "bank" run. Did this run afoul of language in a customer agreement?

As far as I know, unlike standard brokerage firms, crypto firms are not bound by law to segregate client assets from company assets. And although Alameda no doubt invested in vehicles riskier than those used by standard banks, your bank takes your funds and loans them out in order to earn a return. It's only the FDIC that saves those conventional banks from the bank runs that plagued banks for generations.

Banks actually have more than FDIC.
The capital and reserve requirements and stress tests are just a few that come to mind. Let alone the reporting requirements intended to detect “bad actors”. BTC is a very useful tool for sophisticated “bad actors” in laundering across borders and for deploying and facilitating conversion to assets that are legitimate. No government oversight avoids detection.

[CM]

Which was entirely against their TOS.

So the action was expressly forbidden in terms of service described in documents available to customers/depositors?

[jacoavlu]

Ok, then how do you define early?

you didn’t answer

[jacoavlu]

Banks actually have more than FDIC.
The capital and reserve requirements and stress tests are just a few that come to mind. Let alone the reporting requirements intended to detect “bad actors”. BTC is a very useful tool for sophisticated “bad actors” in laundering across borders and for deploying and facilitating conversion to assets that are legitimate. No government oversight avoids detection.

what is the reserve requirement for banks?

[jacoavlu]

So the action was expressly forbidden in terms of service described in documents available to customers/depositors?

Yes

[jacoavlu]

Banks actually have more than FDIC.
The capital and reserve requirements and stress tests are just a few that come to mind. Let alone the reporting requirements intended to detect “bad actors”. BTC is a very useful tool for sophisticated “bad actors” in laundering across borders and for deploying and facilitating conversion to assets that are legitimate. No government oversight avoids detection.

by the way the collapse of FTX has nothing to do with bitcoin. SBF ran a shitcoin casino, created his own shitcoin, used the “value” of that shitcoin to prop up his balance sheet, committed fraud using customer funds to bail out his trading firm to the tune of billions, and it all came crashing down once people realized he was running a fractional reserve and the token he created was really an illiquid pile of ************************

regarding bitcoin, the qualities that make it useful (not perfect) for dark net markets are precisely the qualities that make it good money, which is something you seem to deny. You can’t have it both ways.

[jacoavlu]

lol

BREAKING: FTX_Official & FTX US’s wallets appear to be hacked, with over $600 million leaving the exchange, per CoinDesk.

FTX has stated in its official Telegram channel that it had been hacked, instructing users not to install any new upgrades & to delete all FTX apps.

so now what you’re going to see is tokens getting locked by “decentralized in name only” central authorities, like tether and ETH. This will be an interesting test for ETH post move to proof of stake and ofac compliance.

[CM]

Yes

If so, then SBF should be headed to prison.

[Tim]

what is the reserve requirement for banks?

https://www.investopedia.com/terms/r/requiredreserves.asp

https://www.federalreserve.gov/monetarypolicy/reservereq.htm

https://www.federalreserve.gov/supervisionreg/large-bank-capital-requirements.htm

You "own a bank by permission", that permission can be revoked.

https://www.npr.org/2009/03/26/102384657/anatomy-of-a-bank-takeover

This is not voluntary nor subject to a "judge" like bankruptcy. They have the authority to revoke that permission and lock the doors and liquidate and/or sell.
The Fed has the obligation in that case of only the FDIC insurance.

The SEC and unregulated entities are a completely different set of powers.

The FED is set up with power over the banks to come in on any day and any weekend UNANNOUNCED and look at the books and do their own audit and shut you down. Voluntarily granted is you want to be a bank or bank holding company. That gives them the ability to shut "bad actors" out of the banking system.

Yes, the disadvantage is the "government" is in control, the advantage is the depositors have protection.

This is why the banks do not have BTC accounts.

[CM]

lol

BREAKING: FTX_Official & FTX US’s wallets appear to be hacked, with over $600 million leaving the exchange, per CoinDesk.

FTX has stated in its official Telegram channel that it had been hacked, instructing users not to install any new upgrades & to delete all FTX apps.

so now what you’re going to see is tokens getting locked by “decentralized in name only” central authorities, like tether and ETH. This will be an interesting test for ETH post move to proof of stake and ofac compliance.

"Hack" suspected to be inside job:

https://twitter.com/MarioNawfal/status/1591389209075814406

SBF apparently flying to Argentina:

https://twitter.com/TheInsiderPaper/status/1591364301771902976

Aaron Sorkin currently working on script for upcoming movie.

[jacoavlu]

https://www.investopedia.com/terms/r/requiredreserves.asp

https://www.federalreserve.gov/monetarypolicy/reservereq.htm

https://www.federalreserve.gov/supervisionreg/large-bank-capital-requirements.htm

You "own a bank by permission", that permission can be revoked.

https://www.npr.org/2009/03/26/102384657/anatomy-of-a-bank-takeover

This is not voluntary nor subject to a "judge" like bankruptcy. They have the authority to revoke that permission and lock the doors and liquidate and/or sell.
The Fed has the obligation in that case of only the FDIC insurance.

The SEC and unregulated entities are a completely different set of powers.

The FED is set up with power over the banks to come in on any day and any weekend UNANNOUNCED and look at the books and do their own audit and shut you down. Voluntarily granted is you want to be a bank or bank holding company. That gives them the ability to shut "bad actors" out of the banking system.

Yes, the disadvantage is the "government" is in control, the advantage is the depositors have protection.

This is why the banks do not have BTC accounts.

lol right there in your link

On March 15, 2020, the Federal Reserve Board announced that reserve requirements ratios would be set to 0%, effective March 26, 2020. Prior to the change effective March 26, 2020, the reserve requirement ratios on net transactions accounts differed based on the amount of net transactions accounts at the institution.

[CM]

From Reuters:

Bankman-Fried showed several spreadsheets to the heads of the company's regulatory and legal teams that revealed FTX had moved around $10 billion in client funds from FTX to Alameda, the two people said. The spreadsheets displayed how much money FTX loaned to Alameda and what it was used for, they said.

The documents showed that between $1 billion and $2 billion of these funds were not accounted for among Alameda's assets, the sources said. The spreadsheets did not indicate where this money was moved, and the sources said they don't know what became of it.

In a subsequent examination, FTX legal and finance teams also learned that Bankman-Fried implemented what the two people described as a "backdoor" in FTX's book-keeping system, which was built using bespoke software.

They said the "backdoor" allowed Bankman-Fried to execute commands that could alter the company's financial records without alerting other people, including external auditors. This set-up meant that the movement of the $10 billion in funds to Alameda did not trigger internal compliance or accounting red flags at FTX, they said.

https://www.reuters.com/markets/currencies/exclusive-least-1-billion-client-funds-missing-failed-crypto-firm-ftx-sources-2022-11-12/