One counterfacutal I think is worth considering: had Sam never loaned customer deposits to Alameda, how do you think everyone should have acted?
Had the loans never happened, FTX would still have been engaged in some fairly disreputable business, Sam would still have a wildly high appetite for risk, and just about all of the “red flags” people bring up would still have been there. However, even if this was all common knowledge, my best guess is that most people would’ve readily endorsed continuing to work with FTX and would not have endorsed making bureaucratic requirements too onerous for FTX funded projects. I think, even in this counterfactual, it might still have made sense to insist on FTX improving their governance before they further scale up their engagement with EA (and perhaps a few other things too).
I suspect that factually, whatever people reasonably could have known was most likely limited to “disreputable business and red flags”, not that the loans to Alameda had happened. Furthermore, I doubt anyone even had particularly good reason to think FTX might be engaged in outright fraud on this scale—I think crypto exchanges go bust for non-fraudulent reasons much more often than for fraudulent ones. For these reasons, I suspect that while there are improvements to be made, they probably won’t amount to drastic changes. I also suspect that, despite numerous negative signs about FTX, even insiders would have been justified in placing relatively little credence in things playing out the way they have.
As a brief addendum, I imagine in the non fraudulent world, Sam’s net worth is substantially smaller. So maybe the extremely fast growth of his wealth should itself be regarded with suspicion?
One counterfacutal I think is worth considering: had Sam never loaned customer deposits to Alameda, how do you think everyone should have acted?
Had the loans never happened, FTX would still have been engaged in some fairly disreputable business, Sam would still have a wildly high appetite for risk, and just about all of the “red flags” people bring up would still have been there. However, even if this was all common knowledge, my best guess is that most people would’ve readily endorsed continuing to work with FTX and would not have endorsed making bureaucratic requirements too onerous for FTX funded projects. I think, even in this counterfactual, it might still have made sense to insist on FTX improving their governance before they further scale up their engagement with EA (and perhaps a few other things too).
I suspect that factually, whatever people reasonably could have known was most likely limited to “disreputable business and red flags”, not that the loans to Alameda had happened. Furthermore, I doubt anyone even had particularly good reason to think FTX might be engaged in outright fraud on this scale—I think crypto exchanges go bust for non-fraudulent reasons much more often than for fraudulent ones. For these reasons, I suspect that while there are improvements to be made, they probably won’t amount to drastic changes. I also suspect that, despite numerous negative signs about FTX, even insiders would have been justified in placing relatively little credence in things playing out the way they have.
As a brief addendum, I imagine in the non fraudulent world, Sam’s net worth is substantially smaller. So maybe the extremely fast growth of his wealth should itself be regarded with suspicion?