Did you understand the mechanism by which FTX claimed to be generating revenue? Were the revenues they reported sanity-checked against a back-of-the-envelope estimate of how much their claimed mechanism would be able to generate?
I think it’s important to note that many experts, traders, and investors did not see this coming, or they could have saved/made billions.
It seems very unfair to ask fund recipients to significantly outperform the market and most experts, while having access to way less information.
Lorenzo, I agree the expert traders and investor have more technical skills about investment. But it seems to me that MacAskill and FTX Future Fund board had more direct information about the personality of SBF and the personal connections among the leaders and the group dynamics. So, when it comes to your statement “having access to way less information”, I don’t think this is the case.
I’ll go with you part of the way, but I also think that experts, traders, and even investors were further from SBF than at least some of the people in the equation here, which seems more and more true the more accounts I hear about people from Alameda saying they warned top brass. I wouldn’t expect an investor to have that kind of insight.
I think it’s good practice to try to understand a project’s business model and try to independently verify the implications of that model before joining the project.
My understanding is that FTX’s business model fairly straightforwardly made sense? It was an exchange, and there are many exchanges in the world that are successful and probably not fraudulent businesses (even in crypto—Binance, Coinbase, etc). As far as I can tell, the fraud was due to supporting specific failures of Alameda due to bad decisions, but wasn’t inherent to FTX making any money at all?
I agree that it is less likely than Binance, based on the fact that public stock market companies are required to be more transparent[1], I do not know much about these particular companies.
This seems to be “not even wrong”—FTX’s business model isn’t and never was in question. The issue is Sam committing fraud and misappropriating customer funds, and there being a total lack of internal controls at FTX that made this possible.
If you say that your business model is to hold depositor funds 1:1 and earn money from fees, but in fact you sometimes earn money via making trades with depositor funds, then you would be misrepresenting your business model.
My current best guess is that WM quite reasonably understood FTX to be a crypto exchange with a legitimate business model earning money from fees—just like the rest of the world also thought. The fact that FTX was making trades with depositor funds was very likely to be a closely kept secret that no one at FTX was likely to disclose to an outsider. Why the hell would they—it’s pretty shady business!
Are you saying WM should have demanded to see proof that FTX’s money was being earned legitimately, even if he didn’t have any reason to believe it might not be? This seems to me like hindsight bias. To give an analogy—have you ever asked an employer of yours for proof that their activities aren’t fraudulent?
Not disagreeing with your overall point, but if my non-EA aligned, low-level crypto trader friend is any indication, then there certainly was reason to believe that SBF was at the very least doing some shady things. In August, I asked this friend for his thoughts on SBF, and this is what he replied:
“He’s obviously super smart but comes across a bit evil while trying to portray the good guy front. His exchange is notorious for liquidating user positions, listing shit coins thats prices trend to zero. He also founded Alameda research (trading / market maker firm) alongside FTX (the exchange). Alameda are one of the biggest crypto trading firms with predatory reputation. There’s also the issue of barely any divide between the exchange and the trading firm so alameda likely sees a lot of exchange data that gives them an edge trading on FTX vs other users.”
The irony is that this friend lost most of his savings because he was a FTX user.
I think it’s important to note that many experts, traders, and investors did not see this coming, or they could have saved/made billions.
It seems very unfair to ask fund recipients to significantly outperform the market and most experts, while having access to way less information.
See this Twitter thread from Yudkowsky
Edit: I meant to refer to fund advisors, not (just) fund recipients
Lorenzo, I agree the expert traders and investor have more technical skills about investment. But it seems to me that MacAskill and FTX Future Fund board had more direct information about the personality of SBF and the personal connections among the leaders and the group dynamics. So, when it comes to your statement “having access to way less information”, I don’t think this is the case.
I’m not as sure about advisors, as I wrote here. Agree on recipients
I’ll go with you part of the way, but I also think that experts, traders, and even investors were further from SBF than at least some of the people in the equation here, which seems more and more true the more accounts I hear about people from Alameda saying they warned top brass. I wouldn’t expect an investor to have that kind of insight.
I think it’s good practice to try to understand a project’s business model and try to independently verify the implications of that model before joining the project.
My understanding is that FTX’s business model fairly straightforwardly made sense? It was an exchange, and there are many exchanges in the world that are successful and probably not fraudulent businesses (even in crypto—Binance, Coinbase, etc). As far as I can tell, the fraud was due to supporting specific failures of Alameda due to bad decisions, but wasn’t inherent to FTX making any money at all?
I’m gonna wait it out on this one.
I’d currently wildly guess that Coinbase is not a fraud.
I agree that it is less likely than Binance, based on the fact that public stock market companies are required to be more transparent[1], I do not know much about these particular companies.
of course Enron, Wirecard and others show that being listed on the stock market is no guarantee
Yeah, fair. I have no real knowledge of crypto, so am not particularly endorsing Binance
This seems to be “not even wrong”—FTX’s business model isn’t and never was in question. The issue is Sam committing fraud and misappropriating customer funds, and there being a total lack of internal controls at FTX that made this possible.
If you say that your business model is to hold depositor funds 1:1 and earn money from fees, but in fact you sometimes earn money via making trades with depositor funds, then you would be misrepresenting your business model.
Sure, and what is your point?
My current best guess is that WM quite reasonably understood FTX to be a crypto exchange with a legitimate business model earning money from fees—just like the rest of the world also thought. The fact that FTX was making trades with depositor funds was very likely to be a closely kept secret that no one at FTX was likely to disclose to an outsider. Why the hell would they—it’s pretty shady business!
Are you saying WM should have demanded to see proof that FTX’s money was being earned legitimately, even if he didn’t have any reason to believe it might not be? This seems to me like hindsight bias. To give an analogy—have you ever asked an employer of yours for proof that their activities aren’t fraudulent?
Not disagreeing with your overall point, but if my non-EA aligned, low-level crypto trader friend is any indication, then there certainly was reason to believe that SBF was at the very least doing some shady things. In August, I asked this friend for his thoughts on SBF, and this is what he replied:
“He’s obviously super smart but comes across a bit evil while trying to portray the good guy front. His exchange is notorious for liquidating user positions, listing shit coins thats prices trend to zero. He also founded Alameda research (trading / market maker firm) alongside FTX (the exchange). Alameda are one of the biggest crypto trading firms with predatory reputation. There’s also the issue of barely any divide between the exchange and the trading firm so alameda likely sees a lot of exchange data that gives them an edge trading on FTX vs other users.”
The irony is that this friend lost most of his savings because he was a FTX user.