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Comment by pseingatl | Hacker News Reader

Can we discus recovery? The Madoff trustee was able to recover something like 90% of the Madoff Ponzi. Alameda and FTX's real estate purchases have value, as do their VC investments, purchases of bank stock, etc. In other words, it's not all gone. My understanding is that even some of the political contributions can be clawed back.

FTX's purchases of IOU's (i.e., crypto) that declined in value are not likely to be recoverable. But Bitcoin still has substantial value. There's at least a billion in loans to insiders that can be clawed back.

How much really was lost?

View on HN

The problem is opportunity cost. People invested in Madoff to grow their money. So if I invest $100 in Madoff and ten years later they say “we recovered $90, congrats,” yeah that’s better than nothing. But if I had put that into a legitimate investment, maybe I’d have $180.

Other folks got money out of Madoff during his scam years, and the trustee says “I’m taking that money back to pay back others.”

So much of crypto went to things that now have little economic value. Burnt out computer hardware, enormous electricity, Tom Brady’s endorsement deal. At least with the housing bubble we got some buildings (I live in a bubble neighborhood.) Crypto is like lighting money on fire. The sooner this scam is over, the better.

Shkreli got hard time even though investors didn't lose money due to his fraud.

There isn't a performance threshold beyond which fraud ceases to be criminal.

Was that trial a bit politicized yu think? serious question

Not particularly. He had gained notoriety due to other behavior (raising drug prices to fund other drug research, his attitude during his Congressional testimony and media appearances, etc.), but it sounds like his fraud [or whatever he was specifically found guilty of] was very cut-and-dry against SEC and other relevant rules.

"On December 17, 2015, Shkreli was arrested by the FBI after a federal indictment in the U.S. District Court for the Eastern District of New York was filed, charging him with securities fraud. The charges were filed after an investigation into his tenure at MSMB Capital Management and Retrophin. U.S. Attorney Robert Capers said, "Shkreli essentially ran his company like a Ponzi scheme where he used each subsequent company to pay off defrauded investors from the prior company."

I think that is a misleading quote. He made actual profits, albeit by unscrupulous (but legal and very common) methods. There was nothing like a ponzi scheme, the prosecution just wanted to say a crime that was well known at the time. Along the way he made false statements to investors, and he was so gross and unpopular they were able to get a conviction the "victims" were not even interested in, but only on two securities technicalities and only because the jury wanted to get him on something. He was acquitted of 5 other more serious charges.

This is a great example of a public show trial, where they basically make an example of someone while allowing companies to engage in the same disgusting behavior without any attempt to discourage it.

Justice Department press releases are incredibly biased. His hedge fund failed (legal), he lied to his investors and said everything was fine (this is the fraud part), then he started a drug company called Retrophin (now NASDAQ: TVTX) which ended up being worth a billion dollars and he was able to repay investors in shares of Retrophin or proceeds from selling shares in Retrophin.

He certainly committed fraud, but it’s certainly unusual that he was prosecuted for it when nobody lost money. In fact, investors did well.

It’s hard not to feel like this is not a thing that would have been investigated had he not been a totally raging asshole.

It’s not true that nobody lost money in spite of the fact that he made this claim in court and it is repeated frequently. The court found he reduced the gains from group A to pay off losses from group B. People in group A lost money that was rightfully theirs as a result of his actions.

Shkreli is a good example of how well oiled justice runs if the defendant is politically indefensible. In the same vein the treatment that SBF got so far (eg getting invited as speaker on a NYT event that featured people such as Selenskyy) makes me fear it will be a much softer prosecution.

A couple of days ago there was a consensus group of Republican commentators confidently asserting SBF’s Democratic donations and connections meant there would no investigation/prosecution at all. Perhaps now this have pivoted to saying they’ll go easy on him?

It seems to me, all these assertions say nothing about the process of justice for SBF, and instead only illustrate that the people making them can’t conceive that there is a section of the political class who believe the law should apply equally to rich people as well as poor people.

Didn't he and his close associates donate to the Republican party members as well?

SBF said so but there is no public evidence of it, so far as I can tell. The federal government brought a charge against SBF due to his campaign contributions, so it can perhaps be expected that we will learn more about those contributions as this saga plays out.

> But Ryan Salame, another executive, gave almost $24 million to Republican and conservative causes, somewhat counterbalancing the giving to the left. Overall, according to Open Secrets, FTX donations to candidates were very slightly GOP-leaning, although contributions to individual politicians were only a small slice of the $70 million.

https://www.theatlantic.com/ideas/archive/2022/12/sam-bankma...

As Jon Stewart pointed out, they went with the classic formula of having “a guy for each camp.”

Here is where semantics get tricky and people are twisting facts. Fox who reported on this positioned it as SBF donated 40 million to democrats and barely anything to republicans. Fox has in several articles used Open Secrets and the number the report match open secrets. But they left out a big part of the story. Most of the 40 million didn't go to "Democrats," they went to democrat aligned super pacs. Open secrets also shows that FTX/SBF put 20-25 million into republican aligned super pacts. I believe one of board members of FTX, Ryan Salame, also donated about 15 million or 20 million to "Republican causes?" For me, I will just say we should probably lump all of these donations under a single entity.

The reality is. These guys were funneling tons of money into anyone who would take it. What is hard to extrapolate is, were democrats easier to buy on mass and that is why there is a higher amount? Or were republican votes cheaper?

[1] https://www.opensecrets.org/orgs/ftx-us/summary?id=D00007369... [2] https://www.politico.com/news/magazine/2022/12/09/crypto-sca...

NYT is not the government. It's a private business that looks at profit first, politics second, and impartial justice last if at all. The financial lure of a panel with SBF post-scandal must have been too much to resist. It's not even clear the panel (did it happen in the end? I'm not sure) would do SBF any good, given his tendency to self-incriminate. On the other hand I'm sure it was incredible for NYT ratings.

I don't think we'll ever see another defendant in these kinds of cases as universally hated by the public as Martin Shkreli. The transcripts from his jury selection made the news[0]. Some highlights:

"he disrespected the Wu-Tang Clan" (big problem in NYC, of course)

"he kind of looks like a dick"

"I would honestly, like, seriously like to go over there -"

[0] - https://www.spin.com/2017/08/martin-shkreli-jury-selection-t...

Elizabeth Holmes?

Shkreli did not get “hard time”, he got a basic, well-deserved prison sentence.

I find it distressing that folks keep pointing out that the investors did not lose money. Are they deliberately ignoring the fact that Shkreli had no right to take criminal risks with investor money?

I don't think GP is implying that it is OK to take risks with investor money. However it sounds right that you should get a longer prison term if you gamble and lose $8B than if you gamble and make some money on it.

On this note I am curious if political organisations will be required to give back the donations he made. It seems the right thing if they were stolen funds. But being politicians I'm curious if it will be rules for thee and not for me.

I wonder if the charities will have to give back their funding.

Yes they will have to. It is stolen money.

On the All In podcast Chamath used a term 'Fraudulent Conveyance'. The idea is that if someone receives money from a fraudulent actor, the entity that received the money has to give it back. Madoff was mentioned somewhere in the comments and the story is that people that got funds out of the Madoff situation before it fell apart had to give the money back.

We will see how it goes this time, but I suspect a lot of the donations will need to come back to the entity.

Chamath is probably just as sly as SBF; Shy of committing fraud, he dumped horrid businesses on public via SPACs.

We just had an election as well, which means most of that money would have been spent. How far can they chase it down? I can’t imagine random campaign staffers needing to pay back their wages.

Naive question here:

Wouldn’t you have to take into account due diligence when talking opportunity cost?

As in, someone who did not do their due diligence and had a higher risk tolerance would be expected to have a lower opportunity cost. In simple words, likely to lose money on this deal but willing due to the high return chance.

Relative to the amounts of money lost here the DD costs would have been a pittance.

> Other folks got money out of Madoff during his scam years, and the trustee says “I’m taking that money back to pay back others.”

What’s the limit on that? Dollars or time? I would be beyond furious if I was expected to help make someone else whole.

I don't think there's a limit when it's part of a criminal scheme.

It's infuriating for sure, but unfortunately it's the reality. If you gained from a Ponzi scheme that means you literally were given other peoples' money (directly).

I fully empathize with the absolutely epic degree it must SUCK to get a call and be told "yeah that 10% you've been earning for the past 20 years was actually someone else's money, you need to give it back."

Assuming you cashed out, wouldn't it be something like "that 10% you earned 10 years ago" because if you never cashed out then you're not liable.

My reply would be along the lines of: "Sorry lost it all in MtGox/FTX/Crypto/Vegas/Horses"

I mean, if the courts say you owe the money, you owe the money. If you lost it, looks like you got some debt to repay somehow.

The court would argue you didn’t complete due diligence and are liable for your mistake due to a crime taking place.

> I would be beyond furious if I was expected to help make someone else whole.

Such are the wages of being a beneficiary of a ponzi scheme. It would be a good incentive to do better research.

How are you supposed to get enough insight from any working fund manager to determine whether something is a ponzi? It’s not like they give you access to the books.

Mutual fund and ETF holdings are public information. Random fund manager? Good luck.

Pretty sure even private hedge funds have to disclose to their clients exactly what they hold, not Madoff's "just trust me bro" promise.

Madoff operated for close to twenty years before being exposed. He was regularly lauded for being the best by well informed people. What is an amateur supposed to do?

If the argument is, “Nobody is that good, you should know better”, does that mean Buffet’s scheme will start crumbling any day now?

> What is an amateur supposed to do?

You have two options.

1. Don't be unlucky. [1]

2. Or, you can make sure your society has socialized old age pensions, and that it puts in the work necessary to keep them solvent, and its citizens taken care of once they are past their working years.

[1] The easiest way to not be unlucky is to buy into a boring, diversified index fund. Berkshire may be a fraud, but it's unlikely the entirety of the SP500 is.

Well yeah that's why Ponzi schemes suck. Why should it be acceptable to profit from a Ponzi scheme? It's not your money at that point, whether you realise it or not.

The trustee has to prove that the transferee lacked good faith, which includes “when the information the transferee learned would have caused a reasonable person in the transferee’s position to investigate the matter further.” The companies which were required to repay Madoff money had “uncovered facts suggesting that [Madoff] was engaged in fraudulent activity” as part of their due diligence. https://www.govinfo.gov/content/pkg/USCOURTS-ca2-20-01333/pd...

>>I would be beyond furious if I was expected to help make someone else whole.

I mean, if you unknowingly buy stolen property, it will be just taken from you if the police finds out. I don't see how that's different.

> But if I had put that into a legitimate investment, maybe I’d have $180.

Or maybe zero. Investing is a casino unless you are very closely supervising your investments and have a thorough understanding of the underlying market dynamics. So better do your homework if you want to see some or all of your money back, preferably with a premium.

Yeah, you have to be a real genius to make money buying the sp500.

I think it was obvious that we weren't talking about index investing.

Do you know what opportunity cost is? Or perhaps you missed that part of the post?

While Tom Brady's endorsement has little economic value, it was money paid to him. I believe a bankruptcy court can undo past transactions, so that cash might be recoverable.

They can’t give Tom Brady his time back.

Of the people stolen from, Tom Brady losing a day filming commercials is pretty low on the list of things I care about.

Like he got paid $X for his endorsement. I would prefer that money go to the people whose life savings were stolen.

Is it really Tom Brady's responsibility to vet each and every one of his commercial offers? That seems unsustainable. He would have needed some pretty intimate knowledge of the crypto world along with the inner workings of FTX to know that it was a fraud. To me it seems like placing too much responsibility on people who shouldn't bear that responsibility.

Your sibling comment says this:

> Didn't exactly that happen, didn't Tom Brady put his life savings in FTX? :/

Which makes your comment seem funny or sad, depending on how you look at things.

This has nothing to do with knowing it was fraud or impending bankruptcy which has nothing to do with having a bankruptcy court claw back money given to you in preference of others. This is like Brady getting a bad check. So he doesn't get paid for acting. A lot of other people didn't get paid what they were owed.

I'm sure he has a PR person, agent, manager, etc.

So yes it is their responsibility.

Didn't exactly that happen, didn't Tom Brady put his life savings in FTX? :/

That’s a tough one as Brady wasn’t an investor or executive but a supplier. Will the media companies that FTX bought ads with also need to give back their fees?

Quite possibly. Even without fraud, transactions within 90 days to a year of filing can be reversed by a bankruptcy court. Brady's transactions are more likely to be reversed because of his ongoing relationship with FTX than the media companies's transactions.

With fraud, they timeline gets a lot longer.

> lighting money on fire

It's almost as if money is just paper and has little economic value. The same criticism you made of crypto.

Your bubble neighborhood likely cut down acres of wild land and trees unecessarily. We are all worst of for it.

Did Tom Brady actually receive the payment?

I'd say there is a good chance they can claw back some of the endorsement money. A celebrity endorser is more than just some vendor, it is someone that is lending credence to the scam either wittingly or unwittingly.

> Other folks got money out of Madoff during his scam years, and the trustee says “I’m taking that money back to pay back others.”

I wonder if things like the political donations could be clawed back.

I’d be absolutely shocked if more than 25% can be recovered. They spent multi-billions on venture investments that were not just high-risk due to their early stage nature but also inextricably linked to ftx by way of the cryptocurrency market as a whole and thus about as undiversified as humanly possible. There’s a few of their investments that have value and value could be recovered through sales but almost all of them are illiquid and have seen valuations collapse.

Also consider that a lot of the players involved are overseas and anonymous* which makes it much more difficult to clawback relative to people onshore (like in the case of madoff).

If we limit ourselves to depositor funds -- who morally ought to be superior creditors to investors-- I wouldn't be shocked if the recovery percentage was quite a bit larger than that.

One thing that made 90% recoveries of Madoff possible were that they first backed out all the fake gains that the customers thought they had but never actually had. This will be harder to do with FTX, but I expect that once all the bogus margin trading on fake assets is backed out we'll find that the losses were far less substantial than the numbers being thrown around.

I think that might have been true a year ago but at the time of FTX’s collapse, most market participants were underwater, especially the laypeople. The amount of money in the crypto market is definitely not anywhere near the supposed market cap, but if we look at USDC’s 50bn we can say with reasonable confidence that there’s at least 50bn of USD in the crypto market. If FTX was 10% of the market then 5 billion seems very plausible as a lower bound for the amount of real money value on the exchange (before backing out paper gains). That’s 5bn after people have lost >50% in the last year.

There was something like 6bn withdrawn in the days before the collapse and if clawbacks could get most of it, we would at least see 0.40 on the dollar recovered… but I am very very skeptical about that happening, given FTX international was for people outside of US jurisdiction — not impossible to recover but much more difficult.

I hope you’re right that it turns out that there’s only, say, 2bn of real money missing, and most people can be made mostly whole… but given the bloodbath of the last year, I fear that there’s probably more real money gone now, rather than less. A lot of people would be absolutely gleeful if you could somehow rollback the last year of trades on FTX.

My wild ass guesstimate before learning about the mobilecoin (the signal integrated crypto) apparent fraud would have been 1-2 billion lost, so I guess I should update that to 3 billion lost-- though there is probably reasonable odds on recovering the mobilecoin funds since there were probably only a few people who could have had access to enough mobilecoin to hit a billion worth even at $67/coin.

It's quite possible that I'm just being bubbled/hopeful. I don't personally know anyone who lost money in FTX even though I know a lot of cryptocurrency people and I thought it was obviously sketchy from when I first heard of it, so these are probably influencing my perspective on how big it actually was.

> If FTX was 10% of the market

I'm dubious about 10%. We know in hindsight that FTX was faking their size in multiple respects (including e.g. faking their valuation by MTMing illiquid coins that they created and never circulated) -- probably every claim we've seen about their size based on their own figures was just lies.

People have already looked into this, and the claims on FTX' debt were valued at 5c on the dollar. Alameda has burned through billions, and most of what was left were illiquid shitcoins and other worthless junk. Madoff, at least, was dealing with real assets.

> burned through billions

If Alameda lost the billions, then who won the billions? Who was on the other side of those trades?

I'd be surprised if you could claw back actual trades on an open arms-length market assuming that's what the FTX exchange was. In Madoff's case, there were no trades at all. Madoff collected the money from his investors, generated fake statements showing inflated fake balances and profitable trades (that never actually occurred) and then selectively doled out limited cash redemptions until everyone demanded their money back at once and the whole thing came crashing down. In SBF's case, it looks like SBF took money from his customers, and then bought or sold crypto in arms-length transactions on an open exchange. If that's the case it's hard to see how they can get the money back from the other side of the trades where his counterparties were buying or selling on the market in good faith. I think the only hope is that if they can somehow get the assets from his affiliated entities and/or reclaim assets that SBF and/or his companies still have control over whether on the block chain or elsewhere.

Matt Levine has speculated that a bunch of the money was lost via market-making with insufficient controls (margin enforcement etc.). For example, as reported by the Financial Times (via Levine's Dec. 5 newsletter, "Crypto had a Credit Bubble"):

[begin quote]

In April 2021, a crypto token called MobileCoin — used for payments in the privacy-focused messaging app Signal — suddenly spiked in price from about $6 to almost $70, before crashing back down again almost as quickly.

The wild moves came after a trader on FTX had built an unusually large position in the little-known token. Two people familiar with the matter said that when the price rose, the trader used the position to borrow against it on FTX, potentially a scheme to extract dollars from the exchange.

Alameda was forced to step in and assume the trader’s position to protect FTX. The trading company’s loss on this deal was at least in the hundreds of millions of dollars, the people said, and as high as $1bn, according to one of the people, wiping out a large share of Alameda’s 2021 trading profits.

[end quote]

...So whomever was on the other side of positions like that. Savvy outsider or well-informed insider? Who knows! Maybe it can be reclaimed, or maybe it's long dispersed down a chain of dozens of crypto exchanges, tumblers, offshore fiat accounts, and so forth. I expect we'll learn a lot more over the next few weeks as the federal case ramps up and the bankruptcy executor delivers more findings.

Seeing this:

> The wild moves came after a trader on FTX had built an unusually large position in the little-known token. Two people familiar with the matter said that when the price rose, the trader used the position to borrow against it on FTX, potentially a scheme to extract dollars from the exchange.

Makes calling regular currency "fiat" super ironic:

> offshore fiat accounts

It looks like at the end of the day, cryptocurrency is something people "fiat" out of thin air, "fair" algorithms and computers and systems be damned.

The crypto market? You can’t just unwind the markets by a few months to fix things

> Who was on the other side of those trades?

Unrelated funds, and random morons from crypto's equivalent of r/wallstreetbets.

It's very easy to lose a lot of money, really quickly in the markets.

Ever wondered where the money to make crypto go up was coming from?

I’m surprised bitcoin is holding up as well as it is

I don't pretend to fully understand markets but movement on BTC, etc with all of these developments is just further proof to me there is no connection between any of these coins and reality.

As another example, when Ethereum successfully moved to proof of stake without a hitch (an ultimately impressive and challenging development) the price actually went down.

I don't understand anything in this space.

Lots of events are already "priced in" before they happen. That is, investors have anticipated the upcoming event (eg Ethereum upgrade) and the stock/token price has already moved accordingly.

https://obliviousinvestor.com/what-does-it-mean-for-somethin...

Even with that how does this[0] chart make any sense?

[0] - https://www.coindesk.com/embedded-chart/tcPpzTgN6bBC9

It's not clear to me that the collapse of corrupt crypto exchanges should make the price of bitcoin drop.

What is the mechanism exactly? It's not like FTX holds a shitload of bitcoin and now suddenly they have to sell it all, driving down the price.

Is the mechanism just some kind of psychological thing, where a centralized criminal enterprise is associated with "crypto", even though it was mostly esoteric shit like FTT and MobileCoin and not bitcoin, but since bitcoin is also "crypto" then people who hold it would sell it because FTX folded?

It's like saying the collapse of Bear Stearns and Lehman Brothers should somehow make US dollars worth less.

1) I would expect a fairly large portion of people are selling their cryptocurrencies on exchanges and wiring out in fiat instead of undertaking the relatively technically challenging process of moving them on chain to somewhere/something else. While we can see on chain activity acknowledged numbers citing "withdrawals" from exchanges don't provide specifics. I personally know several people who have just said "Yeah turns out the entire thing is a scam, I don't trust anything and I'll just cut my losses and be done with it all".

2) Bear Stearns and Lehman Brothers were not a total loss that resulted in the founder being arrested and charged with multiple counts of fraud within weeks with multiple reports from the guy who handled the failure of Enron (John J Ray) expressing public incredulity on just how crazy the whole thing was. Failed crypto institutions aren't receiving TARP loans or being absorbed by other institutions. I'm not saying what caused the 2008 financial crisis wasn't criminal but as we all know no one went to jail over it, which if nothing else highlights the differences in terms of public opinion and treatment by regulators.

3) Any comparison between crypto (individual coin or the entire ecosystem) and the world's reserve currency backed by the world's largest economy is dubious at best. The complete collapse of a couple of even the largest banks barely puts a dent in USD in terms of circulating supply, activity, etc. USD has this status because it's backed by what is considered to be the most financially stable institution in the world - the United States. In the minds of many if crypto is "backed" by anything it's people like SBF, the VCs this kid was able to hoodwink, etc.

4) The collapse of FTX has had an incredible ripple effect that has caused at least a dozen other entities (that I've tracked) within crypto to fail.

5) Over the past few weeks there has been increased focus and media attention on the shadiness of Binance, Tether, and virtually every other crypto exchange/institution up to and including Coinbase.

This is all reflected in a survey from a couple of weeks ago that indicates just 8% of Americans have a positive view of cryptocurrencies[0]. I'm sure if they ran that survey again now that number would be even lower.

So yeah, I would expect crypto prices to move downward significantly.

[0] - https://www.cnbc.com/2022/12/07/just-8percent-of-americans-h...

Okay, then to summarize, you're saying there's lots of shady stuff with centralized exchanges, and more of them could go bankrupt, and people with fiat and shitcoins and bitcoin on deposit there could lose it.

There's a run on the bank, people want out, and the easiest way to get out is to sell your shitcoins and your bitcoin, and wire transfer dollars to your bank account.

With all the selling of bitcoin to raise cash, the price of bitcoin must drop.

And yet the bitcoin price is up six percent in the last seven days, so there must be some other mechanism at work.

More or less - exactly but like I said in my original post, almost nothing in this space makes sense to me. I'm trying to decide if there's something I'm missing (happens a lot) or like Theranos, mortgages and real estate in 2006, WeWork, etc (which I always knew were off) it's all being propped up by who/what knows what and it's just a matter of time before it crashes and burns.

I moved to Florida in 2006 and have distinct memories of meeting sleazy and disgusting mortgage brokers from Countrywide, real estate agents, etc flaunting their fast cash while thinking all along "this doesn't seem right". I basically watched "The Big Short" in realtime... Same goes for Theranos (it's been 10 years, where is your product?) and WeWork (wait aren't you just leasing out office space?).

Crypto is 14 years in and absent a few extremely rare use cases like fleeing a dictatorship, dealing with currency destabilization in developing nations, etc no one uses it for anything other than trading on exchanges, which at this point seems like Russian roulette.

It's as though the last remaining "widespread" use case for crypto has now almost been effectively wiped out.

The collapse of Bear Stearns and Lehman Brothers did make US dollars worth less, quite rightly.

One blogger's estimate of their losses:

>Voyager/BlockFi acquisition: 1.5b

>LUNA exposure: 1b

>KCG-style algo crash: 1b

>FTT/SRM collateral maintenance: 2b

>Venture capital: 2b

>Real estate, branding, other frivolous spending: 2b

>FTT drop from $22 to $4: 4b

>Discretionary longs going bad: 2b

>Total: 15.5 billion

https://milkyeggs.com/?p=175

Reminds me of the famous quote by the footballer George Best “I spent a lot of money on booze, birds and fast cars. The rest I just squandered.”

A lot of it is probably stolen. A lot went into thousands of worthless altcoins and their devs got rich. Another big portion is probably advertising. They spent big on YouTube influencers. Basically a lot of people got rich and a lot more people got screwed.

Altcoin devs are not paid well; Bitcoin devs make entirely normal SWE salaries according to public information, and I can't imagine DogeCoin or whatever is any better. All the big money is in marketing, since that's what creates the value.

By devs he probably doesn't mean software devs, but coin creators.

There was never "billions" of deposits in the first place. Someone mints a coin and pays FTX 5 million to list it. Then that person pays influencers and invests themselves to get the price of the coin to go up. Now on paper that coin is worth "100 million". But in reality only 8 million dollars has been spent.

This is often very ignored in analysis, most (if not all) those coins have prizes based on inflated valuations.

I'd imagine there's a huge problem in that FTX did not declare bankruptcy until the vast majority of their liquid assets had been removed by the bank run. If they had declared bankruptcy before the run, most people might have gotten out with a 50% haircut.

Instead, after the run, those left over will get nothing and those who got out will got 100%.

Those who got out will be told they need to give back 50% (assuming you are right that that is how much was left).

Even non-US customers? How?

The US has an excellent record of recovering stolen money from most places you would want to live (and reciprocally of helping other countries)

Maybe I wouldn’t, but at least a billion people live somewhere happily out of US extra-jurisdiction.

Do you have a list with those places? Google isn't helping much.

I assume they're referring to the over a billion people living in China. Whether China is a place you'd want to live depends entirely on your personal cirumstances, of course.

How?

Bankruptcy law allows for the clawback of preferential transfers. Any transfers within 90 days of bankruptcy are assumed to be preferential. Or transfers for a longer time to insiders. And that's without fraud. With fraud they can go back farther. Like, Madoff's investors who got out in time had to turn over a lot of cash.

But this is nothing like the Madoff situation. So you're saying if I withdraw my rightful funds 80 days before a company goes bankrupt, and I use those funds to pay for consumable goods, and consume those goods, that those funds can be clawed back and I am now in debt? That doesn't sound right at all.

I also just looked and a preferential transfer would be when the company that goes bankrupt deliberately pays off some debs but not others, hence giving some creditors preference. The notion does not seem to extend to individuals otherwise regularly conducting business with the company. That can't be resolved the way you suggested. Customers who ran FTX will not be required to return their funds so that someone can distribute some of their money to FTX's creditors, or even so that things can be "fairly" distributed across all customers...

Not only can it happen like that, it can happen like that even if there is no fraud. Paying off some customers you owe money to would be giving those creditors preference, I don't see how else you could interpret it.

Heck, FTX went out of its way to only allow Bahamian citizens to withdraw money at the end, imagining that would be the jury pool deciding their fate soon.

I don't believe it would even be possible to "claw back" consumed goods, is my point. If you can link to some examples of ordinary people getting money clawed back because they withdrew it form a financial institution prior to bankruptcy, please do, because I simply don't understand how that's possible. The money is gone.

The guy in charge of this for FTX is the same guy in charge of handling getting money back from the Enron collapse. He's currently testifying to congress about the state of things. It doesn't look good.

Well the Madoff trustee's were able to see who received payouts from Madoff due to KYC rules. This allowed the trustee to go to people, most of whom were completely innocent, to ask the to give back some of the money they redeemed from Madoff.

FTX on the other hand has very few KYC docs so the trustees are left with wallet addresses.

Not sure how you contact a wallet address to ask for money back.

There was also a lot of paper wealth. You can get back your FTT tokens but they’re completely worthless

This is a distraction.

Billions of dollars and euros went into a black box.

Then some magic beans invented out of thin air came out of the black box.

Now when we open the black box, the billions of dollars and euros are gone.

FTT tokens doesn't explain where the fiat went.

Yes the real dollars went somewhere. I would guess the majority of them were lost from poor trades by Alameda. Combine that with the fact that a lot of those real dollars were converted in to Crypto schemes which are now down 90%. And their insane spend on houses and politics and who knows what else. I’m waiting anxiously to see what the truth is once we get some real data

madoff operated from 01960 to 02008

kyc is from 02002

His Ponzi scheme started in 1991. Ponzi schemes are exponential, so more than 90% of the volume was after 2002. What's with the leading zeros?

Probably preparing for the year 9999 issue early.

Most systems don't have a Y10k issue: year numbers are variable-width already. Forcing a fixed-width 5-digit representation is creating a Y100k issue.

Never made sense how any software would consider the year value as _two characters_ when an integer works far better. There's even a 0 epoch date for crying out loud.

I was under the impression it was a quirk in cobol.

I think this is a generational divide when computers were significantly more limited. If you look at older data formats, they are nearly all fixed width. Either due to punch cards, memory constraints, performance considerations, or just band wagoning, prematurely optimizing for date representation seems silly.

Early mainframes read data on punch cards or tape files which were character-based (or possibly, binary-coded decimal). Two digits were used for the year to save memory.

Because when the Y2K problem was created, computers had only recently been invented, every byte counted, and there was no history of software best practices.

Even by 1980, which was 5 years before any recorded mention of the Y2K problem, an IBM mainframe, of the kind a university might have, had only e.g. 4 MB of main memory, which had to support many concurrent users.

Such computers would have been unable to load even a single typical binary produced by a modern language like Go or Rust into its memory - yet they supported dozens of concurrent users and processes, doing everything from running accounting batch jobs, compiling and running programs in Assembler, COBOL, FORTRAN, PL/I, or APL, and running interactive sessions in languages like LISP or BASIC. Part of how they achieved all that was not wasting any bytes they didn’t absolutely have to.

Possibly, the origins of the practice predates computers entirely, and goes back to their predecessors in business data processing, unit record equipment. As such, it may be like many other traditions - made complete sense when it was invented, yet people still clung to it long after it ceased to do so.

Unit record equipment generally didn’t use binary integers, instead using BCD; and most early business-oriented computers followed their example. Binary integers were mainly found on scientific machines (along with floating point), until the mid-1960s, when the hard division between business computing and scientific computing faded away, and general purpose architectures, equally capable of commerce and science, began to flourish.

His Ponzi provably started in 1991. It may have been going on for longer than that.

the leading zeros are a sign that the poster is unusually short-sighted and only concerned about the next 98,000 years or so in their fixed-size date representations.

before i get tarred and feathered, i'm just going for a cheap ironic laugh here, no offense intended! :) more seriously, i sorta doubt humanity is going to be around long enough to care, and if we are, the odds of some apocalypse resetting our calendars aren't zero.

During my first week in my first programming job I remember overhearing a senior engineer saying “don’t worry, there’s not another leap year for 2 years”. I was still working there on February 29, he wasn’t. It was a stressful day. My condolences go out to the engineers who will be working on January 1st 100000.

Surely by then we'll have had a powerful enough pope to rename the months at least once.

SEPTember = 7

OCTOber = 8

NOVember = 9

DECember = 10

Fixed it!

And do we need the name "JASON" (July to November) first letters? Seems unnecessary.

Easier to make the year begin in March.

Not sure renaming the months is gonna help with the numbering of the years...

My hope is that some programmer dictator will instate a form of the discordian calender:

- All 5 seasons are the same length - The days of the year always fall on the same week day, as the week is 5 days long - the year always starts with the first day of the week. - the leap day is not assigned a day

Things I would change though: - start the year at winter solstice. - put the leap day at the end of the year.

https://en.m.wikipedia.org/wiki/Discordian_calendar

Finally, we can get rid of Wednesday... Wendsday? Woesnday?.... that day in the middle of the week that no one can spell =P

February needs to be reconsidered as well imo.

In German Wednesday got that treatment in the middle age and was replaced by what would be midweek in English.

You can rename the months any time you feel like. The problem is getting other people to go along with your renaming.

Once upon a time, enough people cared what the Pope had to say, he could actually succeed in changing the calendar for everybody. But, it would be a rather interesting future history for the Catholic Church to regain power to the point that became true once again.

I wonder how bad 2038 will be. Real talk, I expect a lot of servers to go down.

I understand Madoff's scheme started in 1960's/1970's. The feeders to the fund date way back. The SEC enforcement action in the early 90's wasn't directly related to the ponzi scheme, more aimed at the feeders. The wiki pedia article has this "Federal investigators believe the fraud in the investment management division and advisory division may have begun in the 1970s.[27][failed verification] However, Madoff himself stated his fraudulent activities began in the 1990s.[28] ". I would trust the Feds. https://en.wikipedia.org/wiki/Madoff_investment_scandal

I've learned to identify a kragen post from the preceding zero.

Even if it started before KYC was a law, it's not too hard to imagine that Madoff had better records than FTX which by all accounts was a s$&tshow

You are right about the year KYC came into effect, so good job!!

But that makes my point. As of 2002 Madoff had to have clear records of f who he redeemed money to.

When the bankruptcy trustee went after people who redeemed they only went back a few years and were able to use those KYC docs they had since 2002 to get the money back.

> FTX on the other hand has very few KYC docs so the trustees are left with wallet addresses.

FTX (US? International? Both?) required KYC during sign-up. Or what do you mean?

I was referring to FTX, not FTX.US

FTX had KYC as does any exchange with bank accounts. But that doesn’t prevent people from paying nominees for register accounts for them either.

Wouldn't FTX-US be required to KYC all of their customers? I assumed that was the (part of) the reason why these exchanges had us and non us versions.

(edit links) https://help.ftx.com/hc/en-us/articles/360027668192-Individu...

https://help.ftx.us/hc/en-us/articles/360048666713-Account-T...

> FTX's purchases of IOU's (i.e., crypto)

Crypto is mostly not IOUs since it doesn’t tie to an obligation by anyone to do anything. (Explicitly redeemable tokens are IOUs, though.)

If this was purposefully orchestrated as the indictment suggests, it's very likely that 100% of every deposit made to FTX could be lost for good. Minus the real estate purchases of course.

Crypto transactions are irreversible.

All of the money that Alameda Research lost (which they borrowed from FTX investors) to bad bets could have easily been won by SBF et al on the other side of the trade... withdrawn to safety and put in a cold wallet for whenever they all see the light of day again.

The majority of the money that Alameda lost to bad bets was propping up shitcoins.

SBF could have created an account on FTX under a pseudonym and taken the short side of all of those shitcoin trades, knowing exactly how much financial support they had and how to break them.

"How much was really lost?"

With respect to culpability for the wire fraud charges, arguably it does not matter. The crime is a devising scheme to defraud. The execution of the scheme does not have to be successful.

Even if every FTX customer gets a 100% refund of their deposits, SBF is still going to face prosecution. This is what makes his recent behaviour so childish, immature, juvenile and foolish. The transcript of his proposed testimony before Congress shows that SBF is anything but a "whiz kid". He is clueless. A pawn.1

1. https://assets.bwbx.io/documents/users/iqjWHBFdfxIU/rbgv1U_v...

"How much was really lost?"

How much what? Fiat money? According to the self-proclaimed crypto experts, the fiat monetary system is to be avoided.2 Why would crypto believers want fiat money.

According to a Google "engineer", the highly regulated, democratically-elected government that issues and guarantees fiat currency may seize it in the near future, referring the reader to "snopes.com" as an authoritative source. Not only that, according to the Google stooge, using fiat currency poses a risk of "total surveillance" and is undermining peoples' privacy.2 You cannot make this up. Employee of almost totally unregulated "tech" company, hoovering up the personal data and invading the privacy of hundreds of millions of people for profit, a company with nearly 140,000 employees and billions in the bank that does not even have a basic customer service line, is giving unsolicited advice about privacy.

2. https://apxhard.substack.com/p/why-bitcoin-is-different-from...

How much was really lost won't matter much in terms of prosecuting those who committed any crimes. And while it looks like a huge crime to me, they are still innocent until proven guilty.

It does matter to those who appear to have been defrauded. They won't be made whole. There will be opportunity costs, and I can't imagine it all being recovered. But if a significant portion is recovered, it would provide some help to the victims.

> FTX's purchases of IOU's (i.e., crypto) that declined in value are not likely to be recoverable. But Bitcoin still has substantial value.

This was kind of what Matt Levine focused on in his coverage of FTX - where did the money go? It wasn't just that they invested in crypto assets, they created their own crypto asset, assigned it a huge value, and put it on the balance sheet at an imaginary price. Used those "assets" as collateral to borrow real money. Then they spent real money on Bahamian property, political contributions, charitable contributions, naming an arena, and the KILLER - bailed out Alameda repeatedly using real money.

> How much really was lost?

How much was really "lost"?

Now that SBF is charged on six counts of conspiracy, it's safe to say it's safe to not believe anything that person says. I don't believe the "leveraged trades gone wrong" angle.

I do believe there's a conspiracy. That's what several, including @Bitfinex'ed (a Twitter user exposing the tether fraud) and Marc Cohodes, said years and months before SBF was exposed for the ponzi boy he was.

They don't believe the fraud only stops at SBF / Caroline Ellison.

How much is going to be found depends on how far they investigate on the conspiracy.

A good place to start looking for a conspiracy to defraud is this: FTX's top lawyer, Dan Friedberg, happened to be colleague with Bitfinex's top lawyer. Indeed, they both worked at a company which defrauded online poker players by cheating on them (using a "god mode" on the server software they were offering).

I'd say that's a good start for the "conspiracy" angle: go look at Dan Friedberg's implication in the scheme. And at its relation with his former colleague now at Bitfinex. And seen that the Panamera papers exposed that Bitfinex/iFinex/tether/Deltec were all one and the same gang of criminals, and seen that it's a fact that Moonstone bank, which SBF bought in the US from Deltec's owner (at least partially) maybe, just maybe...

That it's time to look into the tether fraud to find the billions?

A lot was lost to traders whose profits came out of FTX's losses from market making.

They need to freeze the crypto holdings until the next bull run.

Have they not just spunked it into cryptocurrencies?

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