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naraburns  nihil supernum  2yr ago (text post)   32345 thread views

Culture War Roundup for the week of December 5, 2022

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I Accidentally Got SBF To Admit to Fraud

So...SBF is simply a moron. I've been trying to resist that conclusion, but now I'm asking myself why I bothered.

In the link above Youtuber Coffeezilla drops into a call with SBF (a second time! Why is he still taking calls??) and proceeds to basically get him to admit that funds were comingled.

Coffeezilla noted that SBF always deflects the issue by arguing that some accounts were trading on margin and so were deliberately open to being used by Alameda, unlike regular accounts. So literally all he does - and all any journalist needed to do - was just keep drilling down on whether the FTX only customers who weren't doing that could still get their funds. SBF obviously has no answer. Even worse, he basically screws himself by admitting that they had one withdrawal process which was him admitting to comingling funds.

So...the guy is just a moron. He doesn't have some grand legal plan to plead negligence or ignorance. He has a half-baked plan based on the idea that everyone is dumber than him (despite multiple counterexamples) and he falls apart the minute anyone puts any thought into his answers.

The entire video is actually a good look at how a journalist should view someone like SBF and his word games and deflections and how they should strategize to defeat them (and the end has the sort of pure joy at skewering the target that I bet all journalists feel but are too dignified to admit when picking up their Pulitzer). And this is coming from someone who thought the idea of people like Coffeezilla being "journalists" laughable.

But he has legitimately done the best job of questioning SBF out of everyone (Stefanopoulos was the close second)

Except supposedly he built a highly successful exchange that had quality tech.

The issue is he was also just a criminal who had no problem stealing other peoples money.

The GME guys were just guys who caught the meme train - though many who were true believers and lost everything. But they didn’t have the same ethical failings as Sbf.

He had people who could code working at FTX, see the Sequoia article:

Pulled into the vortex was Nishad Singh, a friend of SBF’s brother Gabe, and a fellow EA member. ...“This thing couldn’t have taken off without EA,” reminisces Singh, running his hand through a shock of thick black hair. He removes his glasses to think. They’re broken: A chopstick has been Scotch taped to one of the frame’s sides, serving as a makeshift temple. “All the employees, all the funding—everything was EA to start with.”

...“Everything was rickety—there was no avoiding the ricketiness. Obviously, the line between rickety and shady is a little unclear at times, but the places that seemed like they were going to steal customer funds outright, we didn’t touch,” Singh says. “Even the best players in the space were having big problems.”

...To sum up, much of the crypto world was panic-selling to try to get out ahead of the market, to make a margin call, or just out of plain old fear. And that volume hit FTX, since it’s a major exchange—the fifth-largest—in the crypto space. There’s really no good way to simulate such an event, but FTX’s trading platform held together under the strain. So SBF’s first order of business is to congratulate the dev crew for building a robust system: “Overall, I think the platform handled the crash relatively well, which is good. Thank you to everyone.”

There are some modest smiles in the Zoom windows, including one from Singh, FTX’s director of engineering. He knows firsthand, from his trading days at Alameda, how frustrating a rickety exchange can be.

Singh was also one of the other two people along with Bankman-Fried who had ownership of large chunks of the various entities in the FTX group, see the bankruptcy filing:

Each of the Silos was controlled by Mr. Bankman-Fried. Minority equity interests in the Silos were held by Zixiao “Gary” Wang and Nishad Singh, the co-founders of the business along with Mr. Bankman-Fried.

The FTX Group did not keep appropriate books and records, or security controls, with respect to its digital assets. Mr. Bankman-Fried and Mr. Wang controlled access to digital assets of the main businesses in the FTX Group (with the exception of LedgerX, regulated by the CFTC, and certain other regulated and/or licensed subsidiaries). Unacceptable management practices included the use of an unsecured group email account as the root user to access confidential private keys and critically sensitive data for the FTX Group companies around the world, the absence of daily reconciliation of positions on the blockchain, the use of software to conceal the misuse of customer funds, the secret exemption of Alameda from certain aspects of FTX.com’s auto-liquidation protocol, and the absence of independent governance as between Alameda (owned 90% by Mr. Bankman-Fried and 10% by Mr. Wang) and the Dotcom Silo (in which third parties had invested).

Bankman-Fried wasn't the coder, that was Wang according to this article:

Gary Wang is not like his co-founder Sam Bankman-Fried, who loves fame and putting himself at the center of public attention (even when people are begging him to stop tweeting). In fact, there’s little public information about Wang, who has been described as a shady but critical player in the rise and fall of FTX.

Wang met Bankman-Fried at a math camp in high school. Later, they became college roommates at the Massachusetts Institute of Technology, where Wang got degrees in mathematics and computer science and Bankman-Fried received a bachelor's in physics.

Before co-founding Alameda Research (and later FTX), Wang worked at Google. He claims to have built a system to aggregate prices across public flight data, according to an introduction on the Future Fund's website. When Bankman-Fried left the Jane Street Hedge Fund to start Alameda in 2017, Wang left the tech giant.

…The firm shifted to Hong Kong, in part to take advantage of arbitrage opportunities in Asian bitcoin markets – including the price discrepancy between BTC in Japan and BTC everywhere else.

It’s there that Wang and Bankman-Fried funneled funds from Alameda to build its bespoke derivatives exchange. Bankman-Fried told Insider that he is not a good coder: "I don't code. I'm trash. I have not written any of FTX's code base. That's all a lot of other really impressive people at FTX. That's not me at all."

Nishad Singh, the head of engineering at FTX, said Wang was a "really good mentor" who offered suggestions and advice to push things out on short timescales.

In the aftermath of FTX’s collapse, and the subsequent $400 million hack, questions are circulating around who could possibly have abused client funds. Wang is a prominent suspect, as one of the few people with "root access" to the exchange’s code base, according to The Block.

So whoever wrote the code, it was only a very few people with access, and probably the two co-founders were up to their eyes as well in whatever Bankman-Fried was cooking up.

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