He may go for it but I don't think he will succeed.
Come on, this is a guy who had:
* A company with a constant revenue stream in a business that could be pretty much 100% automated.
* Backing from the largest investors and VC funds worldwide.
* Valuable connections with people higher up in academia and the prevailing political party in the US (all the way up to the president).
* All the money in the world and free reign over what to do with it.
* Unparalleled info and insights about the crypto markets.
* A massive group of followers that found his antics particularly alluring and who were trusting him with their money more and more everyday.
* A team of geniuses who were absolutes alphas from quantitative trading, won math olympiads and were constantly on drugs to enhance their cognition 1,000% (ok, this one's sarcasm)
And he still managed to f*ck it up. I don't think he's capable of pulling off a Hillblom, tbh.
Ramesh ("sunny") at Theranos got $40 million bucks when he cashed out after a brief period of working at a dot com startup and he blew most of it on his divorce and Theranos. On the upside, he got to date 19 year old Holmes. People are alleging that SBF being romantic partners with Alameda's chief trader Elisson was also a bad idea for similar reasons.
Btw, does anyone know where the heck Elisson went? I haven't seen any articles specifying her current whereabouts.
They are either industry saboteurs planted by big banking interests or they are complete imbeciles.
Same can be said about people who gave them money. It's just retarded. The whole business went completely against the core purpose of cryptocurrency. Anyone who invested in him or had their money sitting on his exchange (or any bankrupt exchange) deserved to lose it. It's scary to think what damage large amounts of capital could do in the hands of such idiots; society is better off now.
I ended up losing a significant amount of money on the FTX debacle, and I want to demonstrate that even risk-aware people who tried to act relatively prudently can still end up losing money. I also want to argue that while most parties involved (myself included) made wrong decisions one way or the other throughout this -- and as a result are greatly suffering from the consequences -- that we should focus less on blaming the victims, and more on prosecuting the actual villains, while figuring out a clever way of preventing such large-scale fraud from happening again.
Here is my story:
- I put $50k into FTX last year. The reason for putting the money into FTX was because it was the only large-scale platform that allowed me to trade the specific token that I wanted to trade.
- My investment proved to be more successful than I had anticipated, and I turned the initial investment into $600k by the end of last year.
- By the spring of this year, I had sold my entire position and was now sitting with $400k USD on FTX (as I didn't sell everything at the top).
- At that time, I attempted to withdraw the entire amount into my bank account, but immediately ran into issues with my bank.
- For background, I'm a dual citizen, originally from South America but now living in the US. As you may be aware, US citizens were not allowed to use FTX.com; hence I used my South American citizenship to get verified by FTX, with the condition that I could only withdraw to a South American bank in my name.
- I spent about 10-20 hours this spring attempting to make the withdrawal, which included dozens of phone calls and emails with my bank as well as the FTX support team, in order to execute the transaction. But the process turned out to be more complicated than I had expected.
- Full details are not necessary here as I wish to somewhat protect my identity, but it became clear to me that this process would be very difficult to complete unless I was physically present at the bank in South America.
- While I considered that keeping the money on FTX for a few more months was not risk-free, I deemed the risk relatively low. A part of that judgement was the fact that FTX was an exchange, and not a bank nor a prop-trading house, and thus I viewed the risk of a run on the bank scenario, or FTX speculating away my money in trading, as low.
- What instead worried me was that FTX could get hacked, or that the founders could take my money and run, but given the high-profile nature of the company and its founders, I made the call that keeping the money on FTX for a few more months was not an overwhelming risk factor.
- I also considered converting my money into BTC and transferring them to cold storage, but ended up not doing that as I worried about a crypto meltdown, and I reasoned that my money was safer sitting in USD at FTX (despite the aforementioned risks). I further reasoned, that given that the amount was already quite large, that it would be even harder to explain to a local bank where the money had come from once it had gone off an exchange and then come back on again.
- For all of these reasons, I decided to wait, and was planning to do the transfer in less than 2 months from today, once back in South America.
We obviously know what happened next, and we know that pretty much any other solution would have been better for me. But with the information available to me at the time, it wasn't obvious that what happened would happen. I believed I had reasoned appropriately about the risks and made the correct decisions at the time when I made them, with the information available at the time.
My point is that we don't know the stories behind why so many people kept their money on FTX. Perhaps some were more reckless than others, and perhaps someone reading this thinks that I was reckless too. But even so, in my view, none of us "deserved" to have this happen to us. So instead of vilifying the victims, the focus should be on holding the perpetrators responsible, while thinking of a better way forward so that this doesn't happen again. Thanks for reading.
Fair enough. It sounds like a real roller coaster ride of good luck followed by terrible luck. I understand that it's sometimes unavoidable to move tokens to an exchange when you are about to cash out. The timing was just really unfortunate.
I guess there is a lesson to be learned about investing in tokens which can only be acquired and disposed of on a single exchange; that is a bit of a red flag. Unfortunately, with crypto, it's better to be paranoid. Many governments and big banks don't want crypto to succeed so these kinds of major collapses are to be expected... I wouldn't be surprised if some of them may be orchestrated intentionally.
Agreed. Well, live and learn. I tried to steer clear of the obviously shady things (like yield farming, etc.) which to me seemed unsustainable all along, but as it turns out, there are ample ways to lose anyway. Thanks for the comment.
I'm curious - all of this makes sense, but what was the disadvantage to buying BTC (Or Eth, or whatever) on FTX, transferring it to Coinbase, and cashing out on Coinbase?
Maybe this is a naive question with regards to how AML / KYC work in crypto, but would Coinbase (and in the extension, my bank) accept an incoming transfer of that size if they didn't know for sure that either 1) the money was coming from "me", or 2) that I had at least obtained it legally?
In my early conversations with my bank, they stated that among other things, they would need to see proof of where the funds had come from (proof of original $ deposit into FTX, FTX trading history, etc.), and I just assumed that sending the crypto to a different exchange would add another layer of complexity that would make that process much harder.
But perhaps I took an overly conservative (and now catastrophic) stance when trying to do everything as cleanly as possible.
I have a sneaking feeling your approach might have worked (or at least it's hard to imagine it being a worse outcome than what actually happened). I'm feeling pretty stupid now for not exploring this further. I guess I never expected FTX would just disappear, and so I didn't explore every option as fully as I should have. I appreciate your suggestion in any case.
I've never moved more than a few thousand dollars around at a time... but you absolutely could move that much into coinbase and withdraw into a US account. Might have some forms to fill out, might have a small waiting period. Will have to send coinbase your US ID etc. But i would be surprised if you had too many issues.
Thank you, that is helpful to know for future reference if I'm ever in a similar situation. I have also moved smaller amounts in the past without much problems (though this was years ago), but you are probably right that this too would have been doable.
The short answer is no, most exchanges are happy to take large deposits straight from an Eth or BTC wallet with a little bit of KYC, but your US bank might have put up the same guardrails and Coinbase could always fold in the same way that FTX has.
Fair enough, and thank you for the response. Reading some of the other responses, it seems people are generally of the view that it probably would have been doable, but perhaps not without some level of hickup, particularly with regards to the US bank. I guess I will never know 100% since this is now in the past.
And the comment around Coinbase also makes sense, though I suppose my exposure to that risk could have been minimized assuming the money would ideally only have been sitting there for a few days. In retrospect, I should have obviously attempted the Coinbase route.
I don't know if Coinbase would take that much BTC and immediately cash it out to USD and transfer to your bank.
The part that should be no problem is the American bank itself, if you ask first for instructions. Coinbase is a legit American entity. Procedure should be same as making large transfers or consolidations of IRAs or liquidating brokerage holdings to buy a house.
Thank you for the comment. I hadn't spent all that much time thinking about this from an AML / KYC perspective up until now, but I recall in years past when I wanted to make a bank transfer from Colombia to the US, it felt like I was holding my breath for the money to eventually arrive (and this was bank <-> bank, without crypto involved), given all the paperwork and questions asked.
The money did arrive successfully by the way, but I just took away from that exercise that banks are really, really strict about money transfers and the origin of monies. This all has me thinking that getting crypto back into the banking system -- to the extent it's easy today -- might only get harder in the future.
I was wondering if this was your concern - I just didn't know how it stacked up to trying to move hundreds of thousands of dollars from a bank in Brazil to a US one.
Good point. My experience with moving to and from South America to the US is that it has been doable, but always with the feeling of "will the money get stuck somewhere this time" (and I never tried anything near this amount).
My concern in this specific situation was greater around moving money from crypto -> bank, vs. bank -> bank. My general sense is that once the money is inside of the traditional banking system, it's less likely to face issues.
But coming to the bank with a wad of cash (or crypto), in my view, could trigger all kinds of issues (in theory at least).
> risk-aware people who tried to act relatively prudently can still end up losing money.
Risk-aware people don't gamble more money than they want to lose. The moral assumption behind "blaming the victims" of crypto schemes is that their losses are little more than a reckoning of their optimism, ignorance and greed, not a tragic economical ruin.
> I turned the initial investment into $600k
If you call it an investment you weren't very risk-aware at the time.
To me, a gamble is something where you go in with the intention of let's say, a 55% chance of winning, and a 45% chance losing it all; or a 10% chance of massively winning, and a 90% chance of losing it all. Whereas investing in things like equities is less binary (as it's rare for things to go to $0), and if you have good investment skills, investing seems to me to offer much greater ways to exploit inefficiencies in the market than what gambling does, and can create much better returns, no matter the asset class.
Obviously one has to be careful which asset class one invests in. High yield bonds are riskier than investment grade bonds; equities are riskier than high yield bonds; bluechip crypto is riskier than equities, and speculative tokens are riskier than bluechip crypto. I think all that is understood, and I was well aware of that aspect of the risk. But an aggressive choice of asset class doesn't necessarily turn it into a gamble, so I reject the way you framed this as a "gamble".
The one thing I would consider a gamble was my "gamble" that FTX would not go under before I had a chance to take my money out. I think it's probably fair to call that a gamble, if that's what you are referring to.
In either case, it's interesting how humans tend to be a quite a compassionate species in face of adversity, and yet, this specific topic seems to trigger something in the human psyche that elicits vitriol and compassion in roughly equal amounts, even as many people are clearly facing adversity. I'm not judging that reaction, but I'm curious as to why it's happening.
To expand on parent, you may wish to read a little more about USDC, Uniswap and non custodial wallets (also known as self custody).
Uniswap would allow you to trade any token that follows the ERC20 interface (not all of them do, but many). USDC would allow you to mitigate day to day price volatility. Non custodial wallet would mean the burden lies on you to secure the funds, but a CEX getting hacked or investing away your deposits is not possible. Self custody also means you could move some to another CEX in US to attempt withdrawal.
Also should note there are different and additional risks with this approach: you might lose your keys, get phished/hacked, or use the blockchain incorrectly, or USDC/Uniswap contracts could fail, etc.
Thank you! I'm not very familiar with USDC, though I am familiar with Dai and the MakerDAO ecosystem, and it looks like USDC serves a similar purpose, even though the design between the two looks different (one is centralized, one is not). Perhaps those two assets offer similar order of magnitude tradeoffs in terms of tail risk. In retrospect, putting the money in USDC (or Dai) or similar would have been a good course of action.
I realize this wasn't evident from my initial post, but I actually go back many years with crypto and have run both airgapped computers at home as well as used Trezors without mistake (including using Uniswap), so I'm less worried about losing my keys or committing other such user errors.
Ironically, while I used to worry more about using CEX's (thinking they could hacked, or the founders could run away with the money), over time I gravitated towards worrying more about actually getting my crypto money back into the banking system, without running afoul of AML / KYC hurdles, and I thought CEX's would be the less risky option in this regard.
And in this case specifically, once the money on FTX became sizable, I became even more paranoid about this, and I guess I got set in my own thinking of not wanting the money to leave the exchange for fear of not being able to transfer it back into the banking system.
In retrospect, it's funny (and obviously sad at the same time) how I overly worried about one thing, while completely missing out on what the real risk was.
You all have been extremely helpful, so I thank you very much (and not least for allowing me to put some of my thoughts in writing and reasoning with you about it). We live and learn -- now onto figuring out how to make up for the money lost!
Every approach has risks, and the right approach depends on the person. I'd never reccomend self custody for my mother (actually I'd never reccomend crypto for my mother) but if you have the technical skills and are personally responsible self custody might be safer than a cex. It also let's you take advantage of defi, which has a whole other set of risks and benefits.
I wrote about what I see as the difference between gambling and investing in a prior comment, if of interest.
But I am genuinely much more curious around the human psyche in situations like these, and I'm seeking your thoughts if you would be kind enough to offer them since I think we are on different sides on this on, in this specific instance.
My experience with the human species is that they generally err on the side of compassion, vs. judgement, but less so in this case. If you could share your thoughts on what might drive the latter rather than former in this case, that would be highly appreciated.
On a personal note, and as I was clear to point out in the parent comment, I am not looking for any sympathy here, I'm a grown man and I am adept at handling adversity. But nor am I necessarily looking for vitriol unless there is a good reason for it. Your thoughts on this topic are appreciated.
> My experience with the human species is that they generally err on the side of compassion
I don't think extreme levels of greed deserves compassion. It's been more than 10+years. I can't have compassion for 20 years. People get tired man and don't care anymore and actually hope for the worst (but don't say it).
Interesting. So it may be your view of this constituting an extreme level of greed that drives your sentiment in this case. That makes more sense to me, though we clearly differ in our assessment of "extreme" and "greed".
Out of curiosity, would you then apply the same logic to people investing in SPAC's, growth stocks at extreme valuation levels, triple leveraged ETF's, doubling down on NKLA when their trucks are shown to roll down hills, etc.? Or is it strictly confined to crypto? To me, these are all different manifestations of the same thing -- a decade of easy money, enabled by flawed monetary policy. An investor in my view can still be rational (not greedy) while still taking interest in such opportunities.
Also, what if this were only 5% of my portfolio (I'm not disclosing the actual %'age, but consider the 5% for argument's sake), would you still consider it an extreme level of greed?
I have my own views of what constitutes extreme greed, but that tends to have more to do with how certain individuals (in this case FTX's executives, but can also be applied obvious scams like OneCoin, and many other scenarios) illegally enrich themselves by exploiting regular people. That, to me, is true extreme greed.
Either way, I think your response is interesting and I appreciate the extra color.
> investing in SPAC's, growth stocks at extreme valuation levels, triple leveraged ETF's, doubling down on NKLA when their trucks are shown to roll down hills, etc.?
Yes. I invest in leveraged etfs. You can't compare NKLA/crypto/SPACs with UPRO for example.
> would you still consider it an extreme level of greed?
I consider the whole crypto ecosystem. I mined bitcoin for some time when it was $300 and thought it was full ponzi even then.
> * Unparalleled info and insights about the crypto markets.
Since both his hedge fund and exchange lost billions, I doubt it.
Except for going long in a bull market, was he ever successful in anything?
> * A team of geniuses who were absolutes alphas from quantitative trading, won math olympiads and were constantly on drugs to enhance their cognition 1,000% (Ok, this one's sarcasm)
Again, they've lost massive amounts of money trading.
If your strategy makes a lot of money for years, but then loses more than anything you've ever earned, it's a crappy strategy.
> If your strategy makes a lot of money for years, but then loses more than anything you've ever earned, it's a crappy strategy.
Depends who's money you're playing with. If you profit on the way up and only your customers lose on the way down. Then high-risk strategies are (unfortunately) always better.
My trading strategy has never made me billions nor lost billions. Yet I kinda feel like there's a solid possibility many of these fools will end up waaay better off than me. Assuming they can stay out of jail.
Some of these fools stash the wealth on the side for when they get out of jail. During their sentence they take classes, meditate and self actualize or possibly write a book about some life lesson they just learned in prison. White collar crime is quite lenient in punishments, jail may even be a good experience for some
Plenty of people fuck up in similar or even better circumstances.
What amazes here is the sheer magnitude and low intellect. They did no accounting. They bought property in their own names out of company (customer) assets. He was still "trying to raise money" as of yesterday, in full denail.
This is not an excessively sophisticated criminal mind, he doesn't seem to understand why people would take issue with his actions.
MIT grads need to stay in their lane. This kind of incompetent deceit at the highest levels of power and influence is supposed to only be possible with a degree from or Harvard and Yale.
edit: what I mean, trollishly, is that I expected more conscientiousness from a room of MIT quant types, even if business process and diligence was not in their wheelhouse.
Gerry Cotton had far less money on the table and he supposedly died abroad.