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mostlysignssomeportents · 11 days

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How finfluencers destroyed the housing and lives of thousands of people

For the rest of May, my bestselling solarpunk utopian novel THE LOST CAUSE (2023) is available as a $2.99, DRM-free ebook!

The crash of 2008 imparted many lessons to those of us who were only dimly aware of finance, especially the problems of complexity as a way of disguising fraud and recklessness. That was really the first lesson of 2008: "financial engineering" is mostly a way of obscuring crime behind a screen of technical jargon.

This is a vital principle to keep in mind, because obscenely well-resourced "financial engineers" are on a tireless, perennial search for opportunities to disguise fraud as innovation. As Riley Quinn says, "Any time you hear 'fintech,' substitute 'unlicensed bank'":

https://pluralistic.net/2023/05/01/usury/#tech-exceptionalism

But there's another important lesson to learn from the 2008 disaster, a lesson that's as old as the South Seas Bubble: "leverage" (that is, debt) is a force multiplier for fraud. Easy credit for financial speculation turns local scams into regional crime waves; it turns regional crime into national crises; it turns national crises into destabilizing global meltdowns.

When financial speculators have easy access to credit, they "lever up" their wagers. A speculator buys your house and uses it for collateral for a loan to buy another house, then they make a bet using that house as collateral and buy a third house, and so on. This is an obviously terrible practice and lenders who extend credit on this basis end up riddling the real economy with rot – a single default in the chain can ripple up and down it and take down a whole neighborhood, town or city. Any time you see this behavior in debt markets, you should batten your hatches for the coming collapse. Unsurprisingly, this is very common in crypto speculation, where it's obscured behind the bland, unpronounceable euphemism of "re-hypothecation":

https://www.coindesk.com/consensus-magazine/2023/05/10/rehypothecation-may-be-common-in-traditional-finance-but-it-will-never-work-with-bitcoin/

Loose credit markets often originate with central banks. The dogma that holds that the only role the government has to play in tuning the economy is in setting interest rates at the Fed means the answer to a cooling economy is cranking down the prime rate, meaning that everyone earns less money on their savings and are therefore incentivized to go and risk their retirement playing at Wall Street's casino.

The "zero interest rate policy" shows what happens when this tactic is carried out for long enough. When the economy is built upon mountains of low-interest debt, when every business, every stick of physical plant, every car and every home is leveraged to the brim and cross-collateralized with one another, central bankers have to keep interest rates low. Raising them, even a little, could trigger waves of defaults and blow up the whole economy.

Holding interest rates at zero – or even flipping them to negative, so that your savings lose value every day you refuse to flush them into the finance casino – results in still more reckless betting, and that results in even more risk, which makes it even harder to put interest rates back up again.

This is a morally and economically complicated phenomenon. On the one hand, when the government provides risk-free bonds to investors (that is, when the Fed rate is over 0%), they're providing "universal basic income for people with money." If you have money, you can park it in T-Bills (Treasury bonds) and the US government will give you more money:

https://realprogressives.org/mmp-blog-34-responses/

On the other hand, while T-Bills exist and are foundational to the borrowing picture for speculators, ZIRP creates free debt for people with money – it allows for ever-greater, ever-deadlier forms of leverage, with ever-worsening consequences for turning off the tap. As 2008 forcibly reminded us, the vast mountains of complex derivatives and other forms of exotic debt only seems like an abstraction. In reality, these exotic financial instruments are directly tethered to real things in the real economy, and when the faery gold disappears, it takes down your home, your job, your community center, your schools, and your whole country's access to cancer medication:

https://www.theguardian.com/world/2012/jun/08/greek-drug-shortage-worsens

Being a billionaire automatically lowers your IQ by 30 points, as you are insulated from the consequences of your follies, lapses, prejudices and superstitions. As @[email protected] says, Elon Musk is what Howard Hughes would have turned into if he hadn't been a recluse:

https://mamot.fr/@[email protected]/112457199729198644

The same goes for financiers during periods of loose credit. Loose Fed money created an "everything bubble" that saw the prices of every asset explode, from housing to stocks, from wine to baseball cards. When every bet pays off, you win the game by betting on everything:

https://en.wikipedia.org/wiki/Everything_bubble

That meant that the ZIRPocene was an era in which ever-stupider people were given ever-larger sums of money to gamble with. This was the golden age of the "finfluencer" – a Tiktok dolt with a surefire way for you to get rich by making reckless bets that endanger the livelihoods, homes and wellbeing of your neighbors.

Finfluencers are dolts, but they're also dangerous. Writing for The American Prospect, the always-amazing Maureen Tkacik describes how a small clutch of passive-income-brainworm gurus created a financial weapon of mass destruction, buying swathes of apartment buildings and then destroying them, ruining the lives of their tenants, and their investors:

https://prospect.org/infrastructure/housing/2024-05-22-hell-underwater-landlord/

Tcacik's main characters are Matt Picheny, Brent Ritchie and Koteswar “Jay” Gajavelli, who ran a scheme to flip apartment buildings, primarily in Houston, America's fastest growing metro, which also boasts some of America's weakest protections for tenants. These finance bros worked through Gajavelli's company Applesway Investment Group, which levered up his investors' money with massive loans from Arbor Realty Trust, who also originated loans to many other speculators and flippers.

For investors, the scheme was a classic heads-I-win/tails-you-lose: Gajavelli paid himself a percentage of the price of every building he bought, a percentage of monthly rental income, and a percentage of the resale price. This is typical of the "syndicating" sector, which raised $111 billion on this basis:

https://www.wsj.com/articles/a-housing-bust-comes-for-thousands-of-small-time-investors-3934beb3

Gajavelli and co bought up whole swathes of Houston and other cities, apartment blocks both modest and luxurious, including buildings that had already been looted by previous speculators. As interest rates crept up and the payments for the adjustable-rate loans supporting these investments exploded, Gajavell's Applesway and its subsidiary LLCs started to stiff their suppliers. Garbage collection dwindled, then ceased. Water outages became common – first weekly, then daily. Community rooms and pools shuttered. Lawns grew to waist-high gardens of weeds, fouled with mounds of fossil dogshit. Crime ran rampant, including murders. Buildings filled with rats and bedbugs. Ceilings caved in. Toilets backed up. Hallways filled with raw sewage:

https://pluralistic.net/timberridge

Meanwhile, the value of these buildings was plummeting, and not just because of their terrible condition – the whole market was cooling off, in part thanks to those same interest-rate hikes. Because the loans were daisy-chained, problems with a single building threatened every building in the portfolio – and there were problems with a lot more than one building.

This ruination wasn't limited to Gajavelli's holdings. Arbor lent to multiple finfluencer grifters, providing the leverage for every Tiktok dolt to ruin a neighborhood of their choosing. Arbor's founder, the "flamboyant" Ivan Kaufman, is associated with a long list of bizarre pop-culture and financial freak incidents. These have somehow eclipsed his scandals, involving – you guessed it – buying up apartment buildings and turning them into dangerous slums. Two of his buildings in Hyattsville, MD accumulated 2,162 violations in less than three years.

Arbor graduated from owning slums to creating them, lending out money to grifters via a "crowdfunding" platform that rooked retail investors into the scam, taking advantage of Obama-era deregulation of "qualified investor" restrictions to sucker unsophisticated savers into handing over money that was funneled to dolts like Gajavelli. Arbor ran the loosest book in town, originating mortgages that wouldn't pass the (relatively lax) criteria of Fannie Mae and Freddie Mac. This created an ever-enlarging pool of apartments run by dolts, without the benefit of federal insurance. As one short-seller's report on Arbor put it, they were the origin of an epidemic of "Slumlord Millionaires":

https://viceroyresearch.org/wp-content/uploads/2023/11/Arbor-Slumlord-Millionaires-Jan-8-2023.pdf

The private equity grift is hard to understand from the outside, because it appears that a bunch of sober-sided, responsible institutions lose out big when PE firms default on their loans. But the story of the Slumlord Millionaires shows how such a scam could be durable over such long timescales: remember that the "syndicating" sector pays itself giant amounts of money whether it wins or loses. The consider that they finance this with investor capital from "crowdfunding" platforms that rope in naive investors. The owners of these crowdfunding platforms are conduits for the money to make the loans to make the bets – but it's not their money. Quite the contrary: they get a fee on every loan they originate, and a share of the interest payments, but they're not on the hook for loans that default. Heads they win, tails we lose.

In other words, these crooks are intermediaries – they're platforms. When you're on the customer side of the platform, it's easy to think that your misery benefits the sellers on the platform's other side. For example, it's easy to believe that as your Facebook feed becomes enshittified with ads, that advertisers are the beneficiaries of this enshittification.

But the reason you're seeing so many ads in your feed is that Facebook is also ripping off advertisers: charging them more, spending less to police ad-fraud, being sloppier with ad-targeting. If you're not paying for the product, you're the product. But if you are paying for the product? You're still the product:

https://pluralistic.net/2021/01/04/how-to-truth/#adfraud

In the same way: the private equity slumlord who raises your rent, loads up on junk fees, and lets your building disintegrate into a crime-riddled, sewage-tainted, rat-infested literal pile of garbage is absolutely fucking you over. But they're also fucking over their investors. They didn't buy the building with their own money, so they're not on the hook when it's condemned or when there's a forced sale. They got a share of the initial sale price, they get a percentage of your rental payments, so any upside they miss out on from a successful sale is just a little extra they're not getting. If they squeeze you hard enough, they can probably make up the difference.

The fact that this criminal playbook has wormed its way into every corner of the housing market makes it especially urgent and visible. Housing – shelter – is a human right, and no person can thrive without a stable home. The conversion of housing, from human right to speculative asset, has been a catastrophe:

https://pluralistic.net/2021/06/06/the-rents-too-damned-high/

Of course, that's not the only "asset class" that has been enshittified by private equity looters. They love any kind of business that you must patronize. Capitalists hate capitalism, so they love a captive audience, which is why PE took over your local nursing home and murdered your gran:

https://pluralistic.net/2021/02/23/acceptable-losses/#disposable-olds

Homes are the last asset of the middle class, and the grifter class know it, so they're coming for your house. Willie Sutton robbed banks because "that's where the money is" and We Buy Ugly Houses defrauds your parents out of their family home because that's where their money is:

https://pluralistic.net/2023/05/11/ugly-houses-ugly-truth/#homevestor

The plague of housing speculation isn't a US-only phenomenon. We have allies in Spain who are fighting our Wall Street landlords:

https://pluralistic.net/2021/11/24/no-puedo-pagar-no-pagara/#fuckin-aardvarks

Also in Berlin:

https://pluralistic.net/2021/08/16/die-miete-ist-zu-hoch/#assets-v-human-rights

The fight for decent housing is the fight for a decent world. That's why unions have joined the fight for better, de-financialized housing. When a union member spends two hours commuting every day from a black-mold-filled apartment that costs 50% of their paycheck, they suffer just as surely as if their boss cut their wage:

https://pluralistic.net/2023/12/13/i-want-a-roof-over-my-head/#and-bread-on-the-table

The solutions to our housing crises aren't all that complicated – they just run counter to the interests of speculators and the ruling class. Rent control, which neoliberal economists have long dismissed as an impossible, inevitable disaster, actually works very well:

https://pluralistic.net/2023/05/16/mortgages-are-rent-control/#housing-is-a-human-right-not-an-asset

As does public housing:

https://jacobin.com/2023/10/red-vienna-public-affordable-housing-homelessness-matthew-yglesias

There are ways to have a decent home and a decent life without being burdened with debt, and without being a pawn in someone else's highly leveraged casino bet.

If you'd like an essay-formatted version of this post to read or share, here's a link to it on pluralistic.net, my surveillance-free, ad-free, tracker-free blog:

https://pluralistic.net/2024/05/22/koteswar-jay-gajavelli/#if-you-ever-go-to-houston

Image: Boy G/Google Maps (modified) https://pluralistic.net/timberridge

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robertreich · 2 years

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Is Crypto Really Going To Crash? (Yes)

Crypto is going to crash and could take your savings with it.

In June 2022, Bitcoin dropped over 30 percent to its lowest values since December 2020, and Ethereum, the second-most valuable cryptocurrency, fell about 35 percent. TerraUSD, a so-called “stablecoin,” also collapsed when its underlying cryptocurrency LUNA lost 97 percent of its value in just 24 hours, apparently destroying some investors’ life savings. The implosion helped trigger a crypto meltdown that erased $300 billion in value across the market.

As cryptocurrency prices plummeted, Celsius Network — an experimental cryptocurrency lender — announced it was freezing withdrawals “due to extreme market conditions.”

These crypto crashes and freezes have fueled worries that the complex crypto banking and lending system is on the brink of ruin.

But this crash shouldn’t surprise anyone familiar with the industry – or anyone who remembers the financial crashes of 1929 and 2008.

Let me explain.

In the murky world of crypto decentralized finance, known as DeFi, it’s hard to understand who provides money for loans, where the money flows, or how easy it is to trigger currency meltdowns.

There are no standards for issues of custody, risk management, or capital reserves. There are no transparency requirements. Investors often don’t know how their money is being handled. Deposits are not insured.

It’s a Ponzi scheme. Like all Ponzi schemes, getting rich depends on how many other investors follow you into it – until somebody’s left holding the worthless crypto coin.

Why isn’t this market regulated? Follow the money.

The crypto industry is pouring huge amounts into political campaigns. It has hired scores of former government officials and regulators to lobby on its behalf — including three former chairs of the Securities and Exchange Commission, three former chairs of the Commodity Futures Trading Commission, three former U.S. senators, and even former Treasury Secretary Larry Summers.

In the past, cryptocurrencies kept rising by attracting new investors and big Wall Street money, along with celebrity endorsements. But all Ponzi schemes topple eventually – just like the Wild West finances of the 1920s did.

Back then, Americans had been getting rich by speculating on shares of stock, as other investors followed them into these risky assets — pushing their values ever upwards. When the toppling occurred in 1929, it plunged the nation and the world into the Great Depression.

That crash resulted in the Glass-Steagall Act, signed into law by Franklin D. Roosevelt in 1933. Glass-Steagall separated commercial banking from investment banking, putting an end to the giant Ponzi scheme that had overtaken the American economy and led to the Great Crash of 1929.

It took a full generation to forget that crash and allow the forces that caused it to repeat their havoc.

By the mid-1980s, as the stock market soared, speculators noticed they could make even more money if they gambled with other people’s money, as speculators did in the 1920s. They pushed Congress to deregulate Wall Street, arguing that the United States financial sector would otherwise lose its competitive standing internationally.

The final blow was in 1999, when the Clinton administration succumbed to intensive lobbying and ditched what remained of Glass-Steagall. With its repeal, American finance once again became a betting parlor.

Inevitably, Wall Street suffered another near-death experience when its Ponzi schemes began toppling in 2008, just as they had in 1929. While the U.S. government bailed out the biggest banks and financial institutions, millions of Americans lost their jobs, their savings, and their homes – but only a single banking executive went to jail. In the wake of the 2008 financial crisis, a new but watered-down version of Glass-Steagall was enacted — the Dodd-Frank Act.

Which brings us — nearly a century after Glass-Steagall — to today’s crypto crash.

If we should have learned anything from the crashes of 1929 and 2008, it’s that regulation of financial markets is essential. Otherwise they turn into Ponzi schemes — leaving small investors with nothing and endangering the entire economy.

It’s time for the Biden administration and Congress to end the crypto Ponzi scheme. In the meantime, share this video so your friends and family don’t fall for it.

#crypto #fraud #Ponzi #Glass-Steagall #finance #regulation #video #videos

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gwgaccountant · 8 months

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Dan Olson's newest documentary, "This Is Financial Advice," has really gotten into my head.

I should mention this first: I'm going to call the memestock redditors believing the MOASS conspiracy theory "apes" because that's one of their most common names for themselves. Like most of their other self-descriptors, it implies a lack of intelligence. There's a weird self-deprecating streak in the memestock community, which you'd think would be incompatible with a typical conspiracy theorist's overconfidence. You'd be wrong. That's part of what's interesting.

Part of me wants to break down all the places where the self-proclaimed apes' financial theories break down. Like, if we accept that Ken Griffin needs to buy back more Gamestop shares than are in existence, and that the Reddit apes already own most real shares of Gamestop, and that all of them will hodl as the stock prices rise to plausibly high stock prices, the hedge funds wouldn't be forcibly liquidated to pay arbitrarily high prices demanded by the apes. The short sale contract is a contract between the short-seller and the lender; nobody involved has an obligation to the shareholders. If stock prices rose too high, the short-seller would either cut a deal with the lender or break contract and deal with the legal consequences. But this kind of thing is pointless; the people who believe that stuff aren't available to be persuaded, and the exercise requires accepting so many absurd premises that its educational value is limited.

Another part of me is fascinated by how the whole memestock community is basically playing the world's slowest game of chicken. They seem to conceptualize their conflict with hedge funds as—well, first of as a conflict that both sides are participating in, where both sides are fighting by the same rules. But those rules are, themselves, kinda silly. The apes ascribe their inevitable, ultimate victory to the fact that they're willing to grind video games for little practical reward; their actions involve stubbornly refusing to sell the stocks they buy, even as the company they represent goes bankrupt and warns investors that those shares are likely to become worthless soon. As far as I can tell, they conceptualize the conflict as basically a contest of will—the diamond-handed apes holding onto their stocks versus the greedy hedge funds...doing...something. Spreading FUD, I guess. It's such a weird conflict and bears so little relationship to how actual finance works.

It also overlaps in some key ways with other topics Dan Olsen has covered, which isn't surprising. Everyone needs a niche, and Olsen's is increasingly online conspiracy theories and grifts. Also, /r/Superstonk users are swimming in the same waters as a lot of conspiracy theorists and crypto-bros, and the sort of person who buys GME because Reddit says it'll make them all gorrilionaires and then swallows conspiracies like tic-tacs to explain why the price is still falling is probably vulnerable to blockchain scams and flat-earth theories and such.

But there are also interesting differences! To start with, despite being a financial conspiracy theory, MOASS is remarkably non-antisemitic. There is still antisemitism, don't get me wrong, but since the villains of their conspiracy are international financial institutions, I expected more. I expected the antisemitism to be front and center, even more prominent than in most conspiracy theories. But it's not! It's probably less antisemitic than the average conspiracy theory!

There's also the fact that apes are basically trying to organize a counter-conspiracy. It's an ineffective one, considering how its plans are based on a bunch of lies they keep telling each other, but they're still organizing an effort to create a new world order with themselves at the top, by accumulating financial capital and forcing the US government to pay obligations owed to them. It sounds like the kind of thing a conspiracy theory with the average amount of antisemitism would say Jews are doing. You don't see that kind of counter-conspiracy "we're gonna take over the world" thing often, outside Christian Dominionist circles and imperialist war hawks, and their "we" is a lot broader than the apes'.

On a completely unrelated note, one of MOASS's core figureheads, DFV, is an ordinary securities broker who wanted to be a finance Influencer. He said that GameStop was probably undervalued by about 50%; it would probably see a bump in 2020 from the ninth console generation (which wouldn't be delayed by any unexpected global events that also hurt brick-and-mortar retail in general), which would give it the capital needed to potentially pivot to a business model that's more sustainable in our digital world. By saying GME was undervalued, defending his theory despite the global pandemic ruining the assumptions it was based on, and celebrating GME's obviously unsustainable prices as evidence of his theory being correct despite being caused by completely different factors, DFV became a bit of a thought leader. The apes started reading anything he said in public as a coded message to them, which lead DFV to withdraw from the memestock community and social media overall, which lead to the apes simply recasting him as the sort of shadowy cabal leader that would be a conspiracy theory villain if he wasn't supposedly supporting and leading the apes from the shadows. DFV is not perfect. He committed to his pet theory even when the basis for it collapsed, even though COVID gave him a perfect ego-preserving exit ("I was wrong, but who could have predicted the pandemic?") He then took an equally unpredictable freak event as confirmation of that theory, even though it was unrelated to the theory's premise. But he saw a bunch of increasingly conspiratorial cranks who wanted to make him a figurehead in their movement, potentially giving a huge boost to his finance Influencer dreams, and said "no, bye". I can respect that.

Ryan Cohen is such a character. He's a perfect example of a capitalist failson. He's an activist investor, a concept which I've been meaning to ramble about ever since I learned of the term in one of my accounting classes. But he likes attention and is willing to give apes the kind of crumbs they like for it. And maybe manipulate them for his own profit. Despite this, the apes still treat Cohen as a trustworthy savior, so much that Carl Icahn got drafted into the pantheon through flimsy association with Cohen. They think he has this master plan to create a megacorporation out of failing retailers that he has already stopped meddling with, which will somehow make the apes into billionaire cyberpunk villains.

Speaking of which: For all that the memestock apes like to position themselves against Wall Street's real-life cyberpunk villains, their predictable bad decisions are making a tidy profit for those same villains. (Aside from the one company that went out of business because it was making short sales that were considered reckless before Reddit started memestocking.) I don't have a point here, it's just ironic.

And, of course: Is the headband guy the same as the "I'm within 400 feet of an elementary school to prove the haters wrong and tell you about an unmissable business opportunity" guy from the Contrepreneurs video?

#dan olson #folding ideas #reddit #memestocks #moass #gamestop

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blockas46 · 5 months

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Crypto Loan Company: Unlocking Financial Freedom with Digital Assets

Explore a new frontier in finance with our Crypto Loan Company. Whether you seek a loan against your crypto holdings or want to borrow digital assets securely, our platform provides a seamless and decentralized solution. Earn interest on your crypto or access liquidity without selling. Join a community of innovators embracing the opportunities of crypto loans. Choose our Crypto Loan Company to redefine your financial journey in the digital age.

#crypto lenders #crypto lending company #crypto personal loan

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st-just · 11 months

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We have talked about Kyle Davies, one of the founders of crypto trading firm Three Arrows Capital, or 3AC, whose superpower was convincing people to lend him hundreds of millions of dollars to do crypto “arbitrage” trades that were just, like, buying speculative tokens of new crypto protocols, holding them for a while and hoping they’d go up. The innovations in 3AC’s business model were: 1. Calling wildly risky venture-type investments “arbitrages,” so that lenders would assume they were safe, and 2. Finding some really gullible lenders.

-Matt Levine

#quote #funny #crypto #matt levine

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transhuman-priestess · 7 months

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Sam Bankman-Fried was found guilty on Thursday for his role in the collapse of crypto exchange FTX.

After 15 days of testimony and about four and a half hours of deliberations, jurors returned a verdict that found him guilty on seven counts of fraud and conspiracy.

The sentencing hearing date will be March 28, 2024. He faces up to 110 years in prison.

Bankman-Fried was found guilty of stealing billions of dollars from accounts belonging to customers of his once-high-flying crypto exchange FTX. He was also found guilty of defrauding lenders to FTX’s sister company, the hedge fund Alameda Research, which held FTX customer funds in a bank account.

haha yeah get fucked man

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beardedmrbean · 7 months

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Sam Bankman-Fried, once hailed as a genius in cryptocurrency, was found guilty Thursday of all fraud counts against him, a year after his exchange, FTX, imploded and practically wiped out thousands of customers.

The verdict was reached around 7:40 p.m. ET, about four hours after the federal jury in Manhattan began deliberations.

Bankman-Fried, a co-founder of the digital currency exchange FTX, was charged with seven counts of wire fraud, securities fraud and money laundering that swindled customers of FTX and lenders to its affiliated hedge fund, Alameda Research.

Bankman-Fried “perpetrated one of the biggest financial frauds in American history,” Damian Williams, the U.S. attorney for the Southern District of New York, said after the verdict.

“The cryptocurrency industry might be new; the players like Bankman-Fried might be new,” Williams said. “But this kind of fraud, this kind of corruption, is as old as time.”

Bankman-Fried faces up to 110 years in prison. His sentencing is scheduled for March 28.

FTX and Alameda quickly collapsed in November 2022 after some of their financial liabilities were exposed. The fact that Alameda had taken billions of dollars from FTX's customers and that much of Alameda's balance sheet comprised digital currency assets it had created, was central to the case against Bankman-Fried.

Unnerved by disclosures about the firm's financial position, many of FTX’s customers tried to get their money back. That set off the equivalent of a bank run.

The value of Alameda's investments crashed, and FTX couldn’t return much of that money because it had been given to Alameda. Some went to the fund’s lenders, and billions were spent on sponsorships, commercials and loans to top executives. That, too, was a major part of the case against Bankman-Fried.

Many of FTX and Alameda's leaders were also charged after the firms went under. Former Alameda CEO Caroline Ellison, FTX co-founder Gary Wang and FTX head of engineering Nishad Singh all pleaded guilty. They agreed to cooperate with the prosecution and testify against Bankman-Fried in exchange for lighter sentences.

While Bankman-Fried testified in his own defense, it didn’t appear to have the same weight as the insider testimony against him. The prosecution, in its closing argument, said Bankman-Fried had answered “I can’t recall” 140 times while he was being cross-examined.

Bankman-Fried’s lawyers contended that he did not intend to defraud anyone and that the government was looking for someone to blame after the failures of FTX and Alameda.

Bankman-Fried was asked to rise and face the jury as the verdicts were read Thursday, and he did so. He showed little emotion as each verdict was read.

His father slumped in his seat, hunched over as each guilty verdict came in. His mother was visibly emotional.

Mark S. Cohen, Bankman-Fried’s counsel, said in an emailed statement Thursday that Bankman-Fried’s legal team respects the jury’s decision but that they are disappointed.

“Mr. Bankman Fried maintains his innocence and will continue to vigorously fight the charges against him,” he said.

Forbes had once estimated that Bankman-Fried's stakes in Alameda and FTXwere worth $26 billion. He was 29 at the time. But after the bankruptcies, that was gone. Criminal charges followed weeks later.

He also faces another trial on charges of bribing foreign officials and other counts. That trial is scheduled to begin in March, and he has pleaded not guilty to all charges.

On Thursday, Bankman-Fried was found guilty of two counts of wire fraud conspiracy, two counts of wire fraud, one count of conspiracy to commit money laundering, one count of conspiracy to commit commodities fraud and one count of conspiracy to commit securities fraud.

Williams, the prosecutor, said Bankman-Fried’s conviction should send a message to others.

“It’s a warning, this case, to every single fraudster out there who thinks that they’re untouchable or that their crimes are too complex for us to catch or that they’re too powerful for us to prosecute or that they could try to talk their way out of it when they get caught,” he said. “Those folks should think again.”

#nunyas news

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robosucka · 2 years

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FTX's very bad november

here are some bullet points of the key things that happened to stupid 'it turns out it was never actually a business' 40 billion dollar cryptocurrency exchange FTX this month. very funny please read more!

FTX is the 'smart, legal, pro-regulation' bitcoin exchange (a bank) beloved by athletes and US Senators alike. They are one of the five largest businesses in the crypto space, and are valued at up to $32,000,000,0000 (32B USD). 1b. FTX mints its own token, 'FT Token / FTT', which has a use-case for their advanced trading services as well as serving as a speculative asset that represents consumer trust.

2. FTX establishes a sister firm, "Alameda Research", which acted as its own market actor and research publisher. Alameda Research also have massive resources on their balance sheet.

3. When the Terra / Luna stablecoin disastrously lost its peg to the dollar earlier this year, crypto lost $60B of valuation. Everything fell, but unlike some stuff, FTT recovered. 3b. during this crisis, Alameda stepped in as a 'lender of last resort'; bailing out the liquidity-crisis-shocked crypto businesses by selling them emergency loans.

4. On November 02 (two weeks ago!) Coindesk published an exposé showing that a lot of Alameda Research's balance sheet was, basically, IOU's from FTX - the lender of last resort was a shell game.

5. at this point (i'm hazy on details!) the three FTX founders - "the Crypto King" "SBF"; Gary; and Nishad - start fighting a lot on twitter about something offline, in particular with their competitors Binance, the #1 company in the crypto space.

6. Binance sells all the FTT in its vaults. Billions of dollars' worth?

7. The market value of an FTT drops from $24 USD to $3. (an 87.5% drop in value)

8. 36 hours later, seeing FTX about to declare bankruptcy, Binance offers to buy FTX in a bailout. Binance lawyers ask to see FTX's most secret internal accounting documents. 8b. FTX provides something, which Binance aren't happy with, and Binance backs out of their offer to buy FTX.

9. a "hacker" steals between $300M-$500M USD worth of various coins and tokens from not only FTX's 'hot wallet' (actual liquid funds) but ALSO from its 'cold wallets' (which an outside hacker has no access to). 9b. in transferring these funds out of FTX and into a wallet for Tether (a stablecoin), the "hacker" doesn't have enough "TRX" to pay the gas to actually move the money. so they panic and uses TRX from their own wallet.

10. That wallet was on the Kraken ecosystem, and TRX is for the Tron Network, and both Tron and Kraken have KYC ('know your customer') ID requirements to use their systems, linking the wallet used to facilitate the theft to a driver's license and banking and contact information etc. 10b. the head of security for Kraken posts on twitter "We know the identity of the user."

11. the Bahamaian police (they spent company money on a big poly mansion on the Bahamas and so this all happens there) detain the three FTX founders

12. FTX goes from being worth $30-40 billion USD to bankrupt, nothing, goose egg, kanye voice: couldn't give a homeless guy change, its principals arrested, detained by island police as foreign billionaires, investigated by the Bahamaian money laundering authorities (lmao), investigated by America for the Tether theft (lmfao)

13. lmfao

47 notes · View notes