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Now that SBF has been actually convicted I think it might be good to have a simple explanation here of what he and rest of the EA-affiliated FTX leadership did.

[Edit: Hopefully I haven't accidentally given the impression that I don't think FTX did anything wrong (this question seems to have been downvoted). I absolutely believe they did wrong and committed fraud. I'm just not sure what it is that they did]

This is one of those times where Google has proved surprisingly useless. I see that he's been convicted of several counts of fraud, but the only explanation I've managed to piece together is this:

Alameda held a load of FTT and borrowed from customer deposits held by FTX. People tried to withdraw their deposits after it came out that Alameda held so much FTT, but FTX couldn't pay out because Alameda couldn't give back the customer funds it had borrowed.

I get the impression that Alameda sneakily holding loads of FTT was very bad, but not illegal, is this right? I guess this is bad because the value of FTT is linked to the value of Alameda and vice-versa so it looks like their assets give them more security if something goes wrong than they actually do, although I only just figured that out.

As for Alameda borrowing customer deposits - I don't understand any of this. What were the rules around lending out customer deposits? What made the lending out to Alameda fraudulent? This seems like THE key thing that FTX did wrong and I just can't find a basic explanation of what the crime was.

Would greatly appreciate any clarification!

[Edit 2: could someone who is downvoting briefly mention why they are doing so? I'm a little confused as to why this got such bad reception]

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In addition to the other answers, I'd like to mention something that while comparatively minor in impact, is IMO strongest in "there's no plausible innocent explanation for this", which helps to paint a picture of what FTX internal culture must have been like: FTX published on their website how much they had in their insurance fund. This fund was supposed to protect customers from losses e.g. arising from other unrelated customers being unable to pay back their margin loans. The number they published was a complete fabrication, in no way informed by the actual size of the insurance fund (which was typically smaller): it was calculated based on daily trading volume and a random number generator.

There was a bunch of news coverage about this at the time, here is the first result I found on Google.

My understanding is that there are two major claims against FTX:[1]

Providing a "backdoor" to Alameda Research

  1. When you trade derivatives, you can end up with a negative balance. This is not a weird crypto thing but is also true of trading on Fidelity or Vanguard or whatever: you short a stock, that stock goes up, now you owe the exchange money.
  2. Alameda research (AR) did a bunch of bad trades, and ended up owing FTX a lot of money. Again, by itself this is not cause for concern. But if you e.g. owe Fidelity too much money then they are going to liquidate your account because they don't trust you to pay it all back. And FTX's official policies said that they would do this, but they didn't.
  3. Telling your investors that you will follow a certain risk management policy and then not actually following that policy is fraud. My understanding is that it would have been perfectly legal for FTX to not liquidate AR, it's just the lying about it that is fraudulent.
  4. My understanding of SBF's defense here:
    1. The backdoor was created because FTX's code sucked and they were afraid of accidentally liquidating their backstop liquidity provider (AR), not because they actually wanted AR to follow different policies 
    2. And, in fact, AR's net position was positive, it's just that many of the assets weren't kept on FTX itself and were illiquid
    3. So, SBF thought AR was following the risk management policy as published
    4. [The jury did not find this defense persuasive.]

Commingling bank accounts

  1. Because FTX was unable to get a bank account, it sometimes told its customers to deposit funds in a bank account that was owned by Alameda
  2. Because their code/ops sucked, Alameda thought that some of this money was theirs, not FTX customers', and invested it
  3. My impression is that both the prosecution and defense agree that until ~June 2022, this improper usage of funds was due to negligence, not malicious intent 
  4. Sometime in 2022, this bug was discovered, and FTX execs realized AR had been investing fiat which wasn't theirs
  5. Fortunately, the investments had done reasonably well, and AR had assets which could be converted back into the appropriate amount of fiat, if required[2]
  6. Even though this use of funds was unintentional and sounds extremely sketchy, FTX's general counsel testified that FTX's terms of service did not prohibit it [though maybe it was implicitly prohibited, see this comment]
  7. However, the prosecution pointed to statements that SBF made to the public which seemed to portray this type of action as prohibited, and the jury found this persuasive
  8. Again, my understanding is that FTX's actions here per se were not criminal, the crime came because they lied about what they were doing. If SBF had just not made public statements beyond "read the terms of service", there would be no fraud. [Edit: this is disputed, see here.]

A final point: SBF's defense relied almost entirely on "good faith", i.e. claims that FTX's risk management systems were so terrible that he wasn't even aware that his behavior was fraudulent. And the prosecution even agrees with this defense at some points. Since your question was about what FTX did wrong, consider that FTX's poor risk management should reflect negatively on them, even if it doesn't qualify as criminal behavior on behalf of any individual.

  1. ^

    This comes mostly from the closing arguments. Note that actually most of the arguments were the prosecution and defense trying to convince the jury that SBF is a bad/good person respectively, and not actually engaging with the concrete details of what happened. So I'm trying to summarize what seems to me to be the most relevant part, but I expect I'm getting things wrong, and would appreciate corrections.

  2. ^

    At least under certain valuations of the assets. My impression is that these valuations were not done rigorously, but their accuracy is not that relevant to the criminal charges against SBF.

According to the guy who wrote the 2nd book on FTX, it was a fraud from mid-’21, when:

  1. FTX lost $1B when a trader took advantage of a software bug using a token called MobileCoin. The loss would’ve wiped out all the revenue FTX had ever made. SBF told employees to count the loss as Alameda's. This concealment enabled FTX to raise ~$1B from VCs.
  2. Even with that VC money, Alameda then borrowed more from FTX (especially for the Binance buyout). “We don’t really have the money for this,” Ellison testified that she told SBF.
  3. Then even before SBF’s spending spree really got going, Ellison warned him that Alameda’s debts were risky. But SBF asked her to invest an additional $3B in VC, even though Alameda had already helped itself to ~$2B from FTX users and borrowed $9B from other lenders. Alamada’s biggest asset was crypto that FTX had either created himself or was pushing (FTT, etc.) and without those, FTX owed ~$3B more than it had. She testified telling SBF that if they made the investments, and the market crashed and lending firms asked for their money back, Alameda would go broke and FTX would fail. Which then happened.

archive.is/FYMhv#selection-1959.0-1962.0 

If they can now pay back user due to the Anthropic investment, that’s ex post luck.

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Ben_West🔸
Thanks! Do you understand how that article is claiming that the borrowing occurred? I think maybe it is referring to the "backdoor" I listed, but it isn't very clear.

I'd note that DOJ chose to present a relatively simple pathway to conviction for the jury. That was smart when you have to convince 12 semi-random U.S. citizens to vote for conviction. Advocating for more complex ways in which the conduct also violated the law merely would have allowed the defense to present smokescreens. Therefore, I would be careful not to equate "USAO/SDNY chose not to argue X" with "USAO/SDNY didn't think SBF committed fraud due to X."

I'm not so sure about:

Again, my understanding is that FTX's actions here per se were not criminal, the crime came because they lied about what they were doing. If SBF had just not made public statements beyond "read the terms of service", there would be no fraud.

"FTX's terms of service did not prohibit it" != FTX was allowed to do it.

As the Government argued:

With respect to the Government’s theory that the defendant and his co-conspirators misappropriated FTX’s customers’ funds, the defendant suggests that to establish misappropriation, the Government must establish a “violation of the terms of a contract,” here the FTX Terms of Service. Dkt. No. 321 at 3. That is incorrect: misappropriation occurs when a party breaches a “fiducia

... (read more)
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Ben_West🔸
thanks! I couldn't think of a succinct way to summarize your comment, so I just said [Edit: this is disputed, see here.]. Let me know if you have suggestions.
1[anonymous]
It sounds like whether AR borrowing fiat deposits was criminal depends on whether the terms of service prohibited it, allowed it, or failed to comment on the matter. But am I right in thinking that this is all moot with respect to the question of fraud if you believe the three key witnesses for the prosecution that no one understood what had happened with the $8B in fiat deposits until it had already happened? Interestingly, a UK lawyer was prevented from testifying for the defense because interpretation of the law -- even foreign law -- is the presiding judge's domain.  ("The terms and any dispute shall be governed by, and construed in accordance with, English law.")  The lawyer had been planning to argue that, "FTX therefore owed no obligations as trustee of any fiat currency, and its obligations were only those contractual obligations in the Terms. On the English law interpretation of the Terms, FTX was obliged to honour customer withdrawals (i.e. to repay the debt of fiat currency that it owed), but was not constrained to use fiat currency for any particular purpose in the interim." (see here.)
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MichaelStJules
From the May 13 2022 FTX Terms of Service: I think these rule out "FTX was obliged to honour customer withdrawals (i.e. to repay the debt of fiat currency that it owed), but was not constrained to use fiat currency for any particular purpose in the interim": 1. If Alameda borrowed customer deposits from customers (without customer consent, e.g. not via margin lending or staking or whatever), this would be through FTX. Either: 1. FTX treated the deposits as belonging to FTX Trading, either intentionally, which makes it theft, or unintentionally, and in either case violates (A). Or, 2. FTX intended to repay, so FTX was treating the deposits like loans to FTX, which makes them loans, violating (B), and then loaned them out to Alameda. 2. The fact that FTX customers couldn't withdraw customer funds during/after the collapse means FTX violated its own terms in (C). (To be clear, this doesn't imply intent, which is required for fraud.)
3[anonymous]
I know this is a digression from the main question of intent but I'm still curious about it:  Do we know how much money was actually in the margin lending program?  How much of the fiat deposits were available for margin lending?  Prosecutors said "from June to November 2022, Alameda had taken between 8 and 12 billion, when there was at most 4 billion in the margin lending program" while the defense said "80 percent of the assets on FTX were margined assets used in futures trading. 80 percent are in this margin trading where customers are always borrowing other customers' assets."
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MichaelStJules
I haven't looked into this, and based on your comment, you seem more informed than me on this issue.
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Jason
If you think SBF didn't know that AR was "borrowing" client monies until after all such borrowing was done, we're going to have to agree to disagree on that. As to the other part: SBF's conduct happened, in relevant part, in the Southern District of New York (and other conduct happened with a sufficient nexus to SDNY to establish venue there). US law, not English law, governs as to whether various representations targeted at the United States (or with a sufficient nexus to the US) create a relationship of trust that gives rise to the possibility of criminal misappropriation. Also, even if the ToS were a defense as to anyone who had signed it, the alleged false statements also reached many potential customers -- say, everyone who watched the Super Bowl. The offense would be complete at that moment; no contract that FTX and a new customer might subsequently sign would change the illegality of those statements. If SBF thinks Judge Kaplan misinterpreted US law, he can take that up with the United States Court of Appeals for the Second Circuit (and likely will). Interpretation of law being a question for the court is pretty well-established. Also, I don't see how the terms of service are even relevant to claims about fraud against investors/lenders. That's ~$3B on those counts alone.
1[anonymous]
No, I was suggesting that I agree with "the three key witnesses for the prosecution that no one understood what had happened with the $8B in fiat deposits until it had already happened" -- I wasn't talking about all borrowing. Maybe, but people have a tendency to lump these different figures together (as it looks like you just did wrt AR's borrowing) and I don't think that's helpful when trying to figure out what exactly FTX did wrong.  Why shouldn't we look at them one by one? Besides, surely the weaker the case for fraud against customers, the more honest FTX's self-representation would appear to be, and so the weaker the case for fraud against investors/lenders?
[anonymous]10
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I broadly agree with all of this.

 

A few points of (minor) potential disagreement

Alameda research (AR) did a bunch of bad trades, and ended up owing FTX a lot of money....AR's net position was positive, it's just that many of the assets weren't kept on FTX itself and were illiquid

As far as the backdoor is concerned, it looks like the defense challenges this: "SBF had not been under the impression that Alameda did not need to secure its borrowing with on-exchange collateral: “‘You permitted Alameda to borrow without requiring that it post collateral to the exchange?’ . . . SBF: ‘That was not my understanding’” (Bloomberg). However, he did know of another customer who was not required to: “Can you name any customers that were allowed to pledge outside investments as collateral for withdrawing money on FTX apart from Alameda? . . . [SBF:] I believe that we did that with a firm called Crypto Lotus, and I believe that we considered that with Three Arrows” (BitMEX)....SBF testified that he had always been “aware of roughly the amount . . . that it was borrowing” via its FTX credit line, which was “millions in 2019 . . . and then by 2022, my understanding was that it was around $2 billion on average of borrowing through the info@ account”, clarifying that Alameda’s balance on FTX was still “Overall positive, but negative in some assets.” Singh similarly testified that, prior to June 2022, he “thought Alameda had positive balances on FTX, that it was borrowing lots in some places but that overall they had more money than they didn't.” He emphasized the internal transparency of Alameda’s borrowing via the margin lending program — in contrast to the popular narrative of a secret “backdoor” known only to an “inner circle”, Singh reported that “Alameda's main accounts balance, is a front-and-center number in all of Alameda's trading systems. It's the sort of thing from my time at Alameda I couldn't imagine being missed or ignored by anyone there”." (from here)

In June 2022, this bug was discovered, and FTX execs realized AR had been investing fiat which wasn't theirs

This realization seems to have been spread over several months.  In June 2022, they realized AR owed FTX $8B more than they thought it had, but they didn't yet understand why.  The FT reported, "However, not all elements of the prosecution narrative line up neatly. Singh said he left the crucial June meeting still thinking things were OK and did not realise customer funds were being raided until September”.  SBF claims that he didn't piece everything together until September/October.  It's not clear even at that point if they thought of what they had done as illegal, or if they thought that continuing to work on raising liquidity for AR to rectify the mistake rather than announcing to the world that AR had accidentally invested $8B that they hadn't intended to, was illegal, or if they'd even decided how to proceed before the run on FTX in early November.

My impression is that these valuations were wrong

I don't think either the CFTC or the team handling the bankruptcy have offered any evidence that this was the case and SBF continues to maintain that AR had sufficient assets to meet its liability.  The fact that customers are probably going to be made whole with much (I think billions?) to spare, is always attributed to SBF having made some "lucky" investments that are now doing very well, but to my knowledge, no one has presented any evidence to support this as the sole explanation.

Again, my understanding is that FTX's actions here per se were not criminal, the crime came because they lied about what they were doing. If SBF had just not made public statements beyond "read the terms of service", there would be no fraud.

Is it a lie if you yourself believe it?  Regardless, I personally haven't yet come across any statements that seem to be claiming anything other than "FTX itself doesn't invest customer deposits" or "AR is not front running other customers on FTX."

 

 

Expanding on some of your points

SBF thought AR was following the risk management policy as published

Yes, as far as I'm aware, no one testified that SBF told his team to create a "backdoor" or to "stop Alameda getting liquidated."  SBF and the people who created the "backdoor" only testified that SBF asked them to make sure Alameda wasn't erroneously liquidated (as it almost was once, which would have been disastrous not only for Alameda, but for FTX and FTX customers in general, because before FTX was successful enough to attract other backstop liquidity providers, it was very reliant on Alameda as a backstop liquidity provider.)  SBF wasn't a coder himself, but he suggested something like "an alert or a delay," so that engineers could check if the triggered liquidation was erroneous i.e. triggered as a result of Alameda's role as a backstop liquidity provider, or valid i.e. triggered as a result of Alameda's role as a customer.  Gary and Nishad chose to implement SBF's instruction by turning off auto-liquidation for Alameda's account.

consider that FTX's poor risk management should reflect negatively on them, even if it doesn't qualify as criminal behavior on behalf of any individual

For what it's worth, SBF appears to have always taken responsibility and expressed great remorse for the mistakes he made regarding poor risk management, even if he does continue to deny criminal activity.

Thanks!

It's the sort of thing from my time at Alameda I couldn't imagine being missed or ignored by anyone there

I don't understand how it can simultaneously be true that 1) AR's balance was easily visible, 2) AR's balance was very negative, and 3) people believed AR's balance to be positive. Do you understand this?

This realization seems to have been spread over several months

Thanks, I have updated my comment to say "Sometime in 2022".

I don't think either the CFTC or the team handling the bankruptcy have offered any evidence that this was the case

Thanks, I have updated my comment to say "my impression is that these valuations were not done rigorously" – let me know if you think that's still incorrect.

I personally haven't yet come across any statements that seem to be claiming anything other than "FTX itself doesn't invest customer deposits"

This is what happened though, isn't it? Customers deposited fiat into North Dimension, and through the fiat@ glitch, that fiat currency was invested in various things.

[anonymous]1
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I don't understand how it can simultaneously be true that 1) AR's balance was easily visible, 2) AR's balance was very negative, and 3) people believed AR's balance to be positive. Do you understand this?

I mean...I just think 2) is probably false.  Nishad messed up in his testimony and some information that undermined the prosecutors' story slipped through.  He also refers to FTX credit lines as nonwithdrawable, "Q. I'm going to ask you some more questions about line of credit in a bit, but just at a high level, what is a line of credit? A. It's a nonwithdrawable dollar amount that's granted to allow for easier trading without actually having to deposit as much money."  How is a credit line supposed to help them steal funds if the funds can't be withdrawn from the exchange?

Now if we assume Gary wasn't lying when he read out that AR's main account on FTX was negative $2.7B in June 2022, I guess it's still possible that when the prosecutor asked the question, they were pointing at the sub-account that was also helpfully named "info@alamedaresearch", or at the main account's balance in a particular coin.  (It may not have even been deliberate on the government's part -- there's a point when one of the prosectors seems to not understand that there's a difference between AR's net position on FTX and AR's balances in different coins.)

"my impression is that these valuations were not done rigorously" – let me know if you think that's still incorrect

That seems fine to say.  I think we just don't know either way, as the team handling the bankruptcy doesn't appear to have given anyone access to the original versions, so we just have SBF's (and Gary's?) memory of the rough figures and John Ray's protestations that SBF is deluded.

Customers deposited fiat into North Dimension, and through the fiat@ glitch, that fiat currency was invested in various things.

Was invested by Alameda, not FTX.  FTX customers invested each other's deposits all the time.  And, if you believe the defense, FTX didn't know what this customer was doing until it had already happened.  I think FTX and Alameda are treated as effectively the same company or completely separate entities depending on the context and who's speaking (I think both "sides" are guilty of this), when the reality is somewhere in between.

Great summary!

You probably base “Even though this use of funds was unintentional and sounds extremely sketchy, FTX's general counsel testified that FTX's terms of service did not prohibit it” on:

The government didn’t want to focus you on that. Why? Again, the only witness who said he had read the terms of service was Can Sun, the general counsel who had helped to draft it. Even though he was very careful in what he told you, he admitted that nowhere do the terms of service contain language that prevents FTX from loaning customer fiat deposits to Alameda or

... (read more)
4
Ben_West🔸
Thanks! I updated the summary and included a link to this comment – let me know if you think it's inaccurate.
1[anonymous]
Jason's comment and my response here are relevant.

@Jason left an answer here, referring to this sentencing memo:

I'd look at pp. 5-12 of the linked sentencing memo for customers, pp. 15-18 for investors/lenders for the government's statement of the offense conduct. The jury merely utters guilty / not guilty on each count, it does not provide detailed findings of fact. Judge Kaplan heard all the evidence as he presided at trial, and can rely on his own factual findings at sentencing under a more-likely-than-not standard. Of course, that is just a summary; Ellison alone testified for ~3 days.

Basically, SBF & FTX falsely represented that the customer assets were segregated from FTX's own assets and would not be used by FTX. Yet Alameda regularly took large sums of money out of accounts holding FTX customer funds, and the "allow negative" feature allowed it to borrow ~unlimited money as well. This was not limited to funds made available to customers through the margin lending program. 

At various points discussed on pp. 9-11, SBF directed Alameda to "borrow" more money from FTX despite knowing it was underwater at the time. For instance, at one point SBF directed Ellison “to use FTX customer funds to repay loans" (her words), despite knowing that Alameda was $11B in the hole and was already "borrowing" $13B in customer funds (p. 11). About $4.5B more in customer funds was used to pay Alameda's lenders as a result (p. 11). In short, I don't think the narrative presented in the linked post is backed up by the trial evidence.

(The last sentence in the response refers to this post.)

Note that the linked document was written by the prosecution, and is therefore presumably a biased summary of the evidence.[1] The defense equivalent (presumably with the opposite bias) can be found here.

  1. ^

    Jason comments on this here to argue that it probably isn't that biased.

[anonymous]3
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I want to quickly address a couple of points of disagreement I have with Jason's take.  (Please don't take this to mean that I accept the rest -- there's a lot I disagree with -- I just don't have time to respond to it all right now.)

For instance, at one point SBF directed Ellison “to use FTX customer funds to repay loans" (her words)

This is misleading.  The complete line from Ellison is, "I understood that he was telling me to use FTX customer funds to repay our loans," then she proceeds to explain how she inferred this.

At no point in the trial ... (read more)

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Jason
Note that I am quoting the source I identified and summarized, which in turn quotes the trial transcript at page 675. As I noted, the prosecution's statement here is a summary written for the trial judge who heard all the testimony -- whether the memo's use of that quotation was fair in that summary depends on all of Ellison's testimony at trial. In particular, the prosecution's memo was not meant to stand alone as proof beyond a reasonable doubt of SBF's guilt of the charges. That had already been established by the jury's verdict. I don't think "read the trial transcripts" was a helpful answer to Michael's original question which led me to post the comment. For those of us who are not inclined to spend days reading over the transcripts, I would note that the jury convicted SBF on all counts with only four hours' deliberation, the experienced district court appears to have bought ~0 of the defense's positions at sentencing, and the media coverage does not suggest many (if any) of the journalists and legal analysts who carefully followed the trial bought SBF's protestations of innocence either.  Moreover, in my view what one would have to believe to find SBF innocent here is simply implausible -- e.g., that he was that of the loop about multibillion dollar cash flows that he failed to grasp what should have been obvious from the conversations established by the testimony and documentary evidence, that he honestly believed ~all of the material public statements he made about how FTX operated and Alameda's relationship to it, that he was so misinformed about how much non-customer money FTX had that he could direct Ellison to have Alameda "borrow" billions and billions of it without understanding that much of that was coming from customer funds, etc. I think all that justifies a strong starting point that everyone else got it right, and it would take a lot of convincing analysis of ~ all of the prosecution's evidence to move the needle on that. 
4
MichaelStJules
+ the customer money FTX had that the customers explicitly consented to be loaned out, through margin lending or staking? He might not have been well-informed about how much this was. It's a number that changes by the minute. But maybe he would have a general idea, and enough to know that what he was asking for was more than customers would have consented to being loaned out.
1[anonymous]
And I think it was not fair because as far as I can tell, that quotation was the strongest piece of evidence the prosecution had that SBF directed Ellison to use customer funds in an improper way. I agree.  I don't expect anyone to take my word for it on the basis of a couple of anonymous comments.  But I'm trying to make a start on this forum because I am someone who is "inclined to spend days reading over the transcripts" and much else besides and given the conclusions I've come to, I'm not sure what else to do.

The FTX estate (which I understand includes Alameda) did a lot of things wrong, but regarding this:

What made the lending out to Alameda fraudulent?

FTX promised many times, in many different forums, that it had sophisticated risk controls that would automatically liquidate customer accounts when limits were breached. Then it turned out that this was true for most counterparties, but Alameda was a big multi-billion dollar exception.

I think there’s an argument that if FTX had kept its promises about risk controls, there wouldn’t have been a criminal conviction, though possibly that would have negatively affected the business in other ways.

I don't have a link on hand but Matt Levine has some great articles explaining the collapse of FTX. Perhaps check out some of the stuff he wrote in November 2022 when the news was just breaking for background & then more recent stuff for a fuller picture.

I also initially misinterpreted the title so maybe consider renaming it something like "Can someone explain the FTX fraud?"

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I'm confused why this is down voted. It factually is challenging to find information about what FTX actually did (see e.g. the lengthy arguments in this market), and the question appears to be asked in good faith.

Agree, I suspect most people downvoted it because they inferred it was a leading question.

I downvoted the question.

I'd have found it okay if the question had explicitly asked for just good summaries of the trial coverage or the sentencing report.

(E.g., there's the twitter handle Inner city press that was tweeting transcript summaries of every day on trial, or the Carl Reilly youtube channel for daily summaries of the trial. And there's the more recent sentencing report that someone here linked to.)

Instead, the question came across as though there's maybe a mystery here for which we need the collective smarts and wisdom of the EA forum.

There are people who do trial coverage for a living who've focused on this case. EAs are no longer best-positioned to opine on this, so it's a bit weird to imply that this is an issue that EAs should discuss (as though it's the early days of Covid or the immediate aftermath of FTX, when the EA forum arguably had some interesting alpha).

It's also distracting.

I think part of what made me not like this question is that OP admits on the one hand that they struggled with finding good info on Google, but then they still give their own summary about what they've found so far. Why give these half-baked takes if you're just a not-yet-well-informed person who's struggled to find good summaries? It feels like "discussion baiting." 

Now, if someone did think that SBF/FTX didn't do anything illegal, I think that could be worth discussing, but it should start with a high-quality post where someone demonstrates that they've done their homework and have good reasons for disagreeing with those who have followed the trial coverage and concluded, like the jury, that SBF/FTX engaged in fraud. 

Thanks, I appreciate the explanation.

I think the tone I wrote it in gave the impression that I was saying "I don't see how what they did is illegal" rather than "what did they do that was illegal". I try and avoid that kind of thing next time.

I asked this question on the EA Forum just because EA is why I'm interested in the story, and I trust the EA Forum to produce good discussion that gets to heart of what I'm interested in, compared to the only other place where I know I can ask a direct question, which is Reddit. Any implication that there was still a mystery to be figured out was accidental.

As for the half-baked takes - actually I don't think I gave any. None of what I said was an opinion it was simply an account of the easily findable facts.

It seems worth pointing out that this question is about what FTX did wrong, rather than explicitly what Sam did wrong, so things that happened at FTX that Sam claimed not to know about or not to direct people to do are still in scope.

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This is the full text of a post from "The Obsolete Newsletter," a Substack that I write about the intersection of capitalism, geopolitics, and artificial intelligence. I’m a freelance journalist and the author of a forthcoming book called Obsolete: Power, Profit, and the Race to build Machine Superintelligence. Consider subscribing to stay up to date with my work. Wow. The Wall Street Journal just reported that, "a consortium of investors led by Elon Musk is offering $97.4 billion to buy the nonprofit that controls OpenAI." Technically, they can't actually do that, so I'm going to assume that Musk is trying to buy all of the nonprofit's assets, which include governing control over OpenAI's for-profit, as well as all the profits above the company's profit caps. OpenAI CEO Sam Altman already tweeted, "no thank you but we will buy twitter for $9.74 billion if you want." (Musk, for his part, replied with just the word: "Swindler.") Even if Altman were willing, it's not clear if this bid could even go through. It can probably best be understood as an attempt to throw a wrench in OpenAI's ongoing plan to restructure fully into a for-profit company. To complete the transition, OpenAI needs to compensate its nonprofit for the fair market value of what it is giving up. In October, The Information reported that OpenAI was planning to give the nonprofit at least 25 percent of the new company, at the time, worth $37.5 billion. But in late January, the Financial Times reported that the nonprofit might only receive around $30 billion, "but a final price is yet to be determined." That's still a lot of money, but many experts I've spoken with think it drastically undervalues what the nonprofit is giving up. Musk has sued to block OpenAI's conversion, arguing that he would be irreparably harmed if it went through. But while Musk's suit seems unlikely to succeed, his latest gambit might significantly drive up the price OpenAI has to pay. (My guess is that Altman will still ma
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When we built a calculator to help meat-eaters offset the animal welfare impact of their diet through donations (like carbon offsets), we didn't expect it to become one of our most effective tools for engaging new donors. In this post we explain how it works, why it seems particularly promising for increasing support for farmed animal charities, and what you can do to support this work if you think it’s worthwhile. In the comments I’ll also share our answers to some frequently asked questions and concerns some people have when thinking about the idea of an ‘animal welfare offset’. Background FarmKind is a donation platform whose mission is to support the animal movement by raising funds from the general public for some of the most effective charities working to fix factory farming. When we built our platform, we directionally estimated how much a donation to each of our recommended charities helps animals, to show users.  This also made it possible for us to calculate how much someone would need to donate to do as much good for farmed animals as their diet harms them – like carbon offsetting, but for animal welfare. So we built it. What we didn’t expect was how much something we built as a side project would capture peoples’ imaginations!  What it is and what it isn’t What it is:  * An engaging tool for bringing to life the idea that there are still ways to help farmed animals even if you’re unable/unwilling to go vegetarian/vegan. * A way to help people get a rough sense of how much they might want to give to do an amount of good that’s commensurate with the harm to farmed animals caused by their diet What it isn’t:  * A perfectly accurate crystal ball to determine how much a given individual would need to donate to exactly offset their diet. See the caveats here to understand why you shouldn’t take this (or any other charity impact estimate) literally. All models are wrong but some are useful. * A flashy piece of software (yet!). It was built as
Omnizoid
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Crossposted from my blog which many people are saying you should check out!    Imagine that you came across an injured deer on the road. She was in immense pain, perhaps having been mauled by a bear or seriously injured in some other way. Two things are obvious: 1. If you could greatly help her at small cost, you should do so. 2. Her suffering is bad. In such a case, it would be callous to say that the deer’s suffering doesn’t matter because it’s natural. Things can both be natural and bad—malaria certainly is. Crucially, I think in this case we’d see something deeply wrong with a person who thinks that it’s not their problem in any way, that helping the deer is of no value. Intuitively, we recognize that wild animals matter! But if we recognize that wild animals matter, then we have a problem. Because the amount of suffering in nature is absolutely staggering. Richard Dawkins put it well: > The total amount of suffering per year in the natural world is beyond all decent contemplation. During the minute that it takes me to compose this sentence, thousands of animals are being eaten alive, many others are running for their lives, whimpering with fear, others are slowly being devoured from within by rasping parasites, thousands of all kinds are dying of starvation, thirst, and disease. It must be so. If there ever is a time of plenty, this very fact will automatically lead to an increase in the population until the natural state of starvation and misery is restored. In fact, this is a considerable underestimate. Brian Tomasik a while ago estimated the number of wild animals in existence. While there are about 10^10 humans, wild animals are far more numerous. There are around 10 times that many birds, between 10 and 100 times as many mammals, and up to 10,000 times as many both of reptiles and amphibians. Beyond that lie the fish who are shockingly numerous! There are likely around a quadrillion fish—at least thousands, and potentially hundreds of thousands o