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Suffice it to say, FTX and Sam-Bankman Fried are in a crisis that could threaten them being in prison, assuming fraud happened.

Here's the initial post to the FTX crisis:


So my question is, what should EAs do in response, and how can they avoid something like this happening again?




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7 Answers sorted by

  1. Don't rush to judgment. We don't know the full story yet.
  2. If it's fraud, give back whatever money can be given back.
  3. If it's fraud, make it clear that the EA community does not support a philosophy of "making money on criminal activity is okay if you donate it to an effective charity".

One thing that I think would be helpful is a discussion of the corrosive effect of certain kinds of dishonesty and criminality on the communities we live, big and small. Some kinds of acts tend to weaken the trust we have of our communities thus crippling our abilities to act together, which is often critical.

This is why, even from a pure utilitarian perspective, there should be a strong presumption against certain kinds of dishonesty and criminal activities. The knock-on effects, upon discovery, are often orders of magnitude larger, and negative, than the direct effects. And, since we think in EV terms, when we incorporate this into our decision making, criminal and/or dishonest decisions are seldom justified.

Perhaps the discussion of the perils of using socially corrosive behavior to further one's ends is discussed in EA, but I have not seen it much in my experience.

One thing we can do as a community is come up with ethical principles for earning to give and expect our donors to adhere to them.

It's good to be more ambitious and risk-loving than most entrepreneurs and other people who aim to make money, but you have to do it responsibly. Being cooperative and acting with integrity are in CEA's guiding principles; we need to articulate publicly and prominently that they also make the world a better place. Personally, I lean towards rule utilitarianism, so this view is second nature to me. But we should be able to justify this view using the thinnest possible version of consequentialism.

Also, good risk management is important to every successful business regardless of its risk appetite. FTX was insanely over-leveraged and exposed to wrong-way risk, which made it vulnerable to imploding in the way it did. Risk is fine; stupidity is not.

Absolutely never become involved with cryptocurrency in any way, shape, or form ever again. It's poison on every level. It's environmentally devastating. It enables crime. And, well, it's a Ponzi scheme.


A good read about crypto: https://www.currentaffairs.org/2022/05/why-this-computer-scientist-says-all-cryptocurrency-should-die-in-a-fire

Re environmental devastation: Ethereum, the 2nd largest crypto, now runs on Proof-of-Stake, using 99.99% less energy than it did before September[1], and a total carbon footprint of only 870 tonnes CO2e, so I don't think it is valid to tar all crypto with this brush.

  1. ^

    where the previous consumption was similar to Netflix

Andrew Rose
Proof-of-Stake, in plain English, means that all holders of crypto are periodically gifted more crypto in proportion to the amount of crypto they already owned. It means the richest people are made richer. Meanwhile, the poorest people's crypto is reduced in value by the creation of all that new crypto which is being handed specifically to the rich. If your solution to the energy problem is to aggressively worsen economic inequality instead, well, sadly, you've just replaced one problem with another. Or, even more accurately, you've replaced one problem by worsening another already-fatal problem, because the entire reason people buy into Bitcoin is that they hope to speculate on it as its value rises. This, of course, gives the greatest rewards to the richest people, because they were able to buy the most Bitcoin in the first place. Proof-of-work crypto already drives horrific inequality, because it is simply a speculative asset. Proof-of-stake drives it far faster, because it is a speculative asset which multiplies itself, handing the new coins to the people who already had the most coins. ...Until it all collapses, that is, because it's a Ponzi scheme. PoS does not alter the fundamental truth that *every* cryptocurrency is a Ponzi scheme (see the article I linked to in my previous comment). So honestly, all this talk I'm giving about the environmental and macroeconomic effects of crypto is laughable. It's a Ponzi scheme! Why would we need to have a discussion that goes into any more detail than that? Why would any of this other stuff even matter when we are talking about a Ponzi scheme?  Why does anything else even need to be said?
How is Ethereum, in particular, a Ponzi scheme? How does new investors' money pay previous investors? How would a bank run and collapse even be possible in principle? (Sure, if everyone sells the price will go down, but as long as there are markets it will always be possible to sell. It is pretty similar to a publicly traded stock in this regard). Ethereum has a burn mechanism whereby ETH is burned in proportion to useage of the network. People using the network pay fees. This is actually more than balancing the new production of ETH for interest paid to stakers, so the net supply is actually reducing slightly now (and is unlikely to increase much even if there is low usage - see ultrasound.money). Proof-of-Stake is kind of like an interest bearing savings account (although in a highly volatile currency). And it's not just open to the rich - to run your own node you need 32 ETH, but there are plenty of 3rd party services that offer staking to people putting in even very small amounts (e.g. 0.1 ETH or less; this does require you to factor in counterparty risk; but you also need to do this for savings accounts etc). [None of this is financial advice.] 
Andrew Rose
1. How is Ethereum, in particular, a Ponzi scheme? How does new investors' money pay previous investors? New investors' money pays previous investors whenever someone buys Ethereum from someone else. That's what buying crypto fundamentally is: a new investor is paying a previous investor. That's the fundamental building block of the crypto "economy". That's why they're all Ponzi schemes. 1. How would a bank run and collapse even be possible in principle? It's happened many times already. The price of crypto collapses regularly, and then people who haven't learned the obvious lesson decide to "buy the dip". 1. "It is pretty similar to a publicly traded stock in this regard." The difference is that a stock confers part ownership of a business, whereas crypto's value is entirely speculative; it's only valuable because other people think it is. The entire "value" of a cryptocurrency is derived from hype, like any Ponzi asset. 1. "It's not just open to the rich." The more money you have, the more crypto you can buy. Thus, between collapse cycles, "investors" make profit in direct proportion to the amount of pre-existing wealth that they could afford to invest. In this way, speculative assets systematically transfer wealth from poor to rich.
How is this any different from buying stocks, or buying anything else for that matter. How does it make it a Ponzi? Where is the pyramid? Where is the insolvency? All markets have crashes. Crypto has had some severe ones, and is high risk, sure; but it hasn't ever gone to 0 (like all actual Ponzi schemes always do eventually). Crypto (or at least Ethereum) is part ownership of a technology. All investing is ultimately speculative, and all investments only have value because other people think they do and are willing to buy them for some price (money is a collective fiction etc). Again, the the same can be said for all investments; crypto isn't special in this regard. Sounds like your problem is more with capitalism itself.  Why hasn't all the money in the world been transferred to a few rich people already? Because rich people sometimes lose fortunes too! (And many have on crypto!) How do people ever become rich starting poor? Investing in speculative assets can be one way; and it has happened many times with crypto - if anything, I think crypto has disproportionally benefited relatively poor people, who got in before most people with already established fortunes. A lot of new money fortunes have been made in crypto (same also for people who bought Apple, Google and Amazon stock 20 years ago).
Andrew Rose
"How is this any different from buying stocks, or buying anything else for that matter?" See point 3 in my previous comment. "Crypto (or at least Ethereum) is part ownership of a technology." No, it's not. You don't have part ownership of anything. You haven't bought up intellectual rights. You have your name written in a ledger. That's all "ownership" of crypto is: your name is written in a ledger, indicating your ownership of... nothing. 'Part ownership of x' could be used to describe anyone's stake in any Ponzi scheme ever. "All investments only have value because other people think they do." If you buy a 1% stake in a company, you own 1% of its assets. Physical, tangible things that have a capacity to do useful economic work. If you buy land, you can charge rent for its use, or occupy it yourself. If you buy a computer, you can use it to do work. If you buy an orange, you can eat the orange to metabolize its nutrients. In contrast, a bitcoin has zero capacity to do useful economic work; its "value" comes from the potential to find a bigger fool to sell it to for profit. "Why hasn't all the money in the world been transferred to a few rich people already?" All the money in the world is being transferred to a few rich people. This is what is currently happening. See Pixel Wealth. "I think crypto has disproportionally benefited relatively poor people, who got in before most people with already established fortunes." No. https://www.wsj.com/articles/bitcoins-one-percent-controls-lions-share-of-the-cryptocurrencys-wealth-11639996204 And to remove any lingering doubt: 1. No. https://www.newsweek.com/dogecoin-co-creator-says-cryptocurrency-inherently-right-wing-technology-1609862 2. No. https://www.fool.com/investing/2022/03/04/how-crypto-increases-economic-inequality/ 3. No. https://gizmodo.com/bitcoin-crypto-bank-of-international-settlements-1849784466 4. No. https://twitter.com/davetroy/status/1478017698676228099 5. No. https://davidgerard.co.uk/blo
I'm not a fan of Bitcoin either (it's basically just digital gold - what do you think of gold as a store of value?). Much prefer Ethereum. It is a physical (distributed) computer system has many economic applications. Ether has been likened to digital oil (but obviously much more green - as per my original comment).
Andrew Rose
Bitcoin is NOT like gold. Gold, unlike cryptocurrencies, is a tangible item that can be used for things. (Electronics, jewelry, etc.) And unlike bitcoin-hoarding, with its massive losses in the forms of electricity and computer hardware, gold-hoarding isn't a massively negative-sum game. But that's beside the point: crypto is a Ponzi scheme and gold isn't because gold can do economic work and cryptocurrency can't. I've been over Ethereum's fundamental toxicity - both the fundamental toxicity of PoS and the fundamental toxicity of cryptocurrencies in general - in my previous comments.
Gold is valued way over and above its direct economic value for making things! It's valued primarily for being a store of value (as bitcoin is - hard to fake, divisible, transportable etc). Some people use bitcoin mining rigs to heat their home. I think that's pretty equivalent to using gold in electronics (i.e. useful economic work, but not the primary source of value). I don't think any of the fundamental toxicity you mention regarding PoS or Ethereum is unique to crypto - it applies to most forms of capital (stocks, bonds, private equity, real estate).

Downvotes here seem unfair and culty for an honest opinion. (Though I admit I haven't checked the linked article, and maybe it's bad.) 

All posts and comments criticizing crypto need some sort of protection, they keep getting downvote brigaded by optimistic people with vested interests in crypto.

I am not invested in crypto in any way and I also believe that most of crypto is a scam, yet there are some diamonds in the mud. The fact that this technology, for instance, enables prediction markets with actual money (regardless of the feelings of the regulators) seems very valuable to me. I would recommend caution with this technology and industry, not outright rejection.

So, fist of all, SBF probably also had "regardless of the feelings of the regulators" attitude. Financial regulation around bonified gambling sites (i am prediction market fan, but that it what they ultimately are) are there for reasons. Chesterton's fence and all that. Not saying that regulations couldn't be improved, i just really dislike sentiment in that sentence, especially in current situation. Also, you can create prediction markets with real money without crypto. And there is/was many of them. If there is some impressive diamond in crypto ecosystem, prediction markets arent it, and i am not aware of any.
Maybe Gitcoin or DeSci?
Raphaël Lévy
Thank you for your perspective. I see where you're coming from, but I disagree. I think that crypto-based prediction markets have the potential to revolutionize information gathering and processing, and that this could have a hugely positive impact on the world. I agree that some regulation is necessary, but I believe that crypto can provide a way to bypass unnecessary restrictions and allow us to tap into this powerful tool. I don't consider most prediction market regulations to be morally justified. Of course, when I'm referring to circumventing regulations, I don't mean by breaking the law, I'm thinking more along the lines of setting up a market in a friendly jurisdiction.

EAs should:

  1. Make clear that they oppose what has happened. 
  2. See if anything can be done to repair the situation. For example, consider returning any funds that were obtained from any fraudulent activities (which may require raising funds from others who were not involved), or maybe even offering legal aid for those affected by any fraud.
  3. Re-evaluate whether EA per se is still a positive ideology to be promoting (as compared to promoting particular academic fields, like AI safety, and important ideas, like existential risk.
  4. In any EA-like community that continues to exist, we need to encourage people to behave in a more trustworthy manner. People should be praised for considering a range of moral perspectives, and deferring to others views on risky projects, whereas we should distance those who have misbehaved - Eisenberg, Vassar, Reese, and so on.
  5. Require more verification from people who tend to behave in a naive utilitarian way. So long as some naive utilitarians are liable to behave fraudulently, utilitarians should be held to a higher degree of transparency in entrepreneurial endeavours, in order to raise comparably sized investment rounds, or to take on comparably-prominent public roles. And this is just what utilitarians should reasonably expect, based on their track record.
  6. Re-evaluate whether particular activities currently pursued by EA are meet these new standards of trustworthiness. It would be good to consider whether to press on with party-politics and youth outreach, for example.
  7. Listen more to people who were rightly worried about FTX, and less to people who weren't worried about it, or who worried excessively about other stuff that didn't matter much.

I wrote a post on damage mitigation ~2 days ago, but it got brigaded by a bunch of poorly-informed, overconfident people:


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I'm having a bit of trouble articulating why, but I'm not that bullish on the EA forum as the best place to coordinate on this.

I think perhaps a public education course - as much for EAs themselves as for everyone else - that while the ends do sometimes justify the means, they often don't, and when using extremely dodgy means you have to be unbelievably confident that your ends are worth it and that no other means will do. In short, I think EA should come to firmly reject the philosophy of the street mugger - that he (we) is justified in taking other people's money just because he (we) thinks or even knows that he (we) can do better things with the money than the people in question. People have rights and we shouldn't steal from them, and honesty, decency, civility are all very important things. AI risk or pandemic prevention of course might be important too, but it's not necessarily more important than maintaining basic societal norms like "don't steal". In short, EA's chronic and severe epistemic overconfidence problem should be publicly addressed.

A compliance training for EAs?

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