As I understand (if crypto can be understood) part of the problem was effectively a run on the non-bank. People paid cash to get crypto, value of crypto started to drop for various reasons (not all of them FTX) many people decided to exchange crypto back for money before it fell further, and FTX for various reasons did not have the money to buy back the crypto.
Not unlike when a Ponzi scheme eventually hits the fan. Done blowed up good.
What internal controls? Or even, what did FTX tell investors were there internal controls? The problem seems to be that SBF got good press saying that he was reliable and people using FTX assumed it was true. I’m really not clear on what assurances they actually gave investors.
“When the tide goes out, you find out who was swimming naked.”
The whole thing increasingly looks like something fairly close to a Ponzi scheme. Here’s a video from 6 months ago, in which SBF pretty much says that: https://www.youtube.com/watch?v=C6nAxiym9oc
Some if not all of the celebrities named were given huge chunks of equity in the company. I don’t know if that will help the case against them (they are the owners!) or hurt (we are victims too!).
Fear not. the Federal Trade Commission has 12 (count 'em!) pages of guidelines designed to guide the marketing industry to make good decisions. It’s not a new thing, either, as this particular revision of thee guidelines was published in 2009.
While I can’t verify this, some of the coverage that I read/watched indicated that FTX claimed that customer deposits wouldn’t be diverted in the way that they were. I also heard that their standard protocols did not allow the company in general to do what was done, but that they had written a backdoor into the code to allow specific people to get around that restriction. Thus anyone who had looked into what they claimed the controls were would have seen a robust-sounding system, and the regular employees couldn’t have gone around the restriction. Thus unless you specifically knew about the backdoor code, which would require having been a top-level insider of the company, as far as you could tell everything seemed fine.
Did anyone actually do this? I don’t know. But at least the reports made it sound like no one could have possibly known unless they were in on it as well, and that outward appearances made it seems fine. Again, I can’t really confirm this - it’s only what I heard.
It was a run on the bank, but I don’t think it was in the way you describe. From what I understand, it wasn’t a run on fiat money, but on crypto that FTX had custody of as deposits from customers. You might think “Why would a crypto bro let someone else hold their crypto?” and that’s what all the real crypto bros are saying, but the posers are the ones who let the exchanges hold onto it because it’s less complicated than holding it in their own wallets.
Yes, that’s how it works if you hold it yourself. But as mentioned above, lots of people didn’t, because it was more difficult to trade and more of a hassle to keep track of. So people acted like the exchanges were just like any other brokerage firm - but they weren’t regulated like them.
Back when Bitcoin was as the only cryptocurrency, there was a manifesto on their web site. Now long gone. In it they addressed the question about what happens when there is a run on the value of the currency. Their answer was that it would have become so important that the government would bail it out.
We haven’t reached that point, but one can be pretty sure what the answer will be once that day arrives.
It really worries me just how many investment schemes there out there that are Ponzi schemes in all but name. All one needs is two schemes that buy one another’s assets in an ever increasing cycle, pay out on the profits and buy with investor’s money. The schemes don’t even need to be run by crooks, there are many that just turn a blind eye to the elephant in the room my favourite example is investment funds buying musical instruments for the use of elite classical musicians. But art investments and crypto are more overt.
Ahh, the same year that Bitcoin originally came out! Surely this ponderous tome accounts for the crypto industry in full, then 
I would think that for a celebrity endorser to be held liable, it would have to be shown that they personally knew it was a scam.
You can’t expect celebrities to commission a corporate investigation for possible fraud before they endorse a product.
But this is the same problem as real banks - they “create” currency all the time - they take deposits, and instead of keeping it as cash in the vault, lend it out to someone else so effectively there is more money “in existence”. The Fed tells banks how much reserve they have to keep on hand in case an abnormal amount of withdrawals happen, and in the case of real banks, insure the deposits (to a certain amount).
With FTX, it appears the management played games between various versions of crypto, overstated the value of their pet crypto, and used cash and crypto held-in-trust as deposits to do risky, stupid, and/or illegal things. Some of these came to light due to bad publicity and investigative journalism, aggravating the impetus for customers to withdraw “before it’s too late”. Thus, when people wanted their crypto back or to exchange it for money, they could not accommodate them.
I suppose for the celebrities, the defense could include “if they had operated properly as they told me they were, this would not have happened. The problem is persons committing fraud on the business, not that the investment concept was doomed from the start.” If celebrity A endorses a bank, and it fails because the boss takes the contents of the vault and flies to Brazil, I don’t think the celebrities could be held liable. (Unless they should have known from experience the manager was crooked.)
I’ve always assumed that any formerly successful U.S. actor who’s now hawking products on U.S television ads is probably not a person to go to for financial planning advice.
It’s questionable whether any claim by a celebrity in an advertisement is of any value at all.
They are selected for their fame, not for any actual knowledge of or experience with the products or services they’re paid to endorse. With minor exceptions (say, an actress hawking beauty products), they have negligible qualification to offer advice.
After the 2008 crisis, I’m rather unconvinced you can trust the regulated investment banks, either.
Now that is a puzzle. What’s less reliable? The crypto, or the celebrity hawking it?
I don’t think the celebrities did any more research into these companies then if the check cleared. They were handed a script and told to say this like this and then they went home.
While some people invested in Crypto for the potential returns, I suspect that much of it has been purchased for illegal activities due to its supposed anonymity. As exemplified in this story, it is far from untraceable.
So you are saying that you think celebrities are exempt from the legal concept of negligence? On what basis do you think they are held to a lower standard than other promoters of scams and snake oil?
I would expect any celebrity endorsing anything to have done some homework first. This is different from a working actor who plays a part in a 90-second play intended to persuade me to buy whatever.
When a geriatric actor, mainly remembered for their romantic parts, tells me that I should sell the equity in my house, I assume that they will not really understand the ramifications of disposing of my child’s inheritance, but it does annoy me.
If a presenter of a motoring programme tells me that a particular car is better than all others, I do expect them to be putting their reputation on the line.
There are, of course, many grey areas in between, and part of adulting is learning to pretty much ignore everything they see in an advertisement and to do sensible research before buying anything that costs more than a trivial amount of one’s hard-earned.
No, what he’s clearly saying is that the celebrity is not negligent.
Working for a company doesn’t make you responsible for any crime the company commits unless you are knowingly a part of the execution of the crime. Enron committed crimes; should EVERY employee have gone to jail? The building maintenance supervisor? The guy who mows the lawn? The receptionist? Of course not, you would think that was madness.
Well, how is Larry David any different? Larry David is in fact less connected to the FTX fiasco than the Enron HQ building maintenance supervisor was to the Enron fiasco: Larry David wasn’t even working directly for FTX. Actors who do commercials are paid by the production company that makes the commercial. David’s job is to show up on time and say his lines, and then Sunshine Commercials or whomever produced the ad sends him a check. He might not have eve known what FTX was or what crypto was, and might not have given a shit; he is just a part of a commercial production team. There is no sane interpretation of those events whereby David acted in a legally negligent manner.