[ExI] lotta splainin to do

[spike at rainier66.com]

Here ya go Stuart, forwarded.  I added a comment and question at the bottom.

spike




-----Original Message-----
From: Stuart LaForge <avant at sollegro.com> 
Sent: Saturday, 19 November, 2022 3:20 PM
To: ExI Chat <extropy-chat at lists.extropy.org>; spike at rainier66.com
Subject: Re: lotta splainin to do


Hi Spike for some reason the server keeps bouncing this back to me as spam. Please forward to the list. Thanks.

Quoting Spike:

> I keep hearing of this FTX digital money exchange, but I don't 
> understand it.  Some news agencies are reporting that it was looted by 
> someone, possibly an insider, but that makes no sense because the main 
> selling point of bitcoin was that ownership is maintained by 
> blockchain, which is said to be inherently secure.  So. this looter, 
> what did she steal?  Digital currency?  Or did FTX have a huge pile of 
> paper currency, and if so, why did FXT have a huge pile of cash when inflation is at 8%?
> But if they did, was that cash in a safe, then some sneaky scoundrel 
> with the combination hauled away the loot in the back of a very sturdy 
> heavily-loaded delivery truck?  A USA bill has about 1g mass, so a 
> million bills is a ton, so even if all that moola was in the largest 
> American bill, the 100, we are still talking 4 tons of currency said 
> to be missing and that just doesn't sound like something that would be 
> easily carted away.  It would be a heeellll of a job just loading the 
> truck.  But if it is digital currency which was stolen, how can they 
> suppose the looter somehow got away with 400 megabucks?
> This story makes no sense to me.  A puzzled rocket scientist I am.
> Adrian or some of you other hep cats, do explain please.


The reason the the FTX saga makes so little sense is that people are still trying to see it as some sort of failed business enterprise.

Near as I can tell based on the following bankruptcy filing by John J.
Ray III (the guy who oversaw Enron's bankruptcy case) the company was never meant to be viable and was designed from the ground up to be an inscrutable scam meant to defraud investors, funnel money to Sam Bankman-Fried and his cronies, and avoid any accountability or transparency. It was all just an elaborate shell game using other people's money for personal gain.

https://s3.documentcloud.org/documents/23310507/ftx-bankruptcy-filing-john-j-ray-iii.pdf

Interesting excerpts include the following items:

4. I have over 40 years of legal and restructuring experience. I have been the Chief Restructuring Officer or Chief Executive Officer in several of the largest corporate failures in history. I have supervised situations involving allegations of criminal activity and malfeasance (Enron). I have supervised situations involving novel financial structures (Enron and Residential Capital) and cross-border asset recovery and maximization (Nortel and Overseas Shipholding). Nearly every situation in which I have been involved has been characterized by defects of some sort in internal controls, regulatory compliance, human resources and systems integrity.

5. Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here.
   From compromised systems integrity and faulty regulatory oversight abroad, to the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals, this situation is unprecedented.

46. Many of the companies in the FTX Group, especially those organized in Antigua and the Bahamas, did not have appropriate corporate governance. I understand that many entities, for example, never had board meetings

50. The FTX Group did not maintain centralized control of its cash. Cash management procedural failures included the absence of an accurate list of bank accounts and account signatories, as well as insufficient attention to the creditworthiness of banking partners around the world. Under my direction, the Debtors are establishing a centralized cash management system with proper controls and reporting mechanisms.

59. The FTX Group’s approach to human resources combined employees of various entities and outside contractors, with unclear records and lines of responsibility. At this time, the Debtors have been unable to prepare a complete list of who worked for the FTX Group as of the Petition Date, or the terms of their employment. Repeated attempts to locate certain presumed employees to confirm their status have been unsuccessful to date.

62. The Debtors did not have the type of disbursement controls that I believe are appropriate for a business enterprise. For example, employees of the FTX Group submitted payment requests through an on-line ‘chat’ platform where a disparate group of supervisors approved disbursements by responding with personalized emojis.

71. One of the most pervasive failures of the FTX.com business in particular is the absence of lasting records of decision-making. Mr.
Bankman-Fried often communicated
by using applications that were set to auto-delete after a short period of time, and encouraged employees to do the same.

Sam Bankman-Fried is like the Bernie Madhoff of cryptocurrency.

Stuart LaForge







Stuart, this has the ring of truth to it, and leaves me asking the same question I was asking 20 years ago in a subgroup of ExI: if we embrace digital currency, how do we get to the place where we can all use it the way we use fiat currency?  Think of the last dozen transactions you did, perhaps the grocery store (owwwww damn) the gas station (owwwww damn) paid your power bill (owwwww damn) your mortgage (well at least that one didn't change.)  Now, if not for exchanges, how can those be done?  Digital currency necessitates exchanges, ja?  We need something like cryptocurrency cash machines analogous to what banks already have.  Alternative: those institutions listed above need to accept digital currency.  Do we have any which do?  Which?

spike