Locklin on science

Michael Lewis: I wonder what FTX shenanigans he was up to

Posted in finance journalism by Scott Locklin on November 13, 2022

Remember kiddies, Michael Lewis last attempt at financial journalism  was a love letter to IEX. When I took that  marketing submarine to the wood shed, I noticed it was a company spun up by friends of his from one of his previous books (Jim Clark of “New New Thing” fame). This is of course, speculation on my part, but knowing how the sausage gets made, and noticing his Flash boys book does no actual investigative journalism or technical explanation of what IEX does or even what HFT is, it seemed worth mentioning. If it’s not completely obvious by now, most “journalism” -especially high profile entertaining journalism such as that of Michael Lewis is just somebody’s marketing baloney. I’ve seen this happen; at this point I’ve even seen stacks of money change hands for this sort of thing. Anyone who isn’t aware that this is happening and represents the majority of what you see in news media is a credulous ninnyhammer. There’s a reason discretionary traders famously don’t read newspapers: the crooked among them are writing the damn newspapers.

According to the rumor mill, Lewis was recently working on a love letter to former-scrillionaire lumpen-wunderkind Sam Bankman Fiend. This kind of made me wonder who put him up to it. Crooked journalists writing marketing submarines are generally recommended by someone. Well, I have no actual proof this is how it happened, but as it happens, FTX dumped a bunch of other people’s moneys into …. IEX.

If indeed this was a marketing submarine paid for by SBF,  Lewis is in quite a pickle. I’m sure he’s presently looking at a few hundred pages of galleys in despair whether or not he took skrilla for his efforts: it was obvious he was going to write a celebration of this evil schlemiel. It’s obvious to everyone now that there is no  happy ending with plucky underdogs getting one over on The Man (Lewis go-to narrative). Everybody loves a good morality tale, but Lewis, as a self-regarding Berkeley resident and  apparatchik to the party SBF gave the 2nd largest historical donation to (reminder:  other people’s money) is going to have a hard time coming up with such a happy ending after this. Of course the family members of this pious fraud are also mobbed up: the MIT professor daddy who is buddies with SEC head and Clinton creature Gary Gensler (almost certainly plotting some regulatory capture with these scum) the Stanford tax law/money laundering daddy,  the “Mind the Gap” super-PAC mommy, and the WEF auntie. These potato shaped lumpen druggie ponzi-wunderkinds are bred from the finest lizard people stock. Saying hard truths, or god forbid noticing that they’re all related to a certain caste of American establishment scum will get you canceled. Do you think Lewis will mention any of this? I doubt it.

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If Lewis were an actual investigative journalist rather than a submarine marketer, he might have looked for someone who had an unkind word or two about SBF and Alameda. In my experience, the set of people with negative opinions and the set of people who have had any business dealings with them is a dense set. The set of people who have done actual diligence on Alameda or FTX also seem to have no problems smelling a rat. Speaking of rats and sinking ships, a journalist might also have noticed his executive team have been fleeing over the course of the last few months, with FTX president Brett Harrison resigning in September, and co-CEO of Alameda research Sam Trabucco resigning in August.

Lewis might have noticed that owning a prop trading firm and an exchange is in itself very strong evidence of criminal activity, such as ‘first look’ advantage -aka giving the prop trading firm a look at the order book before anybody else. Nobody is supposed to do that; it’s a completely obvious crime and has been for like a century of tradfi practice. By the way, think about how incompetent they  must be: they own the casino, have a giant edge in that they know what trading counter parties on the exchange are doing before anyone else, they can borrow levered multiples against  trading counter parties assets, they can print billions in fake money and control its supply, they bribed the politicians and own the regulators  and … somehow you still fucking lost 30 billion dollars.

There are other questions a hard headed journalist might have asked. “Effective  altruism” sounds, looks and acts like “sociopath camouflage” in its real world manifestations. Have you, dear reader, ever noticed that people who talk a big game about their good deeds are usually scum? I’ve certainly noticed that. People claiming some word salad nerd gibberish about being a better person than the next guy immediately raise my suspicions. I am no psychologist, but in addition to being sociopath camouflage, “do gooderism” can be psychological salve for a guilty conscience. I always immediately suspect such “look how altruistic I am” people of having some bizarro and possibly illegal sex life at the bare minimum. Moral preening can also be more prosaic sociopath camouflage: there is a ton of public relations public relations bullshit around “charitable work.” For example, Zuckerschmuck and Gates foundations work is always accompanied by a healthy PR budget making sure you know what wonderfully generous people they are, and hoping you don’t notice those are tax dodges to pass their wealth onto their offspring and extend their power without paying a dime in taxes. Either way, someone who babbles on about  altruistic whatever is probably some kind of bag of shit. Taking this sort of nonsense at face value from some fat dipshit (who ever heard of a fat vegan?) with too much money is gaping credulity of the most egregious kind, unworthy of anyone who cares about truth. I defy anyone reading this to name a prominent counterexample of an alleged public do-gooder who isn’t an obvious sack of shit.

 

揭秘新晋“DeFi 黑帮”FTX及背后机构Alameda扩张版图 - 滚动 - 碳链价值

One could also have listened to these boobs and realized that the words coming out of their mouths, or their speed addled twatter poastings are …. pretty stupid. You don’t need to know about technology, blockchain or finance to know what they’re saying is nonsense. It was abundant, obvious and egregious nonsense. Actual reporters rather than groveling lizard stenographers would, you know, ask questions, push back, ask for clarifications: ask the adolescent sociopathic dipshit to give you the basic human courtesy of not mogging you by playing a video game during your interview. One might have noticed the obviously bought and paid for marketing blowjob on Sequoia’s website where SBF said he’d never bother reading a book. He might have noticed the remaining CEO of Alameda research is a self-admitted amphetamine addict at the very least. It would take independent judgement to notice she is both unqualified and an obvious imbecile  so maybe that’s a bridge too far.

 

Finally: just look at them. They all look like they’re constructed of play-dough, soy paste, tumors and antidepressants. Some of them look like they’re missing chromosomes. They made the Red Lectroids from planet 10 look like convincing members of the human species. They really don’t look like full fledged members of the human race: how can you not be a little suspicious? Physiognomy is something you can judge people on. I know sloppiness is supposed to be “cool” somehow, but this sort of outre appearance is people telling you exactly who they are; Calibans, Grendels, Fagins. Not all monsters look like monsters, and not all people who look like monsters are bad, but people who look like monsters are often monsters. I don’t know how this became forgotten and forbidden knowledge, but it shouldn’t be. For all of human history people were suspicious of le creatura looking lumpy humans who look like a plastic bag filled with turd and rotting cabbage. Your medulla oblongata is screaming at you that there is a problem here: you shouldn’t always listen, but you should at the very least be on your guard.

FTX people trying to fit in with the press

 

I suppose the Michael Lewises of the world have a choice here: this is an excellent opportunity to chop down a ridiculously corrupt part of the rotting edifice of the United States of America. I suspect, though, such people will either take the Dennis Hastert/Epstein approach of pretending that never happened, or take whatever marching orders issued by the same reptiles who did this. Probably some Daedelus too close to the sun bullshit. Maybe I’m picking on Michael Lewis, but the fact that such people have lost their critical faculties is one of the many reasons this got as far as it did. I always knew the FTX ponzi gang were scum and fools; just by looking at them (I also asked around). I’m not a reporter, or even particularly curious: it’s just a fucking obvious thing you do in the finance business.

 

 

BTW all praise to CZ; I don’t trust him either, but he is neither an obvious crook nor a moron.

 

 

Edit Add: this is some decent speculation as to the timeline and details of what happened. Unlike the NYT (the “reporter” is obviously bought and paid for), this guy knows a thing or two: https://milkyeggs.com/?p=175

Edit Add^2: this is also good: https://www.epsilontheory.com/the-macguffin-part-2-the-story-arc-of-sbf-and-ftx/

 

68 Responses

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  1. Scott Locklin said, on November 13, 2022 at 3:52 pm

    • tg said, on November 13, 2022 at 7:26 pm

      this is pretty damning stuff. I doubt anything will come of it though. He’ll just claim to be a victim, it would make a lot of powerful people look bad so my bet is on some lesser charge many years from now. It’s just interesting when these secretive relationships come to light. Gensler, Bankman-Fried, Ellison, hmm, probably just a coincidence.

  2. Igor Bukanov said, on November 13, 2022 at 6:52 pm

    I suspect if FTX behaved and talked more normal, they would not be able to steal 20 billions.

    It is like in many cultures in bad times people give power to freaks. Which may not be even a reasonable strategy long-term. If a situation is very abnormal, past experience does not count and weirdo may have more relevant skills to deal with it than normal people.

  3. electricangel said, on November 13, 2022 at 6:56 pm

    Thanks for the explanation, Scott. I didn’t pay much attention to it, but fascinating to grasp how rotten everything is in the USA.

    Except the short sellers, who are getting destroyed by crap like GME.

  4. tg said, on November 13, 2022 at 7:52 pm

    So a guy who ran an exchange made their own token (this is always a cultish warning sign imo) that his customers bought to use the exchange. Then he gave his customer’s money away to a hedge fund that he and his weird creature of a girlfriend happened to run. That fund made a bunch of bad bets and then lost his customer’s money? But, according to journalists, this guy was different from all of the other executives who ran exchanges (that have collapsed and everyone forgot about) who raided their customer’s assets because he seemed like a “nice guy” and he “cared” and happened to know the right people and the donations don’t hurt? Oh and a bunch of professors and legislators from a special group were closely associated to him but he was smart and hardworking and nepotism and corruption doesn’t exist in that group. *sigh*

    • Scott A said, on November 14, 2022 at 3:41 pm

      They’re just naturally so much smarter and if you disagree with that, they’ll take away your bank account of the banks they definitely don’t run.

  5. nate-m said, on November 13, 2022 at 9:29 pm

    The more I learn the more I realize I don’t know much and most other people know even less. Even really basic things I thought I knew I now know I didn’t really understand much at all. I am like a monkey pulling on the levers of a steam locomotive and guessing their functions just based on what is happening outside of a tiny window.

    We seem to have entered into a new dark age. Most everybody is existing in a sort of self-imposed bubble thinking they are hooked into the world via their laptops and the phones. But in reality have very little actual personal experience beyond what is happening more then 10 feet past their doorstep.

    And almost everything they are reading, viewing, hearing, and experiencing is mostly a lie. Everything online that is bright, friendly with smiles and nice calming blue color schemes…. is trying to eat you. Everything that promises you truth, news, and insights is just leading you like cattle through a chute into the back of a slaughter house. It isn’t your life they are after. They just want all of your productive output for themselves.

    The whole realization has made me very irritable lately.

  6. JMcG said, on November 14, 2022 at 12:23 am

    F**k you, John Bigbootay!

    A perfect movie.

    • Brendan Eich said, on November 14, 2022 at 12:37 am

      Amen.

      Lord John Whorfin: “Shut up, Big-booty [mispronounced on purpose], you coward! You are the weakest individual I ever know!”

    • Scott Locklin said, on November 14, 2022 at 10:31 am

      Rewatched after writing this and noticed that Red Lectroids have yellow bean bags in their nests: my subconscious was working overtime on that metaphor.

    • Brendan Eich said, on November 15, 2022 at 4:25 am

      Peter Weller’s 2014 PhD Thesis, “Alberti Before Florence: Early Sources Informing Leon Battista Alberti’s De Pictura”: https://escholarship.org/uc/item/0dm859tj

  7. William O. B'Livion said, on November 14, 2022 at 2:11 am

    > I defy anyone reading this to name a prominent counterexample of an
    > alleged public do-gooder who isn’t an obvious sack of shit.

    Scott Harrison, dude who started Charity Water.

    I mean, he was a NYC Nightclub promoter, so probably a cocaine and loose women Chad sort. Well, not probably almost certainly. Then he decided to go looking for God again. But he doesn’t seem to have been a major douche. About the worst claim I can find is that Charity Water doesn’t do enough to monitor *existing* projects to make sure they’re still pumping water.

  8. Scott Locklin said, on November 14, 2022 at 4:55 pm

    This is also a very good summary:

    • nate-m said, on November 14, 2022 at 5:02 pm

      Seems accurate and checks out. Insight score 10/10. Thank you for the update.

    • William O. B'Livion said, on November 15, 2022 at 2:25 pm

      Watch it jiggle see it wiggle…

      Someone needs to spend less time at the table and more time moving heavy shit through space and time.

      As for their appearance: https://www.youtube.com/watch?v=4x0fPZrPV3M

  9. Chiral3 said, on November 14, 2022 at 5:04 pm

    Very Epstein-esque in the sense that – who are the other people? Assuming Wang even exists, it took a village to set up 130 legal entities and create all the plumbing and decks and filings, and not simply two people.

    BTW, great movie reference. Haven’t thought about that one in years.

    • Scott Locklin said, on November 14, 2022 at 9:44 pm

      It’s a perfect movie.

      There has been speculation that FTX is where dead-Epstein parked his money -admittedly based purely on time and I suppose naughty ethnic and political considerations. I don’t have a chainalysis licence but I know people who do, and it is completely possible to see where the moolah came from and where it went. That’s why Satoshi invented blockchains.

  10. asciilifeform said, on November 14, 2022 at 6:51 pm

    USG’s unofficial “ministry of keeping BTC exch rate under control” curates a dozen or so scams like this one at any given time. (Starting with the original MTGOX.) The appointed muppets perpetrate pyramids, front-running exchanges, shitcoin-minting ops, etc. with an implicit guarantee of non-prosecution (sometimes ceremonially “prosecuted” for PR purposes; but observe that Karpeles is a free man today, and no one ever publicly explained how or why.) Any time the exch. rate threatens to heat up (and start tracking “the real inflation”) a “gox” is “popped”, like clockwork, the lemmings stampede into fiat, order is restored.

    • Donna said, on November 17, 2022 at 4:38 am

      Yes. Did you see the picture of SBF and Bill Clinton looking very close? Appears they have known each other for some time

      • Scott Locklin said, on November 17, 2022 at 10:19 am

        I notice he ain’t in prison yet. How long did it take before Bernie Madoff went to jail again?

  11. William O. B'Livion said, on November 15, 2022 at 2:19 pm

    I was on the cypher-punks (RIP Timothy May you bomb throwing bastard) mailing list back when it was a thing, and followed a lot of the crypto debates, but kind got away from it during the GWOT, and then raising a family.

    So dumb question:

    Why doesn’t (well, didn’t) someone get a bunch of money together, marry Chaum style e-cash to a block chain like ledger system(to mitigate the double spending problem), then buy a s*t load of some precious or semi-precious metal–gold, silver, etc. to “back” the currency with?

    I’m not really a gold bug, or a believer that you *have* to base a currency on something in the real world, but governments can do without it because they’re governments have have some illusion of control over their economies. If FTX had a couple billion dollars worth of gold somewhere they’d be in a lot different position right now.

    • Scott Locklin said, on November 15, 2022 at 3:56 pm

      https://paxos.com/paxgold/

      I forget what its legal limitations are. Paxos unlike FTX seems to be fine. FTX was always a fraud and afaik never had any intentions of being anything different: their plan was basically to get too big to fail.

      FWIIW Libra scared the shit out of the EU because it sounded actually better than Euros as a reserve currency (it was a sort of average of many currencies), so they passed something called MICA which makes doing this illegal. Mind you this is exactly the sort of thing I want the EU to do; opposing American “innovations” -but they usually pick the wrong ones.

      You probably knew the real Satoshi; Cypherpunks was something I always meant to get involved with (Bram was), but never quite got around to.

      • William O. B'Livion said, on November 16, 2022 at 2:08 am

        >https://paxos.com/paxgold/

        Interesting. Going to have to look more into that.

        It’s probably not interesting to many people because it’s not an “investment”, it’s just a currency…which is what we should be wanting.

        I probably read the real Satoshi’s emails, but I only met maybe a dozen or so in real life.

        • chiral3 said, on November 16, 2022 at 4:17 pm

          FWIIW, and I admit to being the least knowledgable in this comments section on this subject, I always found it curious that, say, BTC was discussed in terms of BTC/USD. If after fiats and intrinsics, there is something else, if not purely speculative, how is it always XXX/USD? Probably naive, but if not for goods and services before quantoing, and if value is only described xccy, against ccy’s that have a reserve base (backing of a government, aka bond on its children), is it not derivative and purely speculative? Obviously BC has clear value.

          • Scott Locklin said, on November 16, 2022 at 9:08 pm

            Depends what era you’re talking about. For a long time most exchanges were SHITCOIN/BTC and SHITCOIN/ETH. Finding a dollar, even a tether pair was difficult and you usually had to do a couple jumps with some price risk. We could easily start denoting things in SHITCOIN/GOLD. I think the present USD situation is part that’s what people want, but part an actual play by the US to own this potential future technology. Could easily become SHITCOIN/GOLD if dollars get more fucked up. My Rubles denoted ADRs have also done really great this year.

            • chiral3 said, on November 16, 2022 at 9:54 pm

              And I think that’s my point. All the retired 30 year olds I know got in early, spent a little bit of time on exchanges taking money from dabblers (probably 50 year olds using their deferred comp late in the game or just a really large number of people using what little money they got from their governments on a wallet) but really just rode it and ultimately converted it all to USD and went and bought real assets like miami condos and cars with doors that this and not that

              So in that sense it was really just a ccy trade that leveraged *coin to some real ccy. Clearly things have gotten much tighter but it seems that it is ultimately about shitcoin/usd or shitcoin/gld as opposed to shitcoin/new_shitcoin.

    • tg said, on November 15, 2022 at 5:20 pm

      my guess is because Satoshi didn’t have a huge amount of money and was just a middle class guy. I would give it 99% probability that Satoshi Nakamoto was Hal Finney who is dead now. Part of this is you would need a lot of money to buy a huge reserve of gold and also that would not be anonymous. Using a moniker like Satoshi suggests the person who invented Bitcoin wanted to remain anonymous. The end result would be the same deflationary asset though except that it does not make a lot of sense to have a blockchain that is centralized if you believed central banks were a problem. Whoever was checking transactions to make sure there was not a double spend and every coin was linked to a real asset, would have power over the ledger which presented a problem. A blockchain ruled by consensus spreads out the risk of one party control. So you could get around this though. Facebook’s diem or whatever they call it has a semi decentralized blockchain. They call it fully decentralized but I think you have to be on a special list to verify the blockchain. But it’s a similar idea because the currency has a reserve, which is other currencies. Anyway, no one has seriously tried to back a cryptocurrency by gold that I know of probably because people who make open source crypto currencies tend to not be mega billionaires and giant corporations are in an alliance with the government.

      • nate-m said, on November 16, 2022 at 7:08 am

        The vast majority of really high-end mathematicians with deep crypto knowledge work for the USA government under the NSA or similar group. Chances are “Satoshi” is/was one of them. Simply playing the odds here.

        This probably relates to why his identity is kept a big secret and nobody is really too interested in hunting him down. They just keep it as a sort of pleasant mystery that isn’t particularly relevant. His association with the government underworld would discredit his creation.

        Which is fine. I am not a big fan of guilt through association. Lots of very good and smart people work for the government.

        ————

        What differentiates Currency from Money is that Money is based on a commodity and has real value. The currency is just the representation of that money.

        Lots of stuff has been used as money… Tobacco leaves, wheat, gigantic stones with holes in them, gold, steel, copper, etc. Basically anything of value that has more or less universal demand has the potential to be money. Gold works well because it doesn’t rot, doesn’t lose it’s value when you cut it into bits, is valuable enough you don’t need to carry around huge amounts, it doesn’t rust, etc.

        Dollar was originally just a measurement in silver or gold. Like grams or ounces. It’s based on the Spanish “pieces of eight” doubloons because it was easier to use Spanish money in the tightly regulated British colonies then the British money. Also it hints at just how much early America depended on piracy.

        This means that you could ‘mint’ your own dollars just by having enough gold to do so. Having the government mint coins was just to make it convenient. The USA tried to do a bi-metal standard in the beginning with fixed weights of silver and gold, which was foolish. When the international market prices of gold vs silver shifted people could profit from exporting gold and importing silver and thus drain the species from USA economy. This caused a couple pretty substantial recessions when the metals were drained from the country. The lesson here is to not regulate fixed ratios between commodities prices to make it convenient to tax people.

        One of the things that people are going to have to get used to is that there isn’t a real need for having a single type of money. Any commodity has potential. This way there is no reason to fear about any money running out. If it becomes too rare to become useful or becomes too valuable people can just use it conjunction with something else. Like with gold and copper. Which means we have more potential money then is ever needed while at the same time that fact doesn’t eliminate any of the value of money. Which makes the benefit of having government fiat currency nonexistent.

        When the USA Federal government decided to eliminate the vestiges of the gold standard they completed the transformation of the USA economy from a value-based economy to a debt-based one. The reason for this is obvious… Government can’t create value. Only markets can do that. However the government can create as much debt as they want. They are very good at that.

        And thus they successfully eliminated the use of money and replaced it with just the representation of money while convincing most everybody it was the best idea in the world and you are a idiot to think otherwise. Hence the term “fiat currency”. Which is a terrible nightmare and has corrupted our economy in a massive way. I don’t know if it’s recoverable. Fiat currency has played a key role in every horror of the 20th century and now the 21st. Playing these pretend-somebody-is-in-control games is costing us more then anybody can guess.

        ———–

        All of this means what makes Bitcoin potential money is the utility of the medium. It costs a lot to transfer currency around. Government regulation makes it worse. Wire transfers, etc etc. If Bitcoin can erase that cost and administrative overhead then it has utility and thus has value. The value may be substantial, but maybe not. It doesn’t necessarily need backing by anything.

        Unfortunately there are problems with Bitcoin. Turns out it’s very expensive to use and transactions are very slow. So I don’t know the value is there. It can’t be fast enough and cheap enough to use then where is the utility? Were is the value? It may get fixed. I don’t know. But I am confident that even though Bitcoin may not replace the dollar it is leading the way. I just feel bad for people who are trying to sink their retirements into it.

        Not that I would know, of course.

        • Scott Locklin said, on November 16, 2022 at 11:49 am

          >Turns out it’s very expensive to use and transactions are very slow.

          Ask me how I can tell you’ve never done a crapto transaction.

          I’m pretty sure Hal Finney never worked for the spooks, though his neighbor Satoshi Nakamoto (who I always assumed used to steal his parking spot or something) might have.

          Otherwise I agree there are many possible kinds of money; commodity money, debt money, network money, etc.

          • nate-m said, on November 16, 2022 at 4:05 pm

            I wasn’t thinking in terms of ‘how long it takes you to do it personally’. But how much global transactions per second the network can handle. Which is around 5-10 TPS. A credit card processor can do tens of thousands per second.

            Hard to see how that will work with a global economy involving billions of transactions per day.

            • Scott Locklin said, on November 16, 2022 at 8:36 pm

              Ask me how I know you’ve never done a crapto transaction on bitcoin or anything else.

              Everyone’s entitled to their own opinions, but not their own facts. I’m about as skeptical as anyone about everything, but this is how money of the future works. Sending $20m across the world in a few seconds is a lot better than the old fashioned way. The UI for small transactions presently sucks, but there’s no reason it needs to.

              • nate-m said, on November 16, 2022 at 11:06 pm

                I think you got me wrong. Or at least I hope so.

                I know that cryptos is the future and you are absolutely right I haven’t done much with bitcoin. But I have, thanks to Coinbase, made a decent amount of cash off of it and I even made money on the Bitcoin Cash vs Bitcoin split. Which is what I am thinking about.

                My doubt was specifically with the speed of the Bitcoin network. Specifically the TPS. It’s obvious you know more about then I do. If you are telling me that the TPS isn’t a problem then I believe you.

                That’s all.

                • Scott Locklin said, on November 17, 2022 at 10:46 am

                  Level-2’s and …. credit cards work just fine for small transactions; the level-2 even gives you some degree of privacy. Other blockchains and “blockchains” are inherently fast. Once you’ve done a few of these and compare to the agony and bureaucracy of wiring substantial money to another country or even another bank: it really works great in comparison.

        • tg said, on November 16, 2022 at 5:12 pm

          ya, there are definitely some issues with Bitcoin, it’s asking a lot for one guy to get it all right. I remember there was the block size debate but I think that’s been settled. It sounds like bitcoin has improved a lot with the lightning network and whatever else. I stopped following it because I will never use it again. After the IRS started asking if you own Bitcoin, which they probably already know, I nope-d out. It’s the same as asking if you own a stake in an offshore company w/ FATCA. I am sure the IRS is only benevolent and would never add you to a list of any sort. You can’t even buy any without providing a photo ID unless you do a shady cash transaction with a possible fed or criminal. Its not very practical to use for transactions for this reason unless you do a lot of them which I don’t.
          This is completely contrary to what cypherpunks believed. You shouldn’t have to identify yourself with a government issued ID to a random bitcoin “ATM” to use it. You shouldn’t have to fill out paperwork and hope the IRS doesn’t decide to fuck you over for trying to buy something online with bitcoin. So I don’t really keep up with the latest news on Bitcoin itself and I am not admitting to own any. Maybe it’s different in other countries. There is a constant stream of other innovations in blockchain though and an annual loss of at least $1B in one of these it seems when it fails.
          As far as the mathematicians working for the NSA I know several who actively despise the federal government who are pretty capable. I am not a nihilist about technology in that sense.

        • Sean said, on November 18, 2022 at 9:50 pm

          I just moved some bitcoin from one wallet to another for about $0.31 (17.1 sats/vB), or 0.02% of the value of the transfer. I could have paid about $0.50 if I wanted it faster, but I’m cheap and was in no hurry. And this is with transaction fees being higher than the recent average. A couple of weeks ago, I could have done the same transfer for pennies if I picked the right time.

          But you’re right that the Bitcoin base layer is slow. This is because of the Blockchain Trilemma: Security, Scalability, Decentralization, pick two. Bitcoin opts for Security and Decentralization, and sacrifices Scalability. This is as it should be for a network that intends to be the vehicle for unconfiscatable, unforgeable, deflationary money.

          If it helps, think of Bitcoin as the native monetary protocol for the internet, just as TCP/IP is its native communications protocol. Advanced features like video streaming or e-commerce (etc.) aren’t present in the TCP/IP protocol itself, but are built in layers on top of the base protocol. Which, again, is how it should be: you can’t design a base protocol for all possible use cases, so you focus on making the base as robust as possible, so that other use cases can be built on top of it.

          This is what’s happened with the Lightning Network, built as a Layer 2 application on Bitcoin, where small transactions can be settled almost instantly for fractions of a cent. The theoretical network throughput is millions of TPS, limited only by the speed and capacity of the thousands of nodes in the network.

          We can expect that, in the future, most transactions will take place on Layer 2+ networks like Lightning, while the base layer will be used mostly for transactions requiring final settlement, which is much the same way that the traditional financial system works.

    • asciilifeform said, on November 15, 2022 at 6:49 pm

      How are the customers to know that the “backing” gold 1) exists 2) in sufficient quantity to cover all obligations 3) would be disbursed on request to the key holder ? (And please don’t say “legal structure” and “approved by officials” — AFAIK the FTX perp bought & paid for all required Official rubber stamps via his mafia.)

      Seems to pose precisely same problem as the (in practice, always) fractional-reserve fiat/crypto exchanges: it’s a bag of promises, and the fancy electronics ultimately do nothing to change this.

      • Scott Locklin said, on November 15, 2022 at 7:29 pm

        I mean you can go look at how Paxos does it. Probably works something like Tether or USDC; aka somewhat better than a bank.

        • asciilifeform said, on November 15, 2022 at 7:36 pm

          From vendor: “Pax Gold (PAXG) is a digital asset. Each token is backed by one fine troy ounce (t oz) of a 400 oz London Good Delivery gold bar, stored in Brink’s vaults. If you own PAXG, you own the underlying physical gold, held in custody by Paxos Trust Company.”

          As expected — a promise. Which may be true, until it isn’t, and there is no way for users, en masse, to verify it. There’s no physical solution to the problem of linking crypto sigs to events in the physical world in a way that doesn’t rely on somebody’s say-so.

          • Scott Locklin said, on November 15, 2022 at 11:09 pm

            if it works like tether in that there are lots of trading pairs with it, it doesn’t really matter, just like it doesn’t with tether.

            • asciilifeform said, on November 16, 2022 at 12:04 am

              “It doesn’t matter” is a rather strong claim. What’s the justification? Concretely: how does Tether (and similar items) differ from e.g. infamous Celsius? (i.e. if there’s a “bank run”, what would keep the “lots of trading pairs” from evaporating in minutes, as the players scramble for the exits?)

              • Scott Locklin said, on November 16, 2022 at 1:24 am

                Go read Kevin Lawler’s essays about it.

                Celcius is not a dollar coin; you might as well ask me how does Tether compare with peanut butter.

      • William O. B'Livion said, on November 16, 2022 at 2:12 am

        > How are the customers to know that the “backing” gold 1) exists 2) in sufficient
        > quantity to cover all obligations

        Third party auditors, paper trails, etc.

        > 3) would be disbursed on request to the key holder ?

        Contract law, arbitration, and ultimately shoot the fuckers in the face.

        We need more of these types to get shot in the face for being sociopathic fuckheads.

        • asciilifeform said, on November 16, 2022 at 2:37 am

          Contract law does not appear to have helped the victims of the previous N-1 “goxes”, and likely won’t help those of the Nth.

          Re: “shoot them” — difficult to disagree, but somehow 0 shot to date AFAIK. Possibly scammers are part of a predator-prey equilibrium — they know full well that no one will shoot, and 11y after genesis block there is still no shortage of people willing to “invest and get 7 percent!”.

          • William O. B'Livion said, on November 20, 2022 at 7:21 pm

            > Contract law does not appear to have helped the victims of the previous N-1 “goxes”, and likely won’t help those of the Nth.

            Then they accepted very poor contracts, at least sometimes in places where contracts are worth less than the paper they are printed on.

            Contracts are backed, in essence, by the expectations that a legal system will hold the perpetrator adequately accountable to those contracts AND that most people will be dissuaded from serious fraud by threat of those legal systems.

            There’s a reason FTX was in the Bahamas. Bernie Madoff died alone (both sons died, one from cancer, one from suicide, his wife divorced him) and relatively broke. Theranos took down people mostly smart enough they should have known better. She’s got 11 years sitting in a prison (probably less for “good” behavior) to plot her next theft. Doesn’t really help the people who put their life savings in one basket, but there’s no helping those people anyway.

            So basically at the root of contracts is The Law, and the root of The Law is the threat of, and actuality of force.

            In second and third world countries, and increasingly in Europe and America corruption is allowing people like Sam Bankman-Fried to get away with this sort of shit.

            It’s time to end that.

            > > We need more of these types to get shot in the face for being sociopathic fuckheads.
            > difficult to disagree, but somehow 0 shot to date AFAIK. Possibly scammers are
            > part of a predator-prey equilibrium

            In IIRC 1996 James Dalton Bell conceived an equally sociopathic fix for this. Do a web search on “assassination politics James Bell”.

            Implement THAT shit and you’ll stimulate the fuck out of the economy.

            > there is still no shortage of people willing to “invest and get 7 percent!”.

            7? I think you’re missing a number there.

            Right now series I bonds are at 6.7 ish, and 2 months ago you could get one for 9.

            The Stock Market, over time, has an average rate of return of 10%, you just sometimes have to wait a few years for it to balance out in your favor.

            • asciilifeform said, on November 20, 2022 at 10:47 pm

              > 1996 James Dalton Bell…

              I recall that piece from when it was bouncing around Usenet. IMHO is interesting that nothing at all came of it. (Would expect, at the very least, rival shitcoin scammers to occasionally take contracts out on one another, a la ’90s Ru. But AFAIK no such cases to date.) Evidently “The Law(tm)” still works, simply not in the way naive commoners would like it to; but rather in the spirit of Mussolini’s “for us and ours — everything, for others — The Law.” It is cheaper, easier, and less risky to purchase legislators/judges than to hire killers, and the assorted SBFs do exactly that.

              • William O. B'Livion said, on November 26, 2022 at 3:54 pm

                The reason nothing ever came of it is because there hasn’t been a sufficiently anonymous digital currency.

                Let’s say that someone setup billionaredeadpool.com and started taking bets on when people were going to kick the bucket–or have the bucket kicked out of them.

                Then the President of Elbonia, a notorious pedophile and globalist catches a 12.7mmx108 infection and some “freedonatello@proton.me” is the winner of the deadpool with a relatively new bet AND a high degree of accuracy.

                Every celebrity in the world is on that deadpool, because why not.

                First that site is off the net *immediately*. Everyone who’s ever done work for it is now getting the rubber hose treatment (no need to “crack” a password when you can crack a skull, aka “lead pipe cryptography”)

                Now how well will whatever blockchained tokens you’re using stand up to the full weight of the NSA, CIA and every other intelligence agency in the world?

                THAT is why it hasn’t been implemented yet.

                That we know of.

  12. O. Lonje Onson said, on November 15, 2022 at 6:23 pm

    The most novel aspect of this whole sequence of events is the report that FTX pushed a malicious OTA update to users mobile devices around midnight on a Friday; this update appears to have exfiltrated users’ private keys, meaning that the funds were stolen off of the users’ devices. Rather than just turning off the lights and freezing the accounts without explanation, FTX appears to have literally stolen customers money in something that is more analagous to a breaking-and-entering. Some people have reported that FTX attempted to drain their bank accounts via Circle, which may or may not be true but will likely be underdiscussed. Provided that the reports are true, one of two things may have happened: either FTX had been deeply penetrated by a hacker at some point in the past, and he merely chose to exploit his privileges now before customer money disappeared from the coffers, or FTX (or someone inside with access to their CI pipeline and signing keys) deliberately attacked customers. If the latter turns out to be the case, consider that this same arrangement of exploits would be called a “supply chain attack” and all the whitehat security agencies would be crediting it to a state actor. I do not know of a historical precedent for a large institution to violate the Computer Fraud and Abuse Act against their own customers. It is almost guaranteed that this will invoke heavy handed legislation to “protect” customers, which will surely unfairly target “non-custodial wallets” (to use the EU’s contrived lie-phrase) and will certainly connected establishment players.

    • Scott Locklin said, on November 15, 2022 at 7:05 pm

      I head the stories about the FTX app, but I don’t know anyone who actually has it installed on his machine. I assume they’re true. I agree with you such things will be under discussed. So is all of the above: the latest NYT atrocity is basically a few thousand words of the “reporter” sucking SBF’s dick.
      FTX had 600 people, even a shit show operation like Kraken has something like 5000, so I doubt they have much in the way of security. Supposedly their accounting system was a spreadsheet.

      • O. Lonje Onson said, on November 15, 2022 at 7:25 pm

        Just as an aside, I’ve heard decent things about Kraken but only second hand; I’ve been meaning to move to them but haven’t yet. Do you have a cex you recommend?

        • Scott Locklin said, on November 15, 2022 at 7:28 pm

          My experiences with Kraken are bad as far as their bureaucracy goes (they also ruined Circle OTC), and in early days their exchange software was a trashfire. Otherwise many people seem happy with them, and I think the CEO is a good guy. It’s possibly good now. I like coinbase and bittrex; have complaints about both, but nothing terrible. I’ve always been suspicious of Binance, but CZ seems to run a decent company. Bitstamp is also interesting, but no direct experience.

  13. Cameron B said, on November 16, 2022 at 3:59 am

    I remember the first FTX ads and thought “where the shit did they come from?”. Albeit I stopped trading a year before, but the sheer volume of ads was incredible given Coinbase and Gemini already existed. Without evidence Id guess I’ve seen more than 2x the amount of FTX commercials than Coinbase+Gemini. Interesting read. Michael Lewis always struck me as a brother to Malcolm Gladwell. Not much substance but “here’s some anecdotes for you”.

    • Scott Locklin said, on November 16, 2022 at 11:41 am

      Lewis was pals with my thesis advisor and I think a talented and entertaining writer. On the other hand, as he gets older he gets more Berkeley and less in contact with reality.

      FTX was a no brainer: call up people who have dealt with him, find out they all think he’s a bag of shit. Of course I lost money on something he was involved in (Slowlana), but that’s my own damn fault.

      • Altitude Zero said, on November 16, 2022 at 3:32 pm

        Kind of off-topic, but I’ll never forgive Lewis for ruining baseball with that stupid “Moneyball” book. Statistically he was correct, but thanks to guys like him publicising the work of stat-heads like Bill James (whose work I once enjoyed), baseball has been turned into a bunch of steroid-laden jackwagons taking pitches to wear out the pitcher’s arm. As Twitteratti “Age of Shoddy” once stated, watching baseball today is like watching two groups of people who don’t like you do their taxes – give me Ricky Henderson any day. Yeah, we now know that stealing bases is not an optimal strategy in baseball – but who the Hell wanted to know that? That Lewis was praising a bunch of nerd statheads for their efforts to ruin yet another part of American life surprises me not at all…

        • chiral3 said, on November 16, 2022 at 3:53 pm

          The head of analytics at the NYYs’ brother works at goldiestix. He was a loudmouth that spouted off alot about eqd vol he didn’t know about (enough that I actually had to meet with the FEDs research arm). Re GS, I know many scrillionaires that left goldiestix in their early 30s that may be back in the job market today. I am not a huge baseball fan but I can appreciate the argument; like listening to AI generated music – it’s missing this Lockean “sweat of the brow” and all its humanity.

          • Altitude Zero said, on November 16, 2022 at 7:34 pm

            Don’t get me wrong, I have nothing against nerds – I was one myself, once. But they should stick to good utterly cool nerd stuff like putting us on Mars, and creating cures for cancer, and inventing Tom-Swiftian whizz-bang weapons systems, rather than messing up perfectly good sports, or figuring out ways to screw cash out of deluded “investors”. Although TBH it doesn’t look to me like the goons at FTX were capable of coming up with a unified field theory or anything.

  14. pc said, on November 17, 2022 at 4:13 pm

    Not to raise an issue with any of your other points, but – Mr. Frankenstein over here suggesting that people be judged based off their physiognomy? Give me a break.

    • chiral3 said, on November 17, 2022 at 8:33 pm

      I think physiognomy, digit ratio, or phrenology are all important considerations when confronted with polycule manifestos like this
      https://decrypt.co/114719/tumblr-blog-linked-ex-alameda-research-ceo-explored-race-science-imperial-chinese-harem-polyamory
      By “[a “cute boy” should be able to….] control most major world governments…. possessing sufficient strength to physically overpower you” I infer she means that SBF was able to overpower her, suggesting he could lift and mount 60lbs of LARPflesh with his noodle arms and have his way while taking a break from world domination.

      The other leading indicator with these types is having 0-2 years at a place like Jane, SIG or DE Shaw. If not polycule world domination the other path is https://mathbabe.org/contact/

      • William O. B'Livion said, on November 21, 2022 at 2:30 pm

        I’m a pretty big fan of retro-phrenology.

    • Pangur said, on November 17, 2022 at 9:21 pm

      Physiognomy is real, friendo, and — even worse — if you don’t judge by appearances, you are ignoring valuable evidence presented to you, for free.

    • Scott Locklin said, on November 17, 2022 at 9:42 pm

      Poast fizzeak, fatty.

  15. […] now, the newsfeed is clogged with hilarious stories about the crypto exchange FTX imploding under the leadership of a speedfreak polycule jacked up on self-righteous “effective […]

  16. Joe Walker said, on November 17, 2022 at 7:23 pm

    A much, much better book than Moneyball is The Beauty of Short Hops by Sheldon Hirsch MD who explains Lewis leaves three things out of Moneyball, Barry Zito, Tim Hudson, Mark Mulder, three lights out pitchers.

    • Altitude Zero said, on November 28, 2022 at 4:15 pm

      Yes, that’s a very good point. Guys like Lewis very seldom actually lie, but a lot of context and inconvenient facts get left out. “Moneyball” was a very good example of this.

  17. […] now, the newsfeed is clogged with hilarious stories about the crypto exchange FTX imploding under the leadership of a speedfreak polycule jacked up on self-righteous “effective […]

  18. […] Scott Locklin goes after the FTX scam and what Michael Lewis could do but won’t do when writing ab… […]

  19. lukemulks said, on November 20, 2022 at 6:48 am

    Impressive. Very based. ❤️


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