It's clear Caroline Ellison has turned against him. Stephanie Avakian, former SEC enforcement chief, is representing her in NY. I'm guessing they wouldn't have been able to file charges this quickly without Caroline becoming a cooperating witness.
Maybe they don't need a cooprerating witness or special deals. Apparently the companies were really badly run, with lots of clear-cut violations, making it very easy to file charges.
John J. Ray III, who has taken over for Bankman-Fried as CEO of FTX and whose credentials include supervising the corporate cleanup after Enron imploded, has already said, '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.'
John J. Ray III is a star. The board did right to hire him for the clean-up. I am sure he is cooperating closely with US and Bahamian authorities for criminal evidence gathering. And, he is being paid ~2.6M USD annualised (1,300 USD per hour, 2,000+ hours per year). Seems cheap to clean-up that mess. It might take 5-10 years for full clean-up and wind-down. As the mess is so extensive, I wonder if some board members will also be under investigation. While board member normally have liability insurance, it won't help if crimes were committed.
FTX US had (at least) nine board members. FTX International (non-US entity) was private, as I understand, and essentially unregulated, so who cares about the board.
FTX US is a subsidary of FTX int. The board of FTX US has no power to do anything to parent co or other subsidaries of parent co. FTX US was/is also a private company.
It is a good question. I assume FTX global and/or US has some cash reserves. At the very minimum they have been running a business that needs to pay cash salaries, rent, utilities, etc. Your question is partly answered by the 200K USD retainer" (no details provided). I assume that was paid upfront. He may refuse to continue work if paychecks do not arrive in a timely manner. This guy is very experienced cleaning up bankrupt companies. I'm sure he will get paid, or not work.
One of the problems of these centralized exchanges is that so much stuff happens off-chain. The DEX don't have these problems (some of them have other problems)
One of the major charges though is that they misdirected funds to Alameda Research or had people deposit directly to them instead which would be happening on chain. The failed arbitrage would have also required a lot of on-chain activity.
Indeed. It's emerged that there are screenshots of a signal chat group called (in what must have seemed at the time to be an amusing joke) "Wirefraud" with SBF, the CEO of Alameda (Caroline Ellison) and two of the other top folks from FTX/Alameda.[1] So one of them (probably Ellison as everyone is speculating) almost certainly turned to provide that. That's the sort of off-chain evidence that is somewhat awkward when you're trying to defend (amoung other things) a charge of wire fraud.
Yeah I think they're absolutely hosed here. Beyond anything they did or said before the collapse SBF kept talking and to all appearance lying while trying to get people to reinvest which is a whole new set of possible crimes about misleading investors as well as basically admitting to several crimes.
A great deal of internal communication apparently occurred within ephemeral Signal Chats. While JJRIII is witness to failure, Ellison was witness to intent.
If the charges include manipulating the prices of TerraUSD and Luna earlier in the year - that ironically probably caused the FTX implosion, it's hard how to see Caroline Ellison as head of Alameda wasn't heavily involved in major criminal activities.
It's possible - but politicians don't stick their neck out very far for past donations, it's the prospect of future donations which is important.
If you've just got wiped out financially? Unless they can expect donations from your allies, or from your peers in industry who are eager to see you released, they can just stop returning your calls.
I remember there was a picture of her in a NYC Starbucks in the past week. Someone predicted she had made a deal with DA and SBF would be indicted soon. Now it appears the prediction was spot on.
1. Someone took a picture of her in a coffee shop down the street from the Manhattan FBI/US attorney office a few weeks ago (last week?). She is supposed to be in Hong Kong as that is where she was based.
2. BBG news article recently speculated some hot-shot lawyers have begun representing Caroline.
She was spotted in NYC with another Alameda employee too.
Maybe the Alameda execs are trying to say they just made irresponsible gambles (like a shitty Wall St investor) but SBF is the one who secretly covered the massive losses with FTX customer assets without telling the public and was responsible for the "dual accounting" issue where deposits were counted twice. Among all the other things that they did wrong.
Or maybe there was a more direct/overt conspiracy at play they both took part in and she snitched first.
The good news is we'll probably find out sooner than expected if the extradition gets challenged in court. We'll see exactly how altruistic SBF really is soon.
> Maybe the Alameda execs are trying to say they just made irresponsible gambles (like a shitty Wall St investor) but SBF is the one who secretly covered the massive losses with FTX customer assets without telling the public and was responsible for the "dual accounting" issue where deposits were counted twice. Among all the other things that they did wrong.
Here’s the crazy thing. Maybe they pierce the veil and say the two companies acted as one, but hedge funds fail all the time. The fraud was SBF using FTX to prop up Alameda…
> Maybe they pierce the veil and say the two companies acted as one, but hedge funds fail all the time.
“Piercing the veil” is a term of art for holding shareholders accountable for corporate liabilities notwithstanding the civil liability shield usually provided by the corporate form.
Holding coconspirators accountable for their role in a criminal conspiracy doesn’t have a special name because it is routine rather than exceptional.
Sigh. Why is HN always like this? (don’t answer, I know)
Piercing the veil broadly refers to removing limited liability protections because the individuals behaved in such a way (criminally) that they have forfeited their protections.
The most common people held to limited liability protections are shareholders in limited liability corporations (LLCs)
A different sort of limited liability is the idea that customers/partners of a fraudulent business are not liable for that fraud, unless they committed gross negligence in allowing the fraud to continue.
To your point, there is not a snappy term for that specific phenomenon, because it is so rare, but piercing the veil 100% applies here because it refers to the “veil of limited liability”.
> Piercing the veil broadly refers to removing limited liability protections because the individuals behaved in such a way (criminally) that they have forfeited their protections.
There is no “limited liability” for criminal sanction to which the term applies. There are criminal immunities, but finding something to be within an exception to one is not called “piercing the veil” in any context.
> A different sort of limited liability is the idea that customers/partners of a fraudulent business are not liable for that fraud
“People other the person committing a wrong are not liable for the wrong” is not generally a “form of limited liability”; it is the basic rule of initial liability. An exception to that is respondeat superior in which a principle is responsible for his agents liability in a broad range of circumstances, and corporate limited liability is an exception to that, since the corporation could otherwise be seen as an agent for its shareholders.
Finding that someone committed a wrong related to a third-party wrong that makes them vicariously liable for that third-party wrong is not generally called “piercing the veil”.
And that’s all in civil liability, which is the only domain where “piercing the veil” applies at all.
> To your point, there is not a snappy term for that specific phenomenon, because it is so rare
No, again, charging co-conspirators in a criminal conspiracy, regardless of their other business relations to each other, isn’t “rare”, has nothing to do with “gross negligence”; it doesn’t have (another) snappy name because its central to the point of the crime of conspiracy.
> There is no “limited liability” for criminal sanction to which the term applies. There are criminal immunities,
Huh? My dude, she didn’t work for FTX.
If you’re saying that she in fact did (and was therefore a co-conspirator), then we agree that FTX was a sham corporation that acted on behalf of Alameda, but then why are we here?
Oh yeah, because you wanted to sound smart without fully understanding a situation; I guess I already knew that.
But DOJ would have needed someone who had the receipts (who could also explain it all) to be able to act this quickly. So, in this case, I think it's a reasonable theory (but not the only viable one).
Maybe part of the urgency was also the planned congressional testimony.
> But DOJ would have needed someone who had the receipts (who could also explain it all) to be able to act this quickly.
Citation needed? I'm not a lawyer, but it seems plausible to me that SBF's public admissions of crimes, plus the full records of his company, are sufficient.
Where would they have gotten the full records? Or been able to know where to look in the records? Forensic accounting takes time (even if the records are as bad as alleged). To me, this suggests someone on the inside helping to build a case. Federal cases can take years to build because they are usually very thorough. Going from collapse of the company to extradition request in the course of weeks seems really fast to me from a historical perspective (but IANAL either).
But this, like most of the thread, is all speculation. We’ll find out more in due course.
It appears that many FTX/Alameda employees were in the dark as well and had huge losses. There's probably no shortage of angry employees interested in sending him to jail (and probably ensuring SBF gets blamed and not them). Add SBF bloviating endlessly on the internet and admitting crimes and you have an easy case?
> Where would they have gotten the full records? Or been able to know where to look in the records?
Bankruptcy procedings. Subpoenas. The standard ways the FBI gets records from regular companies run by people who aren't criminals and don't want to become one (the current CEO is a regular business person).
All of that takes time. Subpoenas can be fought. Bankruptcy cases take time, and I’m not sure that prosecutors would get unfettered access to bankruptcy filings (unless/until the presiding judge thought it was relevant).
But either way, these things take more time than what has passed thus far. I’m not saying that a case couldn’t have been made without an internal informant — just that it happening so quickly makes me suspect that someone (who was high up) flipped.
They can be, but they don’t have to be, and the current management doesn’t seem interested in protecting SBF or the others formerly responsible for running the FTX network of companies.
Besides there's a very extensive history of state procescutors offering deals to co-conspirators early on. Even in obvious sure things they've sided on the safest possible option.
It probably reflects the inherent risk-aversion that comes with a gov lawyer job.
A more balanced tolerance to risk is often missing from much of gov policy making. Probably has a lot to do with people who care more about highly visible and immediate prosecutions to satisfy the public > balanced long-term justice. Politics selects for that. You see the same thing happen on social media where emotions reign king.
> Besides there's a very extensive history of state procescutors offering deals to co-conspirators early on. Even in obvious sure things they've sided on the safest possible option.
I think it's often less about convenience and more about prosecutor's political antennas. Who wants to see the guy dead in jail, and who would be most upset at you if that happened.
While it's possible someone just misunderstood colossally in the reporting (happens all the time), one of the allegations is that he had two different sets of documents to hide stuff and get things past auditors, not just double every as is standard.
As others have mentioned, there is circumstantial evidence in that she was photoographed recently at a Lower Manhattan Starbucks quite close to the Southern District of New York (who would handle any Federal prosectuion like this as it realtes to securities fraud).
But you have to look at the larger picture: The Federal prosectuion conviction rate is 95%. The Federal government is very good at getting prosectuions in cases they choose to prosecute. They tend to plea out cases that are riskier. A key tactic in doing this is they get one or more cooperating witnesses. That witness gets a better deal in exchange for their testimony that pretty much turns the case into a lock.
It's classic Prisoner's Dilemma. The first to take the deal is always the best off. Lawyers know it so if their clients are at risk, they'll tend to push their clients to be the one to take it. Ellison will most likely have direct knowlege of the situation and will be able to produce evidence such as emails and texts.
Importantly, she's not the main guy. It's SBF who opened up custodial assets to be used in that way (or so it seems). That's the primary offence here. It's a bit like how in a murder case the cooperating witness might be a driver or a witness but unlikely to be the actual shooter. They may get embroiled in a felony murder conviction otherwise thanks to the US-specific pecularity (and some, including myself, would call a miscarriage of justice) of felony murder but that's another story.
So Ellison fits the profile of an ideal cooperating witness, there's supporting circumstancial evidence and the fact that Federal prosecutors indicted SBF so quickly further suggests a cooperating witness with firsthand khowledge or they'd otherwise be mired in subpoenas for communications, conducting interviews and otherwise building a case.
A criminal indictment represents the end of the investigation, not the beginning. SDNY has already built their case to their satisfaction. People seem to think an arrest happens and the investigation continues. That's not how Federal prosecutions works.
> A criminal indictment represents the end of the investigation, not the beginning.
That's oversimplified, especially when dealing with wide ranging investigations into complex issues, as the many indictments (including successive, either superceding or in different districts or, in some cases, both) indictments of the same party in the course of, for an obvious recent example, the Mueller investigation attest.
A necessary conceit of the prisoner's dilemma is that they can't communicate, and therefore can't strategize together so that doesn't exactly apply here. It's just self preservation.
Like others said, it's not about communication, but trust. If you stack the payoff matrix severely enough, there's nothing the prisoners can strategize, and you can literally keep the prisoners in the same room, and it will still work.
Consider the payoff matrix in this example, somewhat analogous to the case we're describing:
- Both defect -> both go to prison for life
- One defects, one cooperates -> the cooperating one goes to prison for life; the defector gets some minor punishment and otherwise goes free.
- Both cooperate -> both go free for a moment, spend some months or maybe even a few years living in fear, then with 95% chance go to prison for life. That's because the whole deal is about saving work for the Feds, but they will put in that work if needed, and come back with bullet-proof case.
There's hardly anything they can do to meaningfully increase their chances of surviving the "both cooperate" option, so the two prisoners will both try to defect.
> Both cooperate -> both go free for a moment, spend some months or maybe even a few years living in fear, then with 95% chance go to prison for life. That's because the whole deal is about saving work for the Feds, but they will put in that work if needed, and come back with bullet-proof case.
This isn't necessarily the case. The Feds convict on 95% of the cases they decide to prosecute. Which means that they decide not to prosecute marginal cases.
It could be the case that there just isn't enough evidence to bury them.
That's a generic case. Parent is describing a specific case in which prisoners determine they have a 95% chance they will be convicted. Given such a case, parent's argument follows logically. How many cases the Fed prosecutes or convicts is irrelevant to the scenario.
Yes, in this scenario the prisoners assume the Feds are going to bring a case in eventually. This, I believe, tracks the real-world situation, because this case is already notable enough that the government is determined to see it through, however long it takes to prepare.
But even if not, then have the prisoners multiply that 95% by whatever they believe is the chance Feds will eventually prosecute. Is it 50/50? That just gives them 52% chance of avoiding spending rest of their lives in prison, which is still not a good bet.
(Note that prisoners won't be unbiased here - the Feds will be trying to make them believe this chance is much higher than it really is.)
There is a third factor here, whether the prisoners can disappear before Feds go after them - I assumed they effectively can't, and/or it comes with sacrifices so big that it's not much different than prison.
> But even if not, then have the prisoners multiply that 95% by whatever they believe is the chance Feds will eventually prosecute. Is it 50/50?
Crucially, these particular prisoners have a very good idea of whether the Feds have enough evidence to go to trial (assuming the Feds get everything, which is probably prudent to assume). Especially with the advice of good council, which they apparently can afford.
> Note that prisoners won't be unbiased here - the Feds will be trying to make them believe this chance is much higher than it really is.
Which is mitigated by the advice of council. Of course, there is a chance that they are influenced too far in the opposite direction - their layers may be banking on raking in fees from going to trial.
This is almost accurate. You can slightly increase your chances if you say "I will defect, but will take care of your family and give you half my income forever. If you also defect, we will both go to prison and you will be worse off", then don't actually defect - which means you both cooperate!
It won't always work, but it did work flawlessly in a show called "Split or Steal", which basically made the prisoner's dilemma a TV show: https://www.youtube.com/watch?v=S0qjK3TWZE8
That's the kicker though, and it's the lever the dilemma orchestrators (here, the Feds) have to force a result: smooth out any real-life considerations by making the payoff matrix more extreme. If the cost of failure is life in prison, "slightly increase" and "won't always work" isn't gonna cut it - they can practically guarantee the prisoners will make a specific choice.
Prisoner's dilemma has a Nash equilibrium where defection is the best move regardless of anything else that happens. If you change the game to be a repetitive 'prisoner's dilemma' with the same actors the best strategy would be tit for tat.
Yes, and this kind of prisoner's dillema isn't an accurate description of the hypothetical one. When it comes to the DOJ making a case against two people, both of them co-operating will likely get both of them harsher sentencing than what the defector will get.
That's why underlings have strong incentives to defect, and defect quickly. (Defection is also rarely an option for the person at the top of the pyramid.)
Yep. Lack of realistic prospect of cooperation working and the asymmetry are key here. I don't think any option either or both of them can take will save Sam, but Sam could possibly save Caroline from the most serious charges by taking full responsibility for the decision to transfer FTX customer funds to Alameda (except I suspect there are other issues with Alameda's compliance they could still nail her for)
Caroline's option to save Caroline regardless of what Sam does by testifying looks a lot better.
'with communication' does a lot of work here. tit for tat is a strategy where you start with the positive-for-both-parties strategy and then just copy whatever the other party did last time.
Yes but the only way repeated cooperation can be maintained is if players can “punish” defectors by also defecting for a certain # of turns (thus making the PV of breaking ranks and defecting < keeping cooperating for every player).
SBF’s situation is different in that the game ends as soon as someone defects.
The prisoner's dilemma isn't predicated on the inability to communicate. It's predicated on (the lack of) trust. Put it this way: if you could lock in your decisions in an atomic fashion there would be no dilemma.
She was staying completely silent since the moment FTX collapsed while he was spilling the beans everywhere. She obviously cut a deal while he was parading on social media for god knows what reason instead of shutting his mouth. SBF is a complete moron who didn't understand how the party was already over for him, I put it on his upbringing given the kind of ideology his scholar parents preach at university, especially the bits about personal responsibility...
> while he was parading on social media for god knows what reason instead of shutting his mouth
Matt Levine:
> “Sam Bankman-Fried Should Shut Up, Bernie Madoff’s Lawyer Says,” (...) perhaps it is one more case of us watching in real time as crypto re-learns the lessons of traditional finance. Maybe in six months all the busted crypto leaders will be saying “oh wow we should not have given all those interviews.”
Half (probably 3/4) of silicon valley is on the same cocktail... also popular in schools, college campus, law, banking, politics and even recent presidents had the same cocktail of pills ...
I haven’t seen any evidence Alameda itself committed any crime, only that they were terrible traders and lost many billions on margin through FTX, who gave them special treatment for collateral. SBF then tried to bail them out with FTX customer funds since he owned both.
I think Ellison will get off scot free since she only controlled Alameda, and not entirely. Her crimes are probably minor and worth forgiving for her testimony. At least that’s my hot take.
I think you grossly underestimate the amount of regulation Caroline is subject to.
At the very least she will be deemed unfit or proper, which means she will be barred from any financial activity for the years to come.
On top of that, as a MOO & RO she will be professionally and personally liable to millions in fines, and most likely jail time.
Negligence _is_ a crime, a lack of means _is_ a crime, a lack of knowledge or control are crimes as well, for any regulated person, especially at the MOO/RO level, a lack of chinese wall between investment and retail is a crime, accepting money from an unverified source is akin to money laundering for an investment firm.
Edit:
MOO, ROs (responsible officers) and MICs (managers in charge) are regulated activities that should be assigned to individuals performing specific duties in an investment fund. Each regulator will have different names and variations on their duties and structure, but overall it's pretty much aligned.
It is mandatory for a regulated firm to have a specific amount and hierarchy of these regulated activities, and each one of them comes with a set of duties.
These activities are the main vector by which regulators enforce and control individual managers.
MOO is often assigned to the CEO. ROs are often the key investment officers, and MICs are often the key tech & operation officers.
Edit2: Hedge funds are no less regulated than any other investment firm. You are mixing "prop shops"/"family offices" and hedge funds.
Alameda was definitely an asset manager as it received external funds and was selling (debt) securities.
She was in charge a hedge fund. Hedge funds are allowed to trade badly and lose money. It happens all the time. There is a VERY high bar for negligence. Alameda Research was also located in the Bahamas. Did Alameda even have outside investors? It was basically SBF's family office. Caroline isn't likely to be liable for much unless she knowingly conspired to commit crimes.
Hedge funds are not exempt from having to know where their money is coming from. A hedge fund that works knowingly using drug money will have people go to jail. A hedge fund that doesn't do any amount of KYC will have people go to jail.
Hedge funds are not magic places where you can say teehee i just used money I found
My understanding is that she was the CEO of Alameda and received a loan from FTX based on garbage collateral. That’s not a crime? SBF knew the collateral was junk, so it’s not misrepresentation. Was she also an officer of FTX? A good chunk of those customer funds were from margin accounts that could be loaned out, so it may be hard to prove she knew SBF was dipping into the forbidden cookie jar, especially when there were no real FTX financials and it all seemed to be in SBF’s head.
I’m not saying she’s fully innocent, maybe there’s some incriminating text messages or something, but from the public information so far it doesn’t seem cut and dry to convict her of a serious crime.
There are very strict rules for any regulated firm about the provenance of the funds, ultimate beneficiaries, client-assumed risk, KYC, etc.
These are not only for customer protection, but anti money laundering as well.
Small regulators often overlook the client risk part so as to attract foreign money (that's why most of these regulators will be OK with little to no restriction of derivatives). The anti money laundering part though is very important for these small regulators as they could be fined internationally and don't want the bad publicity.
You cannot just "accept money and trust its from a legitimate source".
> I haven’t seen any evidence Alameda itself committed any crime
I've seen considerable evidence that the FTX empire, including Alameda, was jointly run by a narrow set of leaders, in which Caroline was #2, not a set of separate, arms length enterprises.
I'd take that bet 7 days a week and twice on Sundays.
No way Ellison is getting off scot free. I'd expect her to get a huge reduction in her sentence, but would still be shocked if she got no jail time.
It has been reported that there was a meeting that included SBF, Ellison and the other high ups at FTX where the decision was deliberately, explicitly made that Alameda would use customer funds to prop itself up. That is most definitely a crime on Ellison's part if true.
I posted a Twitter thread about this in an early story that I can look up that was super informative with a lot of detail, but the short of it is that it was all a house of cards based on FTT. If Alameda died, it would have tanked the value of FTT, which would have in turn killed FTX, because they were assigning huge value to FTT on their balance sheet (which is, in and of itself, insane because FTT worked more like a stock of FTX itself - a company doesn't put its own stock on the asset side of the balance sheet).
> which is, in and of itself, insane because FTT worked more like a stock of FTX itself - a company doesn't put its own stock on the asset side of the balance sheet
Thinking about it, it makes sense. But I never did before. So where does a company’s own stock normally end up at, balance-wise?
> But I never did before. So where does a company’s own stock normally end up at, balance-wise?
The company’s own stock is in the equity section (treasury stock – stock that the company has repurchased after it was issued is a contra equity account, since the act of purchasing reduces stockholder equity.)
On a balance sheet, assets - liabilities = shareholder equity. This calculated shareholder equity amount is known as a stock's book value, but this can of course differ from its market value: https://www.investopedia.com/ask/answers/how-are-book-value-...
I've always been confused about this point. In the stock buyback world apparently they just vaporize the stock when it's acquired, they don't hold it on the books because if they need to issue more they can always dilute and create new shares when they need it.
Though I would disagree that FTT really functioned equivalently to ownership shares.
* FTX's success was helped a lot by the reputation of Sam and Alameda as the best of the best
* Alameda bankruptcy proceedings would have unveiled some skeletons, like the unlimited borrowing of user funds (confirmed by court filing recently)
She doesn't even need to be aware to be accountable and prosecuted. Most regulated activities have a requirement of _means_ rather than _outcome_. i.e. She is as much in breach for not setting up the means by which she should have known, than actually knowing.
Couldn’t she just claim she believed those funds were coming from the customer margin accounts where the terms allowed that usage? That matches her public statements.
If Alameda executives knew that FTX customer funds were being commingled with Alameda’s then they were well aware their source of capital was from customer money they shouldn’t have been touching. It’s not just that they were given unlimited margin from FTX.
> I haven’t seen any evidence Alameda itself committed any crime
Well if you look at what the mainstream media are saying, the very same mainstream media who were presenting SBF as the second coming of the Christ on their front cover, you're not looking very much.
For a start it's proven that some people who wanted to send hefty sum of money to FTX had to wire it to Alameda to dodge controls. That's wire fraud.
Then it's clear that Alameda manipulated the market and were the ones behind the pump and dumping of several shitcoins. Including several shitcoins of SBF's creation.
But really... People who actually called SBF for the ponzi boy and FTX and Alameda for the complete ponzis they were, months or even years before they failed, have lots of evidence that Alameda was part of a bigger criminal operation, before FTX even existed.
If you really believe it's a coincidence the top lawyers at FTX and Bitfinex happened to be colleague at a company caught in an online poker cheating scandal I've got a bridge to sell you.
From the very start even just the naming of Alameda as "Alameda Research" was part of the con (SBF says on video he added "research" to dodge banking restrictions more easily).
The goal of Alameda Research was, from day one, to engage in criminal activities.
This entire "leveraged trade gone wrong" is lies, lies and more lies, relayed by certain media (once again: the same who were presenting SBF as an altruistic genius that was going to save the world).
Now maybe that Alameda also fucked up trades but I'm pretty sure that a lot of the missing billions mysteriously ended up at the hands of those behind the iFined/tether/Bitfinex/Deltec cartel.
Funnily enough this may make tether a bit more backed now.
One of the latest development btw is that one of the shareholder of Bitfinex is a now convicted money launderer (China just arrested sixty people in relation with chinese mafia money laundering through stashes of cash that found their way to Hong Kong and then were exchanged for USDT: $1.7 bn at least).
FTX / Alameda are one and the same and it's highly likely they were just a front for tether, with SBF as the useful idiot.
Some are going to say: "there's no evidence" but this entire thing stinks.
And nobody will convince me that Alameda didn't commit any crime.
Alameda, just like Moonstone bank (bought by SBF from Deltec) and the tens if not hundreds of companies SBF had, were part of a criminal operation.
Let's assume there's no documentation or non-conspiring witnesses who can pin someone, but there are five co-conspirators. They will quickly turn on each other and spill the beans. Literally the prisoner's dilemma. All the government needs to do is threaten 20 years in prison. People will do anything including betraying friends and lovers to get that down to 5 or 10 or zero.
I would suggest that a CEO should know where any magic beans are coming from beyond a reasonable doubt. Not knowing where those magic beans are coming from is its own kind of special trouble, from a legal liability perspective.
She is highly intelligent but not street smart it seems - one does not win maths prizes for being stupid - just think she was either in over her head and was controlled by SBF and his cult to do rather dodgy stuff.
Did she get any special loans or other gifts from FTX like SBF's parents got a free condo in the Bahamas ???.
Ellison joined Alameda Research in March 2018. She became co-CEO along with Sam Trabucco in October 2021. She became the sole CEO of Alameda Research in August 2022 after Trabucco stepped down.
Sam Trabucco - now there is a name you never hear ... yet he was CEO and left 2 months before they went bankrupt ...
Hard to believe they weren't complicit in the fraud given users were wiring money directly to Alameda's bank accounts (for deposits intended for FTX). You (Alameda) receive thousands of wires from random people, so you just decide it's OK to trade with it?
Granted they technically have no fiduciary duty to users since nobody signed a contract with them, I doubt they get off scott free.
Depends on what deal she was offered and what she agreed to. If the feds already had a bunch of evidence against her (or believed they soon would), they may have offered a plea deal (less-serious charges, shorter sentence). If they had nothing, but knew she'd have a lot of dirt, they may have offered her immunity. I'm sure the specifics of the deal (if any) will come to light soon enough.
Everybody can agree that some bargains are appropriate and others are not, so what people are going to discuss is the dividing line and particular deals.
He is a much bigger "prize" for the prosecution. She had low profile and not all that well known to the electorate. Plus, prosecuting her may not even look all that good, for identity politics reasons. If she cooperated first, there is a good chance of immunity or very low sentence.
> Plus, prosecuting her may not even look all that good, for identity politics reasons.
Strongly disagree with this. Look at how they threw the book at Elizabeth Holmes (vs, say, Adam Neumann, or any other male founder from the last decade plus). If anything women have been getting it harder.
> Strongly disagree with this. Look at how they threw the book at Elizabeth Holmes (vs, say, Adam Neumann, or any other male founder from the last decade plus).
There are plenty of male founders who got popped for fraud. Trevor Milton (of Nikola infamy) is an easy one that comes to mind.
Adam Neumann did not even commit a crime. The only "crime" he committed was being such a great salesperson to VCs and getting a ridiculous valuation from them. This comparison is ridiculous.
IIRC Adam Neumann’s infraction was owning many of the properties leased to WeWork for above market prices. IANAL but that’s not a crime as long as he was upfront with investors about it, even if they never bothered to read that page of due diligence.
Before filing for bankrupcy, she was the Queen of Crypto - "Is Caroline Single - we would have the best Crypto babies". Turned quickly to "she is ugly" when she wasnt a billionaire CEO of the biggest crypto hedge fund in the world.
Crypto men can add speed running traditional finance gold digging to the list of accomplishments.
Neumann scammed chump investors out of a bunch of money in ways that were legal, but would have been illegal at a publicly traded company.
For example, selling some of his wework shares, buying office buildings, then leasing the buildings back to wework at above-market rates. Registering the 'We' trademark for himself then selling it to wework. That would be illegal due to being a conflict of interest, were the company publicly traded - but it wasn't.
(There was also drug use and sexual assault claims)
Depends how much they needed her cooperation, which will determine how much of a deal she got, if any.
If they wanted her cooperation, but didn't absolutely need it, they may have struck a cooperation deal in which she still sees some prison time, but a lot less than she would have after a full prosecution.
My gut says that because he was so sloppy in implicating himself, that DOJ may not have strictly needed her, and so total immunity for her is unlikely.
IANAL so please correct me but here’s how I understand it: there are three levels of cooperation.
The informal one is basically just telling (some of) the truth during interrogation and agreeing to testify, where her lawyer gets to enter “she cooperated” as evidence during sentencing, but she might still get off scott free, or a judge might ignore the cooperation entirely if she’s found guilty. If SBF pleas guilty anyway, this cooperation is pretty much useless but carries the most credibility.
She can cooperate as part of a guilty plea [1] in which case the prosecutor provides the judge with a sentencing recommendation. The judge can still sentence her within the guidelines at his discretion, though usually the plea deal is on a smaller set of charges than the indictment so its a net win regardless and brings double jeopardy into play since it counts as a conviction.
The last kind is total immunity which sounds nice in theory but is more dangerous for both sides. She’d have to spill all of the beans on everything within the bounds of her immunity which will be broad. If she is ever caught in a lie or a deliberate omission, the immunity deal flies out the window and everything she said as part of the deal can be used against her at trial. Waiving one’s 5th amendment rights is usually a stipulation of immunity agreements - total honesty or guaranteed prison time.
It remains to be seen how much she is cooperating.
There is zero chance she was offered a deal. She is cooperating voluntarily in hopes of leniency. Deals screw her credibility on the stand. She will negotiate a deal when all the cases are over.
This is not correct. Plenty of would-be defendants take deals to testify. Negotiating a deal after you testify is a ridiculous idea and if it has ever happened once, I would love to hear the story.
She is getting the leniency from the sentencing reform act of 1984 which is predicated on cooperation. No way prosecutors have given her a damn thing. Yes, many cases use snitches because that is the only way to win the case, but it is fraught with peril because of the obvious incentive to lie. Prosecutors avoid deals, and sentencing guidelines already provide for leniency for cooperation. When it is all over, they may, at their own discretion, decide not to pursue charges against her.
Out of perhaps an over abundance of curiosity, what would be your take on, say, Massachusetts Rules of Evidence Section 1104? What sorts of things do you think Massachusetts would promise a witness?
They don’t make specific promises except as a last resort because of things like 1104. I know a specific example of the feds losing a case because they granted immunity to get someone to fly to the US to testify. The witness completely blew the prosecution’s case. A federal prosecutor losing is quite the stain on their reputation. Immunity deals are the fastest way to blow a case.
The witness is supposed to say they cooperated because the law provides lighter sentences for those who cooperate voluntarily.
I think a more reasonable interpretation is “they make specific promises so frequently that there had to be a rule enacted to deal with it. I agree that you know about one case where a cooperation witness with immunity caused a problem. As to your initial claims that there is “zero chance she was offered a deal” or that any cooperation must be voluntary, we’ll have to agree to disagree.
Justice is what happens when people are held accountable for the wrong things they've done.
Nothing about justice requires that punishment be meted out in strict accordance with the demographic breakdown of a population except insofar as wrong things are done in strict accordance with the same demographic categories.
Maybe you're assuming that to be the case, but I don't think you'll find any evidence to support such a claim.
Justice should be blind in terms of punishment. Easy show systemic racism by looking at the number of African Americans in jail for drug offenses for drug when comparing across races. Drug use by race is relatively consistent in terms of percentage. I would consider that a big problem with our justice system.
My understanding is those "usage rates" are uniform only if we look at "used in last year", but ignore "used in last week" metrics where they diverge (according to Bureau of Justice Statistics). SSC did a pretty good deep dive on race and the criminal justice system, that covers this and other things such as underreporting, below:
It's not justice, but the same phenomenon. If certain group has a larger tendency to commit crimes, and you have limited time and resource to look for crimes, it's overall more effective (arrest more people and perhaps prevent more crime) to disproportionately target that certain group. Men and blacks do in fact proportionally commit more crime than women and other races, but less so than the rate of incarceration suggests. There are only two ways to prevent this: being super effective and checking everything (police state), or being less effective and arrest less criminals for taking extra steps to arrest in just proportion (there are legit reasons to want this, e.g. it'd be terrible for society if for example white women had the sensation they could commit any crime without punishment. But to what degree is that extra effort worth it?).
Exactly. If men are disproportionately in prison, maybe that isn't justice.
Why is it ok for 'spaulding to just shut down the argument as "nothing about justice requires that punishment be meted out in strict accordance with demographic breakdown" but suddenly a fallacy when I insert an actual demographic? I knew it would make people upset because well if we're talking about men then no defense is necessary, no woodruffw to the rescue with "affirming the consequent", but if black people cue up the folks with the torches.
Nobody has torches out. I'm just pointing out that 'spaulding has made a strictly correct observation. You could have responded to it with an equally valid and interesting observation ("we have ample social evidence that criminalization is gendered"), but you chose to be inflammatory instead.
Would need to have more information before coming to such a conclusion, such as the proportion of crimes committed by men vs women, the types of crimes committed by men vs women, etc.
National Crime Victimization Survey (NCVS) does a pretty good job. It compiles the stats through interviewing victims of crime, so they aren't coming from enforcement branches.
Aren't there lots of terrible crimes without a victim? Like smoking or growing plants, or owning an NFA restricted firearm item? So looking at victims may not tell the whole picture.
I agree that correlation doesn't equal causation, I pointed it out because it's the exact same argument used to decry racial disparities in the criminal justice system. Either the argument is valid, or it isn't. We can't pick and choose when it fits our beliefs.
You're still oversimplifying things. A large reason people get confused between correlation and causation[0] but rather things that are correlated and connected with a confounder. The problem here is oversimplifying the model. You have to ask a lot more whys. It is fact that men are arrested more than women and fact that black men are arrested more often, as a percentage, than white men. But it is naive to assume that the "man" variable or the "black" variable are causal variables. In fact they are confounders.
The argument isn't either "valid or not" in a general sense. The argument needs more nuance and if that's your concern, ask for it and point out where it is lacking. Demand better comments instead of trying a quick mic drop.
[0] Most people aren't confused with spurious correlations like: US technology funding vs number of hangings. (99.8% correlated) http://tylervigen.com/spurious-correlations
For what it's worth, I agree with you. But if you've ever discussed racial disparities in anything you know that asking for more information that might not fit neatly with the established narrative, is likely to just get you called a Nazi or something.
I think you're exaggerating this. No one is going to call you a Nazi for saying that Black men have a lower ability to climb the socioeconomic ladder through traditional legal means and thus have a propensity to seek out other non-legal means. Many seeking social justice will stand by that actually. But you will get called a Nazi if you suggest that the reason for them doing this is because they are black (note: capitalization is subtle but important). That is eugenics and has been disproved.
See how the causal factors in these arguments are different? The former is a demonstration of an unfair set of opportunities that disproportionately affects a certain subset of humans while the latter says that the arrests are destined because of genetic makeup. We know one is true and the other is false.
If you're making arguments akin to the former and getting called a Nazi, get off Twitter and touch some grass. Talk to some real people. Specifically people of color. But maybe listen first before you open your mouth.
If you use that argument to explain away property crime differences, maybe. But that doesn't hold for violent crime rate disparities, which is typically where these conversations go off the rails.
Maybe if that is happening then the problem is you're talking about apples when others are talking about oranges. They're both round fruits and share a lot of similarities so it is easy to get the two confused. Especially with human language where we have a lot of priors that fill in the tremendous gaps in our compressed language. It is even more problematic with hot topics, which is why I suggested listening first. If there is a failure to communicate then maybe change the means in which you are communicating. This should also prod you to listen better. Remember that in communicating you're trying to express this complex idea with a limited vocabulary and time. The listener then has to decompress and interpret this information based on what you said (not what you are thinking) combined with their prior experiences (including the similarity of your argument to arguments made by others. Possibly others you don't wish to associate who are instead dog whistling or using malinformation). So do your best to communicate well and specifically with your target audience but also ensure that you are doing your best to interpret the intended message of those you are communicating with. Not only will the latter help make a more productive conversation, but demonstrating this helps encourage others to do the same in return. Not to say that we aren't human and won't make quick quips. But if we can re-navigate these situations, they do tend to turn out better. I think this conversation between us is a good demonstration of that.
You assume good intentions with these people, that is not what has been on display for the last few years. A general rule of thumb is that anybody engaged in identity politics is a horrible human being, and discussion with them is generally an exercise in futility.
These are people who literally start every discussion with the idea that people of different races should be treated differently based on the color of their skin. So I suspect they're projecting a bit, since that is precisely Nazi ideology cloaked in a different skin (literally).
Yes, because if we don't, then it does lead to what's been on display (which is also a selection bias). Start with the assumption of good intentions, but you don't have to keep that after they play their hand.
> A general rule of thumb is that anybody engaged in identity politics is a horrible human being, and discussion with them is generally an exercise in futility.
I found the problem. If you treat everyone you meet like an asshole or terrible person then it is no wonder they respond that way. You can't expect anyone to be nice to you if you are being a dick to them. People can tell what you think of them. You probably aren't as good of a bluff as you think you are.
Well there is an easy way to test this theory of yours, by answering a question. Do you think we should treat people differently based on the color of their skin?
I happen to think we should treat everyone the same regardless of skin color. Do you?
I'm not taking the bait. I just want you to know that the reason you're having problems with people is because you're arrogant. Tone it down if you want to have the conversations you want to have because you're never going to get there the way you're going about it. That's the end of this conversation for me. Sorry.
Most crime that we have records for to use for studies is committed by men you mean. Who is to say how much crime by women goes unreported and uninvestigated, and therefore has no presence in our statistics.
Yeah but it's not as if there is this huge epidemic of underreported or uninvestigated crimes committed by women. This doesn't account for the statistical difference.
Madoff's scam was so baffling because his contributions to finance before that were legendary. He practically invented modern market making but his firm and others following in his footstep were wiped out by HFTs.
I think they were gradually decimated due to shrinking margins but that was partly due to decimalization, Reg NMS and other market structural reforms / changes. Then HFTs stared to flourish which drove the older market makers out of the picture.
Is one of many articles on the topic. I had an old textbook (maybe 2003) textbook on markets and trading that had a sidebar that lionized him but almost everything on the web is colored by his scam.
I know her parents would have been colleagues of SEC Chair Gary Gensler when he was still at MIT, that's a large faculty though. Is there evidence that they were more than just colleagues though?
They were known to be friends while they both worked at MIT, and both were economics professors in the same sub-field, which makes it very unlikely that they didn't speak to each other.
I just learned that people have been theorizing on the internet that Caroline Ellison is Gary Gensler's daughter, which is completely nuts and totally false.
just a quote from wikipedia as a whole paragraph, you can verify it, did not think that much, no need to over react, everyone is so sensitive these days.
But what does it have to do with this thread or the comment you replied to? If I wanted to read random wikipedia snippets I'd be at wikipedia.org, not news.ycombinator...
Whether or not you thought about it much, or whether you think I’m over reacting and calling me sensitive is you disregarding your own actions rather than acknowledging the sexist undertones. Bet your mother is proud.
