Yes, it explicitly mentions that FTX US is included:
> FTX Trading Ltd. (d.b.a. FTX.com), announced today that it, West Realm Shires Services Inc. (d.b.a. FTX US), Alameda Research Ltd. and approximately 130 additional affiliated companies (together, the "FTX Group"'), have commenced voluntary proceedings under Chapter 11 of the United States Bankruptcy Code in the District of Delaware in order to begin an orderly process to review and monetize assets for the benefit of all global stakeholders.
Excluded are:
> The following subsidiaries are not included in the Chapter 11 proceedings: LedgerX LIC, FTX Digital Markets Ltd., FTX Australia Pty Ltd. and FTX Express Pay Ltd.
To be fair, any billion-dollar multinational will have an organizational chart that looks very similar to this. Companies like EY exist, almost purely, to create 'tax effective' structures with hybrid debt instruments and service agreements.
Being US only limits your structure options. Start generating some international revenue and you’ll see how your entity/structure requirements increase.
That’s actually just a tiny, tiny subset of the overall Enron corporate structure. The chart you linked just shows the capitalization and ownership of one of the off-balance sheet structures that Enron used to conceal debt. This structure was capitalized with Enron stock, which worked great as long as the price kept going up, but once the value of that stock fell beneath a certain value, the single-purpose entity used here became insolvent and accounting rules (finally) required that that debt be consolidated back onto Enron parent’s balance sheet.
It’s a situation with many interesting parallels in the crypto industry. Not only does history rhyme, but sometimes it really does repeat.
This is a huge oversimplification but my recollection is, there is a design arm of the IKEA structure which is a non-profit. They create and own all of the designs and IP related to products, which a different IKEA subsidiary then licenses and pays royalties on, essentially negating much/all of the margin of the finished good.
It's quite common to spin off daughter companies per project, it isn't unusual or illegal in any way. Without at least type and ownership information it's hard to tell if it's iffy.
From the Sequoia article on SBF / FTX, it's very likely to be able to trade internationally because each country requires you to have a bank account in that country to be able to access their markets.
In the Sequoia article, SBF gained his initial funding for FTX from executing trades from the US to Japan, where BTC was overpriced because no one bothered to arbitrage it because of the setup difficulty. The way he did this was by contacting a friend to open a bank account in Japan and manage the funding over there while he managed the account US side.
I am sure some of it is normal corporate shell game but I'd imagine at least 50% of this setup was for regulatory purposes. Even small fintechs will have "shell game like" company structure to please regulatory forces that require having certain things be independent from the consumer platform even if the two companies are working towards the same goal.
That sounds to me a lot like a cover story to try and convince people there was actually a value-add. I'm skeptical that the barriers were so high they discouraged anyone from seizing essentially free money, but he solved this with a Japanese friend's bank account.
No one did it for Japan first probably because they have pretty strong criminal liability stuff for securities violations and other financial crimes and don't play the "no fault settlement" game.
It's not illegal to arbitrage but yeah I think what you are pointing at is you have to be regulatory-ily buttoned up for Japan markets vs a more loose market where you don't have to be super careful & can learn as you go.
So SBF having been in finance before (Jane Street), he knew where the footsteps were and how to do it vs a fly-by night crypto investor with no finance background.
Supposedly the Japan “subsidiary” (if you can call it that) was set up by a Japanese person and a resident of Japan, who was a contact of SBF through the Effective Altruism thing. I think they knew something was shady, because the account they had opened in Japan was with a small rural Japanese bank.
When that “arbitrage” turned out to be really lucrative one of the founders of Skype (Talinn something) gave SBF a $50 million loan. SBF and that Talinn guy knew each other also from that Effective Altruism sect-like thing.
All this info was part of a Sequoia congratulatory piece on SBF, they of course had also given him money. The article has since been taken down, it’s still reachable through Web Archive.
This guy has major Epstein vibes (minus the girls). comes out of nowhere super politically connected, investing in research, with a pretty dubious origin story of how he got rich.
What do you even need a blueprint for? The guy did an interview with Matt Levine and laid the Ponzi scheme straight out: scammers make boxes that pay fake coins when you store your money in them, they put so much money into the boxes that the fake coins seem valuable, then they rug pull everyone and move on to the next one. That's how he described his own business.
I remember listening to that interview and this part always got me:
> Matt: (27:13)
> I think of myself as like a fairly cynical person. And that was so much more cynical than how I would've described farming. You're just like, well, I'm in the Ponzi business and it's pretty good.
I seriously cannot understand how after this interview Sam still had any kind of support from VCs and so on.
I hope the late 2010s-early 2020s will be remembered as the dot-com era of extremely dumb money...
> Because they thought they could make money by finding a bigger fool
$10B "somehow" "gone" is QED that someone did find their marks.
More interesting is how none of these guys are seeing the inside of a jail and doing the jailhouse orgies. I wonder if 'defenestration' will become a meme in crypto world too.
> I seriously cannot understand how after this interview Sam still had any kind of support from VCs and so on.
yes you do - because they're at best amoral and know their position and connections means they can make money out of shit like this by ensuring there's a series of bigger fools waiting to buy them out.
Forget VCs. This interview snippet went semi-viral, I don't understand how FTX's customers didn't try to pull all their money out right then and there.
I hate to be the That Guy this time, but pump-and-dump is a different kind of fraud from a Ponzi. Not that anyone cares to make the distinction anymore.
Hey, that guy, tell it to Matt Levine and SBF, who literally used the term in the interview.
:)
I'm just reacting to the idea that you'd need to see the SBF corporations laid out on a diagram to reach the conclusion. When Carrell's character says "they aren't confessing, they're bragging", he's talking about an allusion. The Ponzi schemes here are not allusive. SBF literally bragged about them.
That still doesn't mean they're using the term properly, at least in regards to kind of scam you were describing in your comment, or what that comment's parent was referring to.
"SBF/Matt Levine said it" does not automatically make it true.
To be honest, you don't explain how they are wrong and then tell us that "SBF/Matt Levine" saying it doesn't make it true but both have a public recognisable background in finance, we have absolutely no idea who you are to even judge if you could be right or not.
Instead of debating semantics, enlighten us with how/why they are using it incorrectly and what you mean by this being a pump and dump and not a Ponzi. To me it definitely looks like a Ponzi: money from new entrants in the system go to pay off earlier entrants, a pump and dump from what I know would require SBF/FTX pumping up FTT to then dump it all leaving bag holders in the wake of the crash.
That's fair -- I thought that by highlighting the correct term, against the parent's description with its mislabeling, that would be enough to make the point, especially since a) the issue of "Ponzi" misuse comes up so much, and b) one could just look up the terms and compare. But, to make it explicit:
Ponzi scheme: Taking later entrants' investments to pay earlier investors on the false pretense that the venture's activity generated the returns.
pump-and-dump: Duping others into thinking an asset has value so that it can be resold above its legit worth.
The original description given clearly fits pump-and-dump better[1], since it's based on making an asset seem valuable:
>>laid the Ponzi scheme straight out: scammers make boxes that pay fake coins when you store your money in them, they put so much money into the boxes that the fake coins seem valuable, then they rug pull everyone and move on to the next one.
For tptacek's part, he could have defended his claim by presenting a substantive understanding of the distinction and justified the label in his own words. Or, somehow indicated this was a point of contention at all. Or done anything whatsoever beyond arguing, in effect, "the perp used the label, therefore it must be accurate". That does not advance the discussion, or indicate a prompt for the kind of contribution in the first half of this comment.
Is this just the natural outcome of running a multi billion dollar crypto business? Do you hire so many experts and lawyers that they set this up for you as an ideal structure?
Seeing how stupid/greedy SBF was, it makes me wonder if people like him are smart enough to truly understand the need for such structure without having experts in place.
You need that many companies trading with each other to create value and muddle the waters... Intangible assests and future flows passed from one entity to the other and priced at some unrealistic assumptions create/raise paper value.
SBF would be a nobody without Sequoia and others throwing money at him. I'm more concerned about the judgment of monied people who are so desperate to find their own Adam Neumann, that they forgo common sense and invest based on 'feel'.
It's almost like they asked GPT3 or Dall-e to create "a corporate structure that is so confusing it will be a liability shield to keep my ass out of jail", and then used whatever came out
if you're a creditor, good luck getting any part of what's left over after they pay the accounting firms to unwind this. On second thought, if you're an accounting firm, good luck getting paid if you do any work for them.
These days owning a crypto exchange is a shell game where you try to hide the funds and liabilities into a chain of companies located in offshore jurisdictions.
Binance does the same but even more extreme — they don’t even tell where their HQ is actually located.
Money launderers and tax evaders have long used these tricks. Those people don’t normally get VC capital at $34 billion valuations though. The crypto implosion ought to be a massive lesson to the industry.
I'm really skeptical of Binance, whilst I would never accuse them of anything specific, I have no proof. Their structure, governance and business model combined with their refusal to meet basic regulatory requirements makes me feel uneasy.
Binance is effectively saying “I’m not going to tell you where I am but you should let me manage your money.” It takes a special kind of gullibility to accept that, but in the crypto world left has been right and black white for a very long time.
Binance’s US subsidiary is just as safe as FTX.US was, despite their claims otherwise. It will fall along with the other dominos.
Even the assets are questionable — as Tether’s attestation language change shows. They value their assets at what they’re worth “in normal market conditions” which is a flashing red light for bank run vulnerability.
Exchange is pretty simple business. Customers deposit coins and fiat, trade between them and pay you commissions. If you don't send any of those coins out, there is no risk, no liquidity crunches, no liabilities whatsoever. This guy took customer coins to gamble, and lost. Story as old as Romeo and Julia.
> If you don't send any of those coins out, there is no risk, no liquidity crunches, no liabilities whatsoever.
If you don't send any of those coins out, there are no profits for the exchange operator, either. Look at how Coinbase does everything more-or-less by the book, and barely makes money. Trading fees just don't cut it.
Yet, some fly-by-night exchange incorporated in the Bahamas is offering wild signup bonuses and lower fees and yield that would make Scrooge McDuck blush.
it looks like the usual nonsense of "here's some bank account balances", with no explanation of what liabilities they hold, or how much related party loan crime they have on their books.
If a hedge fund trades on an exchange in Singapore they will probably want a corporate structure there for trading and tax purposes. Larger trading operations aren’t just clicking sign up on random exchange websites and allowed to start trading billions of dollars. Legal agreements need to be inked, collateral deposited, etc.
> FTX Trading Ltd. (d.b.a. FTX.com), announced today that it, West Realm Shires Services Inc. (d.b.a. FTX US), Alameda Research Ltd. and approximately 130 additional affiliated companies (together, the "FTX Group"'), have commenced voluntary proceedings under Chapter 11 of the United States Bankruptcy Code in the District of Delaware in order to begin an orderly process to review and monetize assets for the benefit of all global stakeholders.
Excluded are:
> The following subsidiaries are not included in the Chapter 11 proceedings: LedgerX LIC, FTX Digital Markets Ltd., FTX Australia Pty Ltd. and FTX Express Pay Ltd.