Wow, you aren't kidding

https://dailyhodl.com/2022/05/28/top-coinbase-executives-hav...

What do you make of Sam Bankman-Fried describing his business as a literal Ponzi scheme on Odd Lots podcast?

The commentary isn’t necessary to see the insanity but here’s fastest way to get to the relevant content: https://youtu.be/C6nAxiym9oc

Edit: To clarify, though not sure how much a mitigation this is, yes SBF is describing much of the underlying activity he takes commission on as a Ponzi scheme. Sure, he’s not operating the Ponzi itself, just keeping it operational and profiting from its continued operation. Mea culpa.

I listened to that, he even predicted the Luna crash in that interview. When that guy talks, it’s very clear he understands markets. Very different approach to Bryan Armstrong, who’s more of a Bitcoin “believer”. I think the blatant description of a ponzi scheme was a rare window into an insiders thoughts.

What FTX does is introduce financial products that could potentially put downward pressure on a lot of these scam coins. To be fair, he also introduces products that allow people to play around w/ crazy amount of leverage, but it could theoretically be done without as much counterparty risk and interconnections that caused the 2008 financial crisis.

lots of exchanges provide crazy amounts of leverage. Kucoin lets you have a margin loan that's 10x your capital. I'm not sure this is unique to FTX.

The exchange itself doesn't need 1000s of people. Coinbase went on a hiring spree in 2021, but it didn't seem to have a clear strategy for all that headcount.

He described defi yields as a literal ponzi. Sam Bankman Fried’s business is charging commissions to people in the ponzi and trading against them and he does a good job of that.

As an aside, for those who like names as destiny, SBF’s is epic

I.e. Bernie Madoff made off with their money

Nuke Goldstein of Celsius nuked depositors money

You get:

Scam-Bankman Fried

Or also Sam Bank-Man Fried (if they go bust)

This sort of naming thing is more common than you’d think in frauds anyway and if you are placing your money with someone who could chuckle to themselves “hehe I made-off with their money” it is a material risk

Relevant to https://en.wikipedia.org/wiki/Nominative_determinism (which itself is a probably just https://en.wikipedia.org/wiki/Pareidolia).

I want an exchange to be neutral. I don't want them to pick and choose the products I'm allowed to trade. Outright fraud should be avoided, but if someone wants to buy a shitcoin, they should be allowed to do so.

> I want an exchange to be neutral. I don't want them to pick and choose the products I'm allowed to trade. Outright fraud should be avoided, but if someone wants to buy a shitcoin, they should be allowed to do so.

BTC-e was the closest thing to that, and the FBI shut them down outside of their jurisdiction (RU).

To this day they were the only exchange trying to make people whole after the seizure, everyone else just exit scammed or has had their funds tied up in an asset seizure (MT gox via the Japanese Government).

He’s not describing his business at all, but yield farming, which is performed using decentralised applications.

He is pointing out that it is in fact a ponzi and explaining the mechanism. There are no regulations against letting people trade this type of ponzi so his company isn't doing anything illegal. I think the problem here is that people outside crypto take it more seriously than insiders.

I think people outside of crypto take it seriously because it’s getting to the scale where it will start negatively impacting non-participants or unknowing participants.

> What do you make of Sam Bankman-Fried describing his business as a literal Ponzi scheme

Strawman. He described DeFi yield farming as a ponzi scheme. [0] Not his own business.

Nice try though and thanks for playing.

[0] https://www.bloomberg.com/news/articles/2022-04-25/sam-bankm...

No need for the snark, thank you for the clarification though!

HN is about as informed on crypto as some random off the street I've found.

I actually wouldn't mind if mods here removed non-technical crypto discussions.

yeah SBF doesn't believe in crypto. He might pay some lip service but he doesn't hold any position extensively.

With the caveat that I'm approximately as crypto-skeptical as they come, (a) the interview snippet in that video sounds like SBF describing how a hypothetical could work, not his actual business - though it's hard to tell with all the interruptions from the host yelling "Ponzi!"; (b) the interview snippet in the video doesn't even obviously sound like a Ponzi scheme, but more like an exploration of collective actions and collective beliefs, which is...not unrelated to how regular money works?

> his business as a literal Ponzi scheme

Imagine being this uninformed and wanting to seriously have a conversation about crypto and the underlying fundamentals. We get it, you hate crypto. Why even bother at this point?

Matt Levine is pretty informed IMHO, and he interpreted SBF's explanation of yield farming as describing a Ponzi scheme.

> 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.

Yes, yield farming is a ponzi (though technically it's the greater fool theory). SBF's company (FTX) is certainly not a ponzi.

FTX's CEO SBF also doesn't believe in crypto, as far as I can say, but just sees it as a means to make some money for philanthropy (effective altruism). That might make him less prone to succumb to the hype and over-invest.

Coinbase have always been amateurs. Were you here 9 years ago when they melted down the first time? That was fun. That was also when I decided the fix was in and I got out of crypto.

<insert startup name> has always been amateurs.

In this era of cheap money it's been maddening to see how absurdly incompetent companies can be and still push forward with no consequences.

I've seen teams of people working on credit scoring with no understanding of expected default. They literally just throw data at XGBoost, and couldn't understand why they couldn't find a way to profit off a group of people with a 30% default rate when the upper bound of interest they could charge was 25%.

This pattern is repeated all over startup land (I've also never met a company that knew how to model churn correctly, this is an essential business metric and yet again people throw XGBoost at it), but cheap money means that doing anything is rewarded with more money so every idea seems like a good one.

Crypto companies will be the first to go, but hard times are coming for anyone working at a company that doesn't have a profit.

There is also a lot less regulation in the Bahamas.

I think for a while they were hiring Node.js developers to develop these trading systems