Being a market maker doesn't exempt a firm from blowing itself up. See Knight Capital.
Re:FTX’s balance sheet was bad
by whimsicalism on Monday November 14, 2022 @04:20PM
(#33601283)
Knight Capital was traded (so taking other people's money).
Let's also try not to conflate "blowing up" with actual fraud. Traders are free to lose all of their own money, and doing so is not fraud
Knight was the largest market maker on NASDAQ and NYSE at the time they blew up so if you're going to use "they're just a market maker" as a defense for JS you can't dismiss Knight as "oh, not THAT kind of market maker." And Knight was known for plenty of shady activity like front running and spoofing.
Re:FTX’s balance sheet was bad
by whimsicalism on Monday November 14, 2022 @04:51PM
(#33601739)
Knight did not blow up due to fraud, so they were not "below board." Losing money is not against the law.
Furthermore, Jane St only trades their own capital - ie. not capital deposited by customers in an exchange and not capital provided by selling ownership stakes of itself on a public market. This is a clear distinction from Knight.
It's as if some guy just had a bunch of money, traded it and made some more money, hired a bunch of people to keep trading it, and it has made a ton of great returns and people are asking: is this a scam?
Who would it be scamming? The only suckers are this guy.
They make money from the pennies in the spread, many many many times over. They are not making over-leveraged big bets.
I encourage you to talk to anyone who works in market-making finance.