"AUSA Roos: They lost their life savings. A man who lives in Portugal - the day before bankruptcy his daughter was born. He was marred by the ominous specter of financial instability and his daughter's future. Then there's the 23 year old from Morocco"
"AUSA Roos: He is the eldest son. He kept money on FTX not to loan it out to the defendant but for family's security. One more - a couple in the later stages of their life, late 60s, they invested with life savings. They were depressed, they had to go back to work"
https://twitter.com/innercitypress/status/177336575999912795...
See from your citation, emphasis mine: "AUSA Roos: He is the eldest son. He kept money on FTX not to loan it out to the defendant but for family's security. One more - a couple in the later stages of their life, late 60s, they invested with life savings. They were depressed, they had to go back to work"
Savings should be handled appropriately as savings, not investments or "savings". SBF stole money, but there is a point to be made that people might also need better education on handling their own money.
What do you mean by "handled appropriately as savings"? Cash is riskier than stocks over the long term. Investing is the safe way to handle your life savings.
I am not saying this is an either-or, I am saying that fraudsters like SBF should be thrown in jail and left to rot and people should be taught better how to handle their money.
Yes deposits made with banks still carry risks, but you know what? Most banks are backed by the government (or at least they are in the US, I assume similar setups exist in other countries), meaning depositors generally will not lose their deposits even if the bank loses money. The failure of Silicon Valley Bank is a recent demonstration of those safeguards for peoples' savings at work.
Savings are, literally, savings. You should not be spending your savings, much less your life savings, on something as frivolous as investments which are all fundamentally gambling. Investment monies should come from your spending money, money you don't mind losing. If you are investing your savings, you are investing wrong and you need help from a proper, good accountant.
Generally, most people do not want to lose their savings. For the poorer people, losing their savings might be straight up unaffordable and something to be avoided at all costs.
Deposits made with banks are understood to be very low risk, that is you can always withdraw what you deposited (eg: your savings) short of the entire sky falling. The trade off of course being that your deposits won't spontaneously grow beyond a small interest dividend.
Investments, meanwhile, can just as likely lose you money as well as gain; high-risk high-reward. Whether it's stocks, business ventures, cars, real estate, precious metals, barrels of oil, collectors' items, or whatever, investing is at its core just gambling on future prospects with no guaranteed returns.
If you invest, you should do so only spending money which you are okay losing. Most people are not okay with losing their savings, hence why I'm saying people who invest by spending their savings are hoisting their own petards and ruining their lives sooner or later regardless if a fraudster is involved or not.
What you are all seemingly misunderstanding is that I am saying you should not invest money that you don't want or can't afford to lose.
Yes, money deposited in savings might not (and probably will not) keep pace with inflation, but you are guaranteed that you will be able to always take out as much as you deposited. If you deposit $50,000.00 you will always be able to withdraw $50,000.00. Yes, inflation might have reduced the purchasing power of that money to $30,000.00 or whatever when it's withdrawn, but that is not the point: You can always withdraw the $50,000.00 that you deposited.
Meanwhile, if your investments go south you lose money. If you invest $50,000.00 into stocks or crypto or whatever, you aren't guaranteed you can get back at least $50,000.00. It could be $100,000.00, it could be $10,000.00, or it could even be $0.00, but in any case you aren't guaranteed a floor of $50,000.00 in returns. You can (and will) both gain and lose money in investments.
This is why I am saying people should not be using their savings (or even life savings?!) for investing. This is ostensibly money you do not want or cannot afford to lose, this is not money you should be spending on investments.
Invest with money you are okay losing, otherwise you will regret it.
In fact I wouldn't be surprised if you could lose your financial advisor's license for suggesting everyone keep their life savings as cash - it's such bad financial advice.
If you keep your life savings as cash you are optimising for the 99th percentile of bad outcomes for the global economy, and losing out massively in every other likelihood.
>it could even be $0.00
It is unlikely that the value of the S&P500 will be zero in our lifetimes. If it is, your 50,000 US dollars won't be worth much.
I consider savings as monies that shouldn't "just" go away (like investments failing), monies that are expected to always be there for when their time comes. That sort of money should be handled with the worst case scenarios accounted for, you presumably depend on that money (either now or in the future) for your life.
>It is unlikely that the value of the S&P500 will be zero in our lifetimes. If it is, your 50,000 US dollars won't be worth much.
Never say never, the Great Depression was bad enough it took a second world war for everyone to get out of the funk.
So was part of it a process failure? Like even when SBF wants to commit fraud in his situation, where should regulations have stopped him?
Not that I'm saying the money was every within an FDIC [1] insured account.
--
Depends on the kind of fraud that Robinhood wanted to do. CEO/CFO definitely have the ability to arbitrarily transfer money amount to accounts they personally control.
FDIC only protects against bank failure, it doesn't save you from somebody credential stuffing your bank to authorize a wire transfer.
[1]: https://www.fdic.gov/resources/deposit-insurance/brochures/d...
Yup, I absolutely am. People who spend their savings (let alone life savings) on investments will end up ruining their lives sooner or later because they are ignorantly misunderstanding what "saving" and "investing" are and what government bank notes and cryptocurrency are.
If you invest money that you do not want or cannot afford to lose, you need help from a proper, good accountant to set you straight.
Talking about those things is not bad.
Would you complain about victim blaming when a kid burns themselves on a hot pan and their parents tell them "well then don't do it again"?
if look into any pension scheme you will see that money are invested all they way up to payout.
the question is the risk of your investment.
as other people called out. this case was fraud.
Catch and punish fraudsters, and teach the commons that investments and savings are two very different things and how they should be conducted. Both can be done with no negative impact to the other.
Hell, even an index fund won’t be safe if there’s another depression. COVID 2: this time even worse could happen at any point, for instance.
Gold might drop if we get asteroid mining going.
Bank runs can wipe out your money.
There’s no entirely safe way to store funds. Property, maybe, as long as the population keeps going up and the government is still functional.
It’s all risk/reward.
Magic black box yield farming at 21:29 timestamp.
The idea that Sam was just a risky investor is the story Sam wants to tell. But he already told that story in court, and it was rejected.. because the evidence doesn't support it.
I'm sure both SBF and Madoff originally thought they would be able to make enough money to cover up the theft.
I don't really think that has the moral conclusion people try to imply though. Thinking they could get away with it as a permanent secret gap that no one need ever know about is actually a worse moral character.
I'm pretty sure Madoff returned some money before being found out, too.
From what I’ve seen about SBF, it does seem like he has a very high risk tolerance, was betting big to win big, and thinking the reward was worth the risk.
Heck it's almost like this describes crypto itself
I suspect the resulting number of shortened lives amongst all the people who lost $8 billion worth of their money due to the fraud is more than the number caused by a single murder.
Just because you put on a suit and mask doesn't make it okay.
* In developed countries. I doubt people from 3rd world countries had $2000 on FTX.
> Kaplan said he had found that FTX customers lost $8 billion, FTX's equity investors lost $1.7 billion, and that lenders to the Alameda Research hedge fund Bankman-Fried founded lost $1.3 billion.
https://www.reuters.com/technology/sam-bankman-fried-be-sent...
Clearly the real crime is bilking investors out of their money. It’s also questionable whether they even ended up losing money given the rising price of crypto in the past year. It’s also interesting how this happened:
> when it filed for bankruptcy after traders pulled $6 billion from the platform in three days and rival exchange Binance abandoned a rescue deal.
https://www.reuters.com/technology/bankrupt-crypto-exchange-...
So basically the traders did a bank run and Sam ended up going to jail. It’s interesting that by contrast SVB leaders didn’t face any repercussions because they were part of the established ways of doing things even though that ended up being very costly for the government.
That's not how that works. Whatever purchasing power they were supposed to have that they were deprived of because of his actions results in damages - obviously equal at least to the crypto gains they would have.
Given that FTX is not a bank, and does not do any sort of (high regulated for a reason) fractional reserve lending ... how exactly can there be a run? All of the assets should still have been there.
This is out of date. There is no reserve requirement anymore.
Why is it interesting? SVB leaders didn't engage in fraud or money laundering.
What? No.
The “lost” money was bet on red at the roulette wheel. While the firm was in bankruptcy, the wheel stopped spinning and came up red. That was enough to make customers whole to their original deposits. But it didn’t make up for capital gains, opportunity cost or the emotional damage caused by having your funds locked away for years.
> interesting that by contrast SVB leaders didn’t face any repercussions
Totally different situations. The analogy would be PayPal freezing everyone’s accounts for 3+ years while they put all the money into Peter Thiel’s hedge fund.
Did it? The FDIC is funded by banks, not the government.
It’s not fully funded by the banks & borrows from the government when it’s short. I don’t know how to account the government borrowing from itself, but I wouldn’t think it’s necessarily “free”. Yes it does get paid back, but you’re borrowing on very preferential terms that aren’t available to the public so there is as cost to the broader economy.
While it's true that the FDIC is "backed by the full faith and credit of the US Government" it is funded by the banks and by interest from treasuries [0]. Has there ever been a case when the FDIC actually ran out of funds and had to be bailed out?
[0] https://www.fdic.gov/resources/deposit-insurance/understandi...
So yes, it ran out of funds & had to borrow. It has not yet experienced a shock bad enough to leverage the Treasury line of credit but that’s a fig leaf IMO. The 2008 crisis saw the government bailing out banks through TARP to shore up failing banks to the tune of 700B. Without that, FDIC would have failed. So from that perspective, yet it was bailed out in 2008 & the funding from members wouldn’t have been anywhere near sufficient. That’s why I don’t understand the political football around TARP - “the full faith and credit of the US government” would have been meaningless if FDIC failed as that would have sent a giant shockwave of trust loss through the broader population as everyday people would have lost huge savings.
Shkreli dealt with the "making people whole/replacing money you took": it's not okay to steal or defraud people just because you later make them whole or they don't even realize that you did.
But even moreso, to your point: Please don't conflate the rising crypto price with SBF's intent. He didn't care about that. The fact that crypto rose and may have lessened the losses is entirely orthogonal to his intent, just a "fortunate" coincidence. It could equally have cratered. The people who are being recompensed are only being recompensed in part because of something entirely outside of SBF's control and intention.
The only reason people can be made whole is because SBF was arrested for fraud, and all the funds got frozen. Given his track record, had he kept steering the firm for another year or two, he would have almost pissed away all the gains/potential gains from the crypto rally, and his customers would have found themselves in an even bigger hole.
Also, Bernie Madoff could have just taken a ten year timeout, bought and rode the S&P 500, and had made his customers whole, too, so I guess he also did nothing wrong...
LOL, yeah, no. SFB also did really well established old fashioned tradCrime. It wasn't even DeCrime.
Because Silicon Valley Bank leaders were nobodies whereas SBF became perceived as a trophy, pretty much immediately.
This is something to be mindful on. When doing self promotion some people start seeing you as an inspiration , many others as a fraud or a human trophy to be captured and paraded around.
Especially in startup communities where groupthink takes over and everybody wants to be the new cult figure of the Silicon Valley or the crypto valley or whatever. People outside that bubble (especially LE, prosecutors and judges) see right through that BS and are specifically looking with a magnifying glass everything that goes on hoping to get themselves a nice trophy on their desk, they want the heads of cult founders. Some would say rightfully so.
These people should be spending their free time reading papers and books on how Romans enforced their laws over remote German provinces of the Empire.
Instead they open all sorts of media and like hunters in the forest they pick a trophy that suits their liking and then they just use all their means to collect that trophy.
Or even worse they are not even creative in their trophy hunting quest, they all pile on Trump because by the way he looks and acts he looks like a fraud and advertises his nature thanks to his huge megaphone . So every prosecutor in the Nation piles on him because they want to be the one uncovering this big revelation to the American public...pathetic.
Their goal should be ratio of Money recovered from criminals to money spent for investigations/proceedings. No one operates this way because they are essentially predators, much like SBF and Trump are, just a different kind, but they receive a salary paid for by taxpayeyrs.
The rationale behind prison, as opposed to corporal punishment without incarceration, is to remove dangerous people from society, so that they don't further victimize the public.
A violent murderer -- of really any type of murder, e.g. of a random stranger, of one's spouse, or a murderer-for-hire -- should be removed from society for society's benefit. The key point is that the needs of society must come first; punitive measures are a secondary concern. As theory goes, this is trivial.
In SBF's case, his ability to further harm the public is absolutely minimal, provided his punishment includes severe restrictions on his ability to access computers and serve as the director or shareholder of any business. I'd sentence him to a few years in jail, as a punitive measure, and then a lifetime of community service and probation. Let him try and do some good, if he's sincere about those stories he tells re his motivations.
You might argue that punitive measures serve a vital function as deterrence, but evidence doesn't seem to support that argument, and in any case it applies far more strongly to violent crime than to financial crimes. As, in the latter, crimes are often amorphous and poorly delineated, and selective enforcement is the rule rather than the exception.
Please stop defending white collar crime as somehow more palatable, as somehow a better class of criminal.
https://www.nytimes.com/2020/05/11/upshot/virus-price-human-...
To you the value of somebody else's life may be $10M. To society, it varies with time and place. Yet, to the person in question, the value could well be infinite -- it's probably infinite more often than not -- i.e. no amount of money will induce somebody to die. When you kill somebody, you rob that person of everything they have, everything they ever will have, and of the value they've placed on their own life.
But we're speaking of society. Is SBF a physical danger to society? Clearly not. He's not going to rob and murder you if he catches you in the park after sundown. His reputation is destroyed, and from a harm mitigation perspective it should be enough to monitor his economic activity and make sure he isn't in a position to run any more frauds.
If you seek punitive measures, that's all well and good, but it should be done in a way that's equitable and according to a theory of punishment that's applied uniformly. I don't believe that exists, and jailing a non-violent criminal for such a period of time, when extremely violent criminals serve less time and are then allowed to reintegrate into society (often with poor results,) seems both strange and wrong.
Not true; people have committed suicide due to financial losses that they believe have destroyed their life and made it not worth living. If any FTX customers ended up killing themselves over this (I saw a post somewhere upthread claiming that was true, though I haven't verified that), isn't that just as bad? Certainly the intent is different in the case of a murderer vs. someone who incidentally drives someone to suicide by stealing their life savings. But the end result is still the same.
Regardless of that, I'm not sure how I feel about the idea that a person would value their own life at infinite dollars. Certainly I don't want to die, but would I expect or want an unbounded amount of money to be spent in order to keep me alive? No, I don't think so; that feels selfish and would undoubtedly harm others.
And people will do some funny things to help their family, including working a job where eventual death due to a job-related accident or illness is inevitable. While that's not the same as someone agreeing to be killed in exchange for money, it seems relevant. And hell, I wouldn't be surprised if there were quite a few (financially desperate) people in the world who would agree to be murdered in exchange for their family being financially taken care of for the rest of their lives.
> non-violent criminal [...] violent criminals
I really dislike this bucketing. It ignores quite a spectrum of crime: punching someone in the face at a bar is not the same as stabbing someone who survives is not the same as shooting someone who dies. And violent crimes-of-passion are not the same as cold, calculated, planned violence.
I'm just not convinced that a violent crime is automatically worse than a non-violent one.
And the terms themselves are somewhat arbitrary. I would consider it incredibly violent to deprive someone of their savings and livelihood.
This undermines a lot of the certainty of punishment and therefore the deterring factor of law enforcement, of course.
The value of a single human life is not infinite. In engineering and public policy, a value like $10 million / life is typically used to make trade-offs. SBF stole funds far in excess of that.
Secondly, when funds of this scale are stolen, inevitably people wind up dying early from things like stress, and suicides.
Yep, it was mentioned in sentencing today by one of the victims.
At least 3 have already committed suicide after the shit hit the fan.
And then, yes, trial SBF for each of them as murder on top of embezzlement.
(Well, really, the opposite: you need to prove that their suicide was a direct result of SBF's fraud. And I don't think that's an impossible -- or even difficult -- bar to reach, here.)
It is impossible, I think, to come up with a "ranking" of crimes that everyone can agree on. And because that's impossible, anyone can always point to a sentence of someone else who received too little or too much in comparison.
I understand the desire to scale sentences by impact. But, I personally think it would be reasonable to give SBF the same exact sentence even if he had defrauded people out of twice as much or half as much money.
That can play out into, say, giving both a murderer and a scammer 25 years in prison, provided that they turn themselves in and otherwise co-operate with the legal process.
I'm sure police officers would rather go into houses to arrest people knowing that whatever the suspect has done, they're going to get another 25 years in jail if they fight back. Arresting someone who has no hope at all, regardless of what they do, is simply more dangerous.
Someone stealing a billion dollars is committing a far worse crime than someone that murders me.
The problem I have with this is imagine what a statistical poll would be if you posed the question "would you spend 20 years in jail for 1 billion?"
There is a good percentage that absolutely would sign up for that, obviously a much different result than "would you spend life in prison to get a billion dollars".
Let's not forget that the time they spend living before dying of things like stress and suicide will often be quite painful too. Deaths of despair are no fun.
The well-considered federal sentencing guidelines put the sentence for this crime at over 100 years. That is, for an anonymous defendant at remove, our legal system believes that 100+ years is a fair sentence for this set of offenses.
So another way of looking at this is because of who the specific defendant is here, the court shaved 80 years off the "fair" sentence. I would consider that a light sentence.
https://popehat.substack.com/p/beware-the-flood-of-trump-sen...
"White collar criminals only get sentenced close to the statutory maximum when (1) they are only convicted of one or two counts with very low statutory maximum (say, one count of a crime with a five-year statutory maximum, as part of a plea bargain), or (2) cases involving truly extraordinary amounts of money."
Unlike the Trump case the article discusses, this case involves a truly extraordinary amount of money. Prosecutors did indeed ask for half that, but the court gave only half of the (already lenient) request due to facts about the person who was convicted.
Note that the Madoff case involved a similar amount of money and he indeed did get the big sentence. I suspect that was because he was likely to die in jail given any reasonable sentence, so better to make a show of it. In this case, SBF got a more lenient treatment for a similar offense because he is younger (note that the judge did not believe he has any remorse and still gave a lighter sentence).
Sometimes we moralize too much.
However, the other thing I'd point out is that murder is rarely a federal crime - it's usually a state crime. I was curious as to when it becomes a federal crime and found this: https://www.greenspunlaw.com/library/when-murder-is-a-federa...
Dollars-to-donuts that the vast majority of federal murders here were drug related. Not that I think the that makes it in any way better, but in many ways gang violence is more of a war than an individual, targeted killing. These types of circumstances matter when it comes to sentencing, and I'm not surprised at all that SBF's sentencing is longer than you "average" federal murder sentencing.
I say this tongue in cheek, but mostly because I don't know what options judges have at their disposal in these situations.
Or is it somehow more okay because they're out of sight, out of mind? There's still going to be a real body count for his actions, it just won't be immediately apparent.
Yes, it's ghoulish, as were his actions, but it's too easy to handwave them away as just some techbro oopsie if they're not contextualized like this.
How many people's lives were ruined or ended by his malfeasance? He got off lightly.
It also affected tens of thousands of people more than a murder or kidnapping.
Imagine if I rob 10,000 people of $2,000. Some people won't feel it. Others will be suicidal and may even commit suicide partially from hopelessness. There also could have ramifications that last years into the future, and cascade. (Can't buy new car to replace old car, don't have enough money now. Old car broke, missed work, got fired, found new job elsewhere that pays less...)
On the other hand maybe a more reasonable approach would be to treat criminals as people who need to be quarantined for as long as they’re dangerous. If we could identify a treatable disease (a tumor for example) and know with 100% certainty that treating that disease could prevent further crimes, I personally wouldn’t have an issue with it. We have an impulse to punish evil, and severely punish very evil things, but it’s more of a primitive drive than anything productive. (Of course the exception is the extent to which punishment can deter crime.)
That "exception" is the productive social instinct of what you call "a primitive drive".
And it's not just deterrence to negate other people's existing criminal intentions. It also prevents the specific individual in question from reoffending, and it also prevents other people who worked with the criminal from effectively spreading their antisocial culture/habits to unrelated individuals who otherwise have no existing proclivities for crime. It's almost about killing the idea, even more than punishing the person.
Having a standard where you're going to say "This is not okay and we absolutely won't put up with it" is vital to keeping a healthy culture where you can walk down the streets safe at night, or keep your money in a bank knowing it won't just disappear. The penalty for crimes has to be at least several times whatever the criminal gained, in order to be a viable deterrent considering the odds of getting caught, plus at least proportional to the harm inflicted, to center your societal structures on empathising and identifying with the victim. There has to be a heavy artificial cost for criminals, because otherwise game theory of the self-interested says that we'll all end up being constantly victimized.
Rule of the law isn't "primitive". I also feel the desire to forgive and quarantine, but with finite empathy, it's backwards to feel for the perpetrators rather than the victims. Look at Russia for an example to see what happens when predatorily selfish behaviors are allowed to go unpunished, and inevitably end up normalized. [1]
1: https://en.wikipedia.org/wiki/Corruption_in_Russia
---
> If we could identify a treatable disease (a tumor for example) and know with 100% certainty that treating that disease could prevent further crimes, I personally wouldn’t have an issue with it.
I would consider this potentially much, much worse and more "barbaric" than imprisonment or even execution, as it would almost definitely be done unconsensually and coercibly.
It's impossible to knoe the number, but it's arguably non-zero.
He should have gotten the 40 years prosecution was asking.
https://www.ussc.gov/sites/default/files/pdf/research-and-pu...
In 2022, the average murderer in the Federal Southern District of New York (N = 58) was sentenced to a median of 231 months, which comes out to 19 years and change.
No crime of any type had an mean or median sentence higher than 25 years; most were far less than half.
So it should be really hard to argue that this is a "light" sentence. If anything, it's excessive if you consider the nature of the crime relative to the nature of murder or kidnapping.