OT: Ray, how's your Bitcoin investment going?

[jimoots]

Originally Posted by prototoast

There are already general purpose laws against fraud. A pure bitcoin would fall neither under the purview of the SEC (it's not a security) nor the CFTC (it's not a derivative), even if some people act like it is. Now, bitcoin (and other cryptoassets) can be made into securities and derivatives, but inherently they are not. Perhaps the SEC and CFTC could be merged and given a mission to regulate "financial markets" more broadly, but there's always going to be some question of what is in or out of scope.

Generally, the U.S. government would get involved when things start to involve dollars. The U.S. government has a strong interest in keeping dollars safe and functional. This is why most of the talk of regulation has focused on stablecoins, because those make specific claims about dollar-values. But if I mine a bunch of dogecoin and deposit it in FTX, does it really make sense for U.S. regulators to make rules mandating the amount of FTT FTX must hold as collateral when it loans out my dogecoin?

What even are these things? Does it matter that FTT is now worthless? Does it matter that Luna is now worthless? I'm not sure the U.S. government has an interest in protecting the stability of these assets. Again, it's still a crime to say "I will take your dollars, convert them to bitcoin for you, and hold those bitcoin until you tell me to sell or trade them" and then steal all the bitcoin for yourself. That's illegal, and that's why SBF has already been arrested




(most, presumably) customers of FTX weren't using it for simple custody. They wanted yield, they wanted to trade derivatives, they wanted leverage, they wanted to do things that they couldn't do at more conventional brokerages.

Let me be more blunt. Banks have capital requirements. Brokerages should too, and their capital requirement should be 100% of a customer deposit.

Ie they should only be able to make money on a trade.

If the exchange wants to use the capital for leverage purposes, the customer needs to say OK and get benefit from the risk taking behaviour.

Crypto, stable coins, etc… different story. That’s buyer beware territory.

But brokerages, acting as custodian for their customer much of the time, need to be regulated more appropriately.

Either way, a healthy reminder - if you don’t have they keys it’s not your coin.

[Louis]

Originally Posted by jimmy-moots

and their capital requirement should be 100% of a customer deposit

Good luck with that ever happening. The modern economy's long past that sort of requirement.

[jimoots]

Originally Posted by Louis

Good luck with that ever happening. The modern economy's long past that sort of requirement.

It’s how an equity brokerage works, no?

[Louis]

Originally Posted by jimmy-moots

It’s how an equity brokerage works, no?

I'm pretty sure the capital requirement is down in the single-digit % of customer funds.

More details here: (good luck figuring out what it really says)

https://www.sec.gov/about/offices/oi.../key_rules.pdf

Also, for banks I believe the figure is 4%.

[jimoots]

Originally Posted by Louis

I'm pretty sure the capital requirement is down in the single-digit % of customer funds.

More details here: (good luck figuring out what it really says)

https://www.sec.gov/about/offices/oi.../key_rules.pdf

Also, for banks I believe the figure is 4%.

The broker cannot use your equity as leverage for some other business activity. This is rule 15c3-3.

The capital requirement for a brokerage is distinct from a bank, and is intended to provide stability with regard to liquidity for all participants. The shares themselves (effectively the customer deposit) must always be held by the brokerage, whereas a bank simply holds a tiny fraction of deposits.

In Australia it wouldn’t even matter if the broker collapsed, shareholders have direct ownership over their shares.

And in America, even if the brokerage was illiquid rule 15c3-3 states they must hold the equities the customer owns… so while the customer might not be able to transact (I am not intending to underplay how suboptimal not being able to trade in such a situation would be) their shares have not evaporated.

[Louis]

I stand corrected.

[verticaldoug]

Jimmy & Louis
https://www.bankregdata.com//allHMmet.asp?met=ONE

If you scroll down, you can see the largest banks are at a 12-14% Tier capital versus Risk Weighted Assets. If a bank was anywhere near 4%, it would be out of business.

As for BD, the reg capital seems lighter, but the asset base is lighter and for the most part the client funds should be segregated.

There are still places for a BD to use leverage, and any client with a margin account and margin balances is a case in point. Reg T define the amount of leverage a BD can extend to clients.

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The issue for Crypto is the whole concept of Exchanges, Banks and Brokers is all muddled.

First of all, an exchange is never lending money to clients, or investing client funds. An exchange is merely a venue for transaction. An exchange makes money by charging companies a one-time listing fee, annual fees for listing, providing data on trades, and potentially other services. But an exchange is by and large, a non-risk, service for fee entity.

Banks and BD you have a rougher idea on.

[XXtwindad]

Originally Posted by jimmy-moots

The broker cannot use your equity as leverage for some other business activity. This is rule 15c3-3.

The capital requirement for a brokerage is distinct from a bank, and is intended to provide stability with regard to liquidity for all participants. The shares themselves (effectively the customer deposit) must always be held by the brokerage, whereas a bank simply holds a tiny fraction of deposits.

In Australia it wouldn’t even matter if the broker collapsed, shareholders have direct ownership over their shares.

And in America, even if the brokerage was illiquid rule 15c3-3 states they must hold the equities the customer owns… so while the customer might not be able to transact (I am not intending to underplay how suboptimal not being able to trade in such a situation would be) their shares have not evaporated.

Damn! Jimmy just went and busted out rule 15c3-3. What the hell kind of rabbit hole is that?

There are some seriously smart mother****ers on this site.

[rallizes]

"The judge also took up a request by Mr. Bankman-Fried’s lawyers to keep secret the names of two people who, along with the FTX founder’s parents, had agreed to sign bonds to help assure his appearance in court.”

https://www.nytimes.com/2023/01/03/t...ot-guilty.html

[yngpunk]

Originally Posted by rallizes

"The judge also took up a request by Mr. Bankman-Fried’s lawyers to keep secret the names of two people who, along with the FTX founder’s parents, had agreed to sign bonds to help assure his appearance in court.”

https://www.nytimes.com/2023/01/03/t...ot-guilty.html

“If the two remaining sureties are publicly identified, they will likely be subjected to probing media scrutiny, and potentially targeted for harassment, despite having no substantive connection to the case,” Bankman-Fried’s lawyers wrote. “Consequently, the privacy and safety of the sureties are ‘countervailing factors’ that significantly outweigh the presumption of public access to the very limited information at issue.”

Apparently, Bankman-Fried’s parents have received threats to their safety

[rallizes]

Originally Posted by yngpunk

“If the two remaining sureties are publicly identified, they will likely be subjected to probing media scrutiny, and potentially targeted for harassment, despite having no substantive connection to the case,” Bankman-Fried’s lawyers wrote. “Consequently, the privacy and safety of the sureties are ‘countervailing factors’ that significantly outweigh the presumption of public access to the very limited information at issue.”

Apparently, Bankman-Fried’s parents have received threats to their safety

The remaining two should not be threatened, perhaps, but they should be scrutinized, IMO

[Mr. Pink]

Originally Posted by yngpunk

“If the two remaining sureties are publicly identified, they will likely be subjected to probing media scrutiny, and potentially targeted for harassment, despite having no substantive connection to the case,” Bankman-Fried’s lawyers wrote. “Consequently, the privacy and safety of the sureties are ‘countervailing factors’ that significantly outweigh the presumption of public access to the very limited information at issue.”

Apparently, Bankman-Fried’s parents have received threats to their safety

"having no substantive connection to the case"

Really. Whomever these fantasy bail bondspeople are, somebody can actually say that. I call putting money or assets on the line pretty damn substantive. Cant get much more substantive than that. Unless it was in bitcoin.

"Apparently, Bankman-Fried’s parents have received threats to their safety"

Remember that close associate of Maddoff's that got off and is living free? I could have sworn she'd get nailed by a car bomb. Lucky her. Sonja Kohn.

[verticaldoug]

Originally Posted by Mr. Pink

Remember that close associate of Maddoff's that got off and is living free? I could have sworn she'd get nailed by a car bomb. Lucky her. Sonja Kohn.

The court did not find her guilty and the case with Irving Picard was dismissed.

She was pretty much the classic mark for Madoff- an Orthodox Jewish Woman in Business. Madoff had a knack for manipulating people's affinity bias.

Even though the case brought against her was dismissed by court, the cases brought by the Trustee (Picard) and investors versus the fund/companies were not. Everyone sued everyone. Eventually the company and fund she was involved settled for 585mm.

https://en.wikipedia.org/wiki/Sonja_Kohn

https://en.wikipedia.org/wiki/Thema_International_Fund

Madoff was very good at paying high fees to feeder funds for his fraud. He wiped out a lot of people in these. She was just one and not even the biggest.


I think the people posting collateral for SBF's bond can remain anonymous. They are anonymous to the public, but not to Johnny 3. Johnny 3 is going to sue everyone who ever sat in a room with SBF. In
That's how this works.

[verticaldoug]

Here's the next set of crypto which is going to leave a blackhole.

Gemini’s Winklevoss Slams DCG’s Silbert Over Frozen Crypto (2)
2023-01-02 16:47:00.411 GMT


By Olga Kharif
(Bloomberg) -- The fallout from the collapse of Sam
Bankman-Fried’s crypto empire just got messier, with digital-
asset entrepreneur Cameron Winklevoss accusing fellow
businessman Barry Silbert of “bad faith stall tactics” and the
intermingling of funds within his conglomerate that Winklevoss
says have left $900 million in customer assets needlessly in
limbo since FTX’s meltdown.
Gemini Trust Co., founded by Winklevoss and his twin
brother, paused redemptions on a lending product called Earn,
which offered investors the potential to generate as much as 8%
in interest on their digital coins. It did so by lending them
out to Genesis Global Capital, one of the companies owned by
Silbert’s Digital Currency Group.
The Earn halt came in November after Genesis suspended both
redemptions and new loan originations at its lending unit
because of its exposure to FTX. Genesis has told clients that it
could take “weeks” to find a path forward, and that bankruptcy
may be one possibility.
Winklevoss, facing pressure of his own from angry customers
locked out of their Gemini accounts and a lawsuit alleging
fraud, in an open letter Monday said he had provided Silbert
with multiple proposals to resolve the issue, including as
recently as Dec. 25. He told Silbert “this mess is entirely of
your own making,” citing some $1.675 billion owed to Genesis by
DCG, which it used for other business purposes within Silbert’s
conglomerate. “This is money that Genesis owes to Earn users and
other creditors.”
Read more:Gemini, Winklevoss Twins Sued for Fraud Over Earn
Accounts
“It’s not lost on us that you’ve been working desperately
to try and firewall DCG from the problems that you created at
Genesis,” Winklevoss wrote. “You should dispense with this
fiction because we all know what you know — that DCG and Genesis
are beyond commingled.”
Read more: Genesis Balance Sheet Reveals Web of Loans
Across Silbert Empire
Silbert in a tweeted response refuted several accusations
in Wilkevoss’s letter, saying “DCG did not borrow $1.675 billion
from Genesis” and “never missed an interest payment to Genesis
and is current on all loans outstanding,” without providing more
detail. Silbert also claimed DCG delivered a proposal for
resolving the dispute to Genesis and Winklevoss’s advisers on
Dec. 29, but had received no reply.
Barry Silbert
@BarrySilbert

[Mr. Pink]

Originally Posted by verticaldoug

The court did not find her guilty and the case with Irving Picard was dismissed.

She was pretty much the classic mark for Madoff- an Orthodox Jewish Woman in Business. Madoff had a knack for manipulating people's affinity bias.

Even though the case brought against her was dismissed by court, the cases brought by the Trustee (Picard) and investors versus the fund/companies were not. Everyone sued everyone. Eventually the company and fund she was involved settled for 585mm.

https://en.wikipedia.org/wiki/Sonja_Kohn

https://en.wikipedia.org/wiki/Thema_International_Fund

Madoff was very good at paying high fees to feeder funds for his fraud. He wiped out a lot of people in these. She was just one and not even the biggest.


I think the people posting collateral for SBF's bond can remain anonymous. They are anonymous to the public, but not to Johnny 3. Johnny 3 is going to sue everyone who ever sat in a room with SBF. In
That's how this works.

It's just that, since she was selling to Russians and Eastern Euros, I figured she lost the wrong people a lot of money, capice? And, since this is crypto, land of lawlessness, there must be some not very nice people who SBF scammed.