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FTX's Sam Bankman-Fried Borrowed From Alameda To Buy Robinhood Shares (coindesk.com) 71

Posted by BeauHD from the good-luck-paying-those-legal-bills dept.
Former FTX chief Sam Bankman-Fried borrowed hundreds of millions of dollars from Alameda Research to purchase his stake in trading app Robinhood Markets (HOOD), according to court documents (PDF). CoinDesk reports: In an affidavit provided to a Caribbean court before his arrest, Bankman-Fried said he and FTX co-founder Gary Wang together borrowed over $546 million from Alameda via promissory notes in April and May. They used that money to capitalize Emergent Fidelity Technologies Ltd., the shell corporation that in May bought a 7.6% stake of Robinhood. The affidavit provides a new curveball in the three-way race to lay claim to the 56 million Robinhood shares. Crypto lender BlockFi, FTX Group and Bankman-Fried himself have all attempted to lay claim to the shares, which could be worth over $440 million.

Crypto lender BlockFi, which like FTX has filed for bankruptcy, alleged in a court document (PDF) that it was owed the rights to the Robinhood shares due to a deal Bankman-Fried made in early November. The shares were pledged as collateral against a loan taken out by Alameda Research -- the same firm whose funds were used to purchase the shares to begin with, according to Tuesday's filing.
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FTX's Sam Bankman-Fried Borrowed From Alameda To Buy Robinhood Shares More

FTX's Sam Bankman-Fried Borrowed From Alameda To Buy Robinhood Shares

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  • They better decide who owns the shares quick. (Score:4, Informative)

    by Fly Swatter ( 30498 ) on Tuesday December 27, 2022 @08:30PM (#63162646) Homepage
    Because yesterday's 440 Million is worth only 426 Million today.

  • 2008? (Score:5, Interesting)

    by revisionz ( 82265 ) on Tuesday December 27, 2022 @09:00PM (#63162686)

    why weren't the 2008 bankers held to the same standard as this guy?

    • Re: (Score:3)

      by gweihir ( 88907 )

      Because a rather large part of the banking system would be missing if they had. The alternative would have been putting these banks under government control and that never really works. It could have been done if there had been political will though, just with some delay and one-by-one and some preparation for this case _before_. Personally, I think banksters should should be treated the same as tax-evaders regarding prison time. As long as they walk free, history will repeat itself again and again and agai

      • The alternative would have been putting these banks under government control and that never really works

        [citation needed]

        That would seem to contradict the actual history of western banking which pretty conclusively leans in favor of government run banking.

        • Re: (Score:2)

          by gweihir ( 88907 )

          Central Reserve Bank, yes. Commercial banks, pretty much no, same as any other sort of enterprise. Of course there are exceptions and commercial banks are heavily regulated anyways. You still need the people in there to run things, you cannot simply swap them all out.

        • Re: (Score:1)

          by sfcat ( 872532 )

          The alternative would have been putting these banks under government control and that never really works

          [citation needed]

          See the Soviet Union. Or compare the per capita GDP of countries in the west with countries that have nationalized banks (like say India). You could use GDP growth but that shows the same thing. In fact, I really can't find a situation in history where nationalizing banks let to a good outcome but perhaps you could enlighten us.

      • And they learned from it too. Subprime mortgages was the main reason. If you had a pulse, you could get a property loan. When property values crashed, so did lehman and they would have taken out everyone if not propped up. As a result, even with the near free money orgy of the late, banks were forced to do better underwriting and so they are in much better shape this go round. It is weird how SBF was asking for regulation in crypto and yet he was doing all this unsupportable leveraging. I guess he figured t

        • Re: (Score:2)

          by gweihir ( 88907 )

          It is weird how SBF was asking for regulation in crypto and yet he was doing all this unsupportable leveraging. I guess he figured the music would never stop.

          Yep, looks like it. A pyramid schemer that deeply believed in the pyramid. I have run into the occasional student of economics that thought the same. When you show them that pretty much every person on earth has to be in the pyramid several times before anybody than the top layers gets a pay-out, at least some of them have a revelation. What I do not get is that SBF gets described as exceptionally smart regularly. He cannot be. I guess he is just exceptionally persuasive.

      • Re:2008? (Score:5, Informative)

        by Anonymice ( 1400397 ) on Tuesday December 27, 2022 @10:01PM (#63162790)

        The alternative would have been putting these banks under government control and that never really works.

        It worked in the UK. They didn't just bail out the banks for free, the gave the money in return for equity & became major shareholders. Within a couple of years the banks managed to buy out all the equity and the Government even ended up coming away with a profit.

        • Re:2008? (Score:4, Interesting)

          by magzteel ( 5013587 ) on Tuesday December 27, 2022 @10:41PM (#63162866)

          The alternative would have been putting these banks under government control and that never really works.

          It worked in the UK. They didn't just bail out the banks for free, the gave the money in return for equity & became major shareholders. Within a couple of years the banks managed to buy out all the equity and the Government even ended up coming away with a profit.

          Same in the USA

        • Re:2008? (Score:4, Informative)

          by sfcat ( 872532 ) on Tuesday December 27, 2022 @11:18PM (#63162924)

          The alternative would have been putting these banks under government control and that never really works.

          It worked in the UK. They didn't just bail out the banks for free, the gave the money in return for equity & became major shareholders. Within a couple of years the banks managed to buy out all the equity and the Government even ended up coming away with a profit.

          That's how it worked in the US too. Look up TARP.

        • Re: (Score:2)

          by sfcat ( 872532 )
          It is also NOT nationalizing the banks. Nationalizing the banks means the bank is owned and run by the government, not that the government has some equity (stocks).

          • GP referred to government control, not nationalisation. In this case, as a majority shareholder the government got the right to make its own nominations for the board and have a proportional influence on day-to-day operations.

      • Let's not also forget that in 2008, we were talking about real banks taking real deposits and doing real lending. The business was not primarily based around criminal intent. Some pretty greedy and ethically marginal lending decisions were made but they weren't done with intent to defraud.

        • Re: (Score:2)

          by gweihir ( 88907 )

          Some pretty greedy and ethically marginal lending decisions were made but they weren't done with intent to defraud.

          I am not buying that. I think in 2008 they just thought they had a good change to get away with it. Same as now.

    • why weren't the 2008 bankers held to the same standard as this guy?

      Slashdot really needs a moderator category for "Whataboutism". I generally mod those posts "off topic", but "whatabout" seems more accurate.

      • Nah, some idiot would.... (Score:5, Insightful)

        by tiqui ( 1024021 ) on Wednesday December 28, 2022 @03:30AM (#63163122)

        decide that "whataboutism" is a negative thing, rather than something akin to "insightful"

        so-called "whataboutism" is necessary in any civilized society that pretends to have the Rule of Law. It is the method by which people who have little power in a particular situation demand fair treatment from the powerful. When a black man goes to jail for stealing a candy bar, and a white guy walks freely after stealing a thousand dollars, the black man is right to point at that whit guys and say "what about HIM?" When a man can own property and a woman cannot, the woman is right to say "what about HIM?" When a poor person is punished for sleeping on a public park bench, but a rich politician can rope-off and camp upon a public beach, the poor person is right to ask "what about HIM?". When a politician of one political party is investigated for something while a politician of another party who does the same thing is not, the first is right to point at the second and say "what about HIM?".

        The Rule of Law is a principle that each person is treated the same by the law and the courts as any other person in the same situation - and without "whataboutism" this does not exist. I get it that because many loving and tolerant people despise the bad orange man and his supporters, and because he and his supporters have asked questions about equal treatment, people have invented the term "whataboutism" and pretended it's a bad thing, just as many of the same people have in recent years suddenly decided that free speech is a bad thing. People need to calm down, step back, and consider that very basic principles should not be discarded in a moment of time when a person they despise is helped by those principles - eventually the shoe may be on the other foot any they just might need those principles themselves.

        • Re:Nah, some idiot would.... (Score:4, Interesting)

          by BadDreamer ( 196188 ) on Wednesday December 28, 2022 @03:51AM (#63163130) Homepage

          Those examples are not whataboutism. They are pointing out hypocrisy. Being unfairly treated for a trivial offense, and pointing out how others get away with gross offenses is indeed necessary.

          Whataboutism is done not to point out hypocrisy but to deflect from blame for what one has done. It's being fairly treated for a gross offense and pointing out how others get away with trivial offenses, to try to deflect attention and blame.

        • decide that "whataboutism" is a negative thing, rather than something akin to "insightful"...

          Then proceeds with two full paragraphs of "whataboutism". Whataboutism is NOT insightful, but rather is "the technique or practice of responding to an accusation or difficult question by making a counteraccusation or raising a different issue." SBF ran a crypto exchange, where he took depositors money. He replaced that money with his own home-made Monopoly money, then took his depositors money to Las Vegas, bet it all on Black Jack and lost. But "whatabout all the bankers in 2008 who crafted shoddy real-est

        • decide that "whataboutism" is a negative thing, rather than something akin to "insightful"

          We already have a mod for that. It's called "Offtopic". If whataboutism is supposed to be on topic then it is a distraction and a negative thing by definition in this argument.

          The only way whataboutism isn't negative is if it's offtopic.

          How do you want to downvote?

    • Because the bankers wore sharper suits and "power" ties.

    • Re: (Score:2)

      by Entrope ( 68843 )

      Fundamentally, because they were not self-dealing and lying like FTX and Alameda people were. The companies that rated bundles of bad mortgages were truly independent of the companies that bundled them and sold them, and of the companies and quasi-government entities that bought them. They were all following direction from the US government -- particularly Congress -- to improve equity of homeownership and mortgage availability. The "2008 bankers" were held to higher standards.

    • Comment removed based on user account deletion

  • I guess this guy really is clueless (Score:4, Informative)

    by gweihir ( 88907 ) on Tuesday December 27, 2022 @09:16PM (#63162700)

    He seems to have overlooked that if you borrow something, you may well be required to repay it. Or go to jail. And be poor afterwards. Which he will now do.

    To be fair, the Lehman scandal and others have shown that the financial system has insufficient safeguards against somebody just not understanding what they are doing and creating massive debt. As a consumer, you may be denied a $10 credit on suspicion only, as a banker, trader, crypto-bro, you can apparently lend a few $100M without anybody looking into you, if you have some minimal skills.

    • Re:I guess this guy really is clueless (Score:5, Interesting)

      by crunchygranola ( 1954152 ) on Tuesday December 27, 2022 @09:48PM (#63162744)

      SBF was running a multi-stage fraud, straight-up. This was not being clueless. Now as a fraudster he may be lacking lots of clues given the just revealed "FTX fiat old” account on FTX. SBF referred to it as “our Korean friend’s account”, which was not included on FTX's balance sheets, and into this account he dumped 8 billion dollars in debts to make them disappear off the books.

      This is much less sophisticated than Enron's "partnership" scheme in which it would create shell company "partnerships" which it secretly controlled. The Enron would borrow real money, keep the borrowed money on Enron's books, and transfer the debt to the partnership that would agree to take ownership of it for no reason. Moving debts to a mislabeled account on your own corporate account system is a much stupider move.

      We are also beginning to see that he pledged the same asset multiple times to cover various debts, so the debt holders seeking to claim the assets will have a few problems.

      • Re: (Score:2)

        by gweihir ( 88907 )

        Yep. It is really quite staggering what he did. Even a single, superficial financial audit of the whole enterprise would have blown him up. Yet at the same time, he comes over as genuinely sorry and seemed to have thought this would all work out. Well, probably a bit like Nick Leeson, who also though he was doing well and nobody did question him until it was far too late.

        • SBF was running a multi-stage fraud, straight-up. This was not being clueless. Now as a fraudster he may be lacking lots of clues given the just revealed "FTX fiat oldâ account on FTX. SBF referred to it as âoeour Korean friendâ(TM)s accountâ, which was not included on FTX's balance sheets, and into this account he dumped 8 billion dollars in debts to make them disappear off the books.

          Sounds just like what Nick Leeson was doing with account 88888 at Barings Bank back in 1995.

    • Re: (Score:1)

      by mtm10 ( 1530769 )

      Isn't every company an incredible risk, until it looks pretty good, then looks great, then it looks dicey, and then it is sold for pennies? Some take decades to travel this arc; others do it in less than a year.

      He seems to have overlooked that if you borrow something, you may well be required to repay it. Or go to jail. And be poor afterwards. Which he will now do.

      Pretty much every financial company in the western world is based on borrowing money to buy something, working (or just waiting) until it appreciates, and then selling it.

      The successful ones manage to sell or rent some or all of it when it is worth more than they paid for it; others not so much. (M

    • He seems to have overlooked that if you borrow something, you may well be required to repay it.

      No. He seemed to have overlooked that if you borrow something from a limited liability company it's called "embezzlement" and it is illegal. Whether you can repay it or not is irrelevant.

      • Re: (Score:2)

        by gweihir ( 88907 )

        That seems to be a special aspect of US law. You are forgetting none of these companies are US companies and for good reasons.

        • Err no it most certainly is not a special case in US law. In fact basically every country with the concept of limited liability companies / corporations has laws against embezzlement on the books in some form or another.

          • Re: (Score:2)

            by gweihir ( 88907 )

            Borrowing stuff is not embezzlement. You seem to be making a mental leap there that does not work.

            • Borrowing stuff is not embezzlement. You seem to be making a mental leap there that does not work.

              There's very strict rules on how you borrow something from a LLC, SBF didn't borrow anything. He engaged in embezzlement. There's no leap of logic here.

  • a company that makes it’s money through stock manipulation, being fed by naive gamblers, spending their federal stimulus money checks that were meant to keep them afloat through the pandemic.

    I’m not sure exactly what to make of it, but I know one thing - this massive clusterf*&k did absolutely nothing for real people, or the real economy.
    • "this massive clusterf*&k did absolutely nothing for real people, or the real economy."

      This describes all of crypto-currency.

  • SBF is gonna get off scot free (Score:5, Interesting)

    by bubblyceiling ( 7940768 ) on Wednesday December 28, 2022 @01:47AM (#63163042)
    New Federal Judge assigned to SBF's criminal case is Judge Lewis Kaplan who threw out the lawsuit in a Retirement Income case against the Lehman Brothers Fund Managers in 2010. Also was the judge in a sexual abuse lawsuit against Britain's Prince Andrew.

    This is what the UN says about him

    In a report released this month, the Working Group on Arbitrary Detention, established by the UN Commission on Human Rights, found a “staggering display of lack of objectivity and impartiality” on the part of Judge Lewis Kaplan of the US District Court for the Southern District of New York, who has handled much of the US part of Donziger’s case.
  • I think the article contains a mistake. They misspelled "Sam Bankman-Fried stole FTX customer funds"

  • Buying HOOD??? (Score:4)

    by gosso920 ( 6330142 ) on Wednesday December 28, 2022 @06:28AM (#63163232)
    Man, talk about doubling down on stupid.

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