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Bitcoin Python

FTX Used Python Code To Fake Its Insurance Fund Figure (cointelegraph.com) 104

Posted by BeauHD from the big-lie dept.
Tom Mitchelhill reports via CoinTelegraph: Crypto exchange FTX used hidden Python code to misrepresent the value of its insurance fund -- a pool of funds meant to prevent user losses during huge liquidation events -- according to testimony from FTX co-founder Gary Wang. In a damning testimony on Oct. 6, FTX's former chief technology officer, Gary Wang, said that FTX's so-called $100 million insurance fund in 2021 was fabricated and never contained any of the exchanges' FTX tokens (FTT) as claimed. Instead, the figure shown to the public was calculated by multiplying the daily trading volume of the FTX Token by a random number close to 7,500.

When the prosecution surfaced the above tweet -- among other public statements of its value -- and asked Wang whether this amount was accurate, he replied with a single word: "No." "For one, there is no FTT in the insurance fund. It's just the USD number. And, two, the number listed here does not match what was in the database." An exhibit in the Oct. 6 trial shows the alleged code used to generate the size of the so-called "Backstop Fund" or public insurance fund.

FTX's insurance fund was designed to protect user losses in case of huge, sudden market movements and its value was often touted on its website and social media. According to Wang's testimony, however, the amount contained within the fund was often insufficient to cover these losses. [...] In addition to revealing the allegedly fraudulent nature of FTX's insurance fund, Wang claimed that Bankman-Fried prompted him and Nishad Singh to implement an "allow_negative" balance feature in the code at FTX, which allowed Alameda Research to trade with near-unlimited liquidity on the crypto exchange.
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FTX Used Python Code To Fake Its Insurance Fund Figure More

FTX Used Python Code To Fake Its Insurance Fund Figure

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  • ...you can go a long way, if you have the proper friends.
    • Well, yeah, but you can go farther if you lie less big. There is an optimal amount of lying. Too little and you don't go very far, too much and you commit enough fraud for the government to take notice. Let that be a lesson to everyone, don't become a public figure if you intend to lie a lot, do it moderately without seeking attention. Then when you've done it long enough, gradually ease yourself out of the lies, and stop doing it you should have enough now to be able to live off of the interest the lies bo
      • But Trump taught us that more than doubling the value of your property with over a $100 million benefit to you is not "too much" so i can't imagine what would be.
        • Well the FTX fraud was $8B so they are at least two orders of magnitude higher.
          • Noi don't think that has anything to do with it. The two problem is that he screwed over people that expect to be the ones that do the screwing. Probably like the case of Trump as well.
            • Who, precisely, did Trump "screw", then? It's my understanding that roughly 0 payments were missed, and 0 complaints lodged.

              Far more worrisome is a weaponized legal system going all Mafia and shaking people down. Sooner or later you and I will become targets, too.
              • You can't undo a crime by returning the proceeds. Had Trump been accurate on his financial disclosures, the lenders might not have made the loans or demanded a higher interest rate. He knew that which is *why* he lied. That he made the payment is irrelevant. If I were to commit mortgage fraud by purchasing an investment property but claim that I will be using it as a primary residence, I would go to jail. Trump made the same type of misrepresentation. "No harm, no found" does not work in fraud cases.

                • Had Trump been accurate on his financial disclosures, the lenders might not have made the loans or demanded a higher interest rate.

                  Counterfactual

                  "No harm, no found" does not work in fraud cases. If SBF has managed to pull of his heist and replay customers (due to some extremely good fortune in crypto-currency prices, perhaps), that would make the fraudulent behavior okay?

                  Counterfactual

                  If three drunk drivers have a drag race through a school zone and one of the kills a child, the other two can absolve themselves of guilt by backing up to the starting line? Your statement defies all logic.

                  Red herring

                  The difference between assault with a deadly weapon and murder is aim.

                  Red herring

                  I take your "wall of garbage" approach to mean that you understand that this lawfare is so much farce.

                  • What company wouldn't get PO'd to find out your lies caused them to sell you millions $$ less product than they should have to keep their risk in equilibrium?
                    • So, your accusation boils down to sharp business on Trump's part?
                    • No, it boils down to fraud on his part.
                    • How does one draw the line between "fraud" and "sharp business"? In court, I guess. For the sake of the future, I hope that this disgusting civil suit goes down in the flames it richly deserves.
                    • If it is a lie than it is fraud.

                      If it is the truth than it is good business.

                      They ask you the value for a reason; because their business model requires them to properly assess their value so that their interests are covered. If Trump lies than he illegally puts them at greater risk. I don't agree with the amount of money a lot of corporations make, but for crying out loud at least draw the line at a bold faced lie.
                    • I think that you nailed it, boss. (Emphasis mine):

                      their business model requires them

                    • Yes most business models require customers, but customers are not entitled to dictate what they will pay. Would you be surprised if a grocery store objected to you saying the items in your card are worth exactly half of what they are charging and therefore you will pay half?

                    • customers are not entitled to dictate what they will pay

                      If only there were some...system of exchange...in which participants in a transaction exchange valuables for other goods or services.

                      To be successful, such a mechanism would require the ubiquity of barter, or currency, possibly involving interest.

                    • I don't see what that has to do with anything. The insurance business would not survive if everyone did what Trump did. It's that simple. The business is still there because of people who tell the truth. Trump is screwing over the other customers more than anything for it is they that are finding half the coverage to their companies. There can only be a fair market if people are b fair to eachother. Why is it so hard to convince Americans that robbing people of money is bad??

                    • Why is it so hard to convince Americans that robbing people of money is bad??

                      Robbing someone appears to be the purpose of this suit, yes.

                  • Not a single one of my statements is counterfactual. Trump entered into contracts with banks. Those contracts were based on disclosures that he made. The law requires those disclosures to be accurate. I have explained the *reason* for those laws. Maybe you don't agree with those laws and you think that rampant fraud should be legal. Or maybe you just have such a boner for Trump that you think he should be exempt. But that changes nothing. The letter of the law is clear. You have to be exceedingly
                    • I had quoted you (emphasis mine):

                      Had Trump been accurate on his financial disclosures, the lenders might not have made the loans or demanded a higher interest rate.

                      And I replied:

                      Counterfactual

                      You say:

                      Not a single one of my statements is counterfactual.

                      Now, look at the bolded words. THEY LOANED. Loans were made and repaid promptly. The proposition that the loans "might not have made" is counterfactual. It did not happen. This is the meaning of "counterfactual". You are attempting to find harm where none occurred. This is a creepy precedent. If allowed to stand, the state will logically be capable of shaking down anyone, anywhere, anytime. I guess that as long as it's someone you disdain, this sort of

                    • Heh, you really are a Trump fan, saying lying is ok (but not when Clinton does it), so partisan you are. You should be his lawyer. I would love to see how the judge would react to your line of defense.

                      Well, maybe the real sin is that this guy used Python. I hope the developers don't get strung up

                    • The loans were made at a *different price* than they would have been made had *actual facts* been available. That they were repaid (with lower interest) doesn't change anything. Again if I go to Walmart and put a fake barcode on a iPhone and scan it at the self checkout for $5 and then decide I don't like it and return it, I'm still guilty of the original fraud. Yes the loans were made. That's the point. They were made as the result of a fraud. Do you really not understand this?

                    • lying is ok

                      I would not accuse Trump of anything but engaging in business. Are you asserting that there is some objective standard whereby Trump could be judged, and falsehood discerned?

                    • Again if I go to Walmart and put a fake barcode on a iPhone and scan it at the self checkout for $5 and then decide I don't like it and return it, I'm still guilty of the original fraud.

                      So, the contention is that there is some barcode database for real estate properties, which Trump hacked? I'm really, really pretty sure that this is not how the system works. Really.

                    • Are you asserting that there is some objective standard whereby Trump could be judged, and falsehood discerned?

                      The court has already decided he committed fraud, you just refuse to see the truth about your guy. Is there something about your own past that relates perhaps? The doctor is in :-)

                    • No, there is a *price* on a loan based on the financial condition of the buyer. If you have say a 30k sq. ft. apartment worth $300m and want to borrow $5M, you get a better rate than if you have say an 11k st ft. apartment worth $5M, and you don't get the loan at all if you own only a normal suburban house worth less than $1M.

                      Do you really not understand the idea that things have a price and especially bank loans have a price that's based on the financial condition of the borrower?

                    • Sure, but the idea that the bank isn't maximizing its profit by charging the best possible interest rate is absurd. The entire suit is absurd. You pretending that there is some "there" there is absurd.

                    • The court has already decided he committed fraud,

                      I'm old enough to remember the pre-show trial days, when juries decided matters.

                    • The bank has to balance two factors in determining the rate: the risk of the loan (leads to higher prices) and the competitive marketplace (leads to lower prices). The issue is that the banks were defrauded because they were given false information which caused them to under-estimate the associated risk. What do you mean by "best possible interest rate?" Best for who?

                      I'm not pretending anything as the statements that I've made have already been decided in a trial. The prosecution offered a case that

                    • This case is false; anyone with two shreds of sense knows it is false; but, as with the media pretending that Israel bombed a hospital, you soldier on anyway.

                    • ... when juries decided matters.

                      Well, maybe they'll remember to request one next time, not that he won't claim they're all tainted, like he always does when he loses. Your hero is a fraud. Why you sacrificed your faith to support him shall remain a mystery

                    • Why you sacrificed your faith to support him shall remain a mystery

                      Sweet, sweet troll. You are a beautiful man, no matter what damn_registrars was saying about you.

                    • :-) Not trolling when telling the truth

                    • The Truth was crucified a couple centuries back. The Establishment can't handle the truth, then or now.

                    • We, you are the establishment. You can't blame others for your choice to follow. That is the truth that apparently you can't handle

                    • One can only be responsible for one's own choices. My quibble with you is your meaningless logical "or" between "Christ or Trump". Simply unrelated. But I stand by your right to troll on, Columbia [youtube.com]: troll on.

                    • One can only be responsible for one's own choices.

                      Right, and your choice to follow makes you just as guilty as all the others of all the government's problems. It is silly for you to complain about the people/party you reelect

                      My quibble with you is your meaningless logical "or" between "Christ or Trump". Simply unrelated.

                      Not at all, you are the one always professing your faith while refusing to acknowledge the conflict with your choice to support and defend Trump. It's very relevant. You can't be taken seriously until/unless you resolve that conflict. Between "Christ or Trump" there is only "or", there is no "and". So, what's it gonna be?

                    • your choice to follow makes you just as guilty as all the others of all the government's problems

                      This is a tinker-toy causal analysis, unless "follow" means shag-all. Have you bought anything or paid taxes? You have followed, and Romans3:23 is a bloody-minded axe, unless we grasp that it is a theological point.

                      there is only "or"

                      OK, Mani [wikipedia.org], i.e. "dualist".

                    • Have you bought anything or paid taxes?

                      Totally irrelevant distraction, another attempt at waving off the consequences of your choice to follow along. We are talking about your vote, not your money habits. You don't have to change anything if you don't want. Just acknowledge the part you play, conscious or not, is just as important as everybody elses. Let's not sweat it, free will really is very much in doubt.

                      So, back on topic, is everybody who uses Python (and ReiserFS) a criminal now?

                    • Have you bought anything or paid taxes?

                      Totally irrelevant distraction, another attempt at waving off the consequences of your choice to follow along.

                      Why do you label this a 'totally irrelevant distraction', beside its inconvenience to your argument?

                      My goal here is to nail down exactly where the conformity line is drawn.

                      How much non-conformity is required to be justified in your eyes?

                      Are we blowing off taxes? Are we driving against traffic? Are we only voting for write-in candidates who cannot possibly prevail in an election?

                    • :-) There's a word for the absurdities you present, can't remember what it's called, but it's just more distraction. Your choices make the government what it is. Your denials just don't hold up.

                    • I support your right to reject everything without offering any substantive suggestion past voting fecklessly.

                    • So, "follow the herd" is best, eh? Failure to conform is "feckless"? And complaining about the people you choose will solve everything, right? Isn't that called passive-aggressive? And really, a bit cowardly?

                    • These days, staying married and raising sane children is highly non-conformist.

                      Politically, I've told you the only thing in view that I think likely to have substantive effect, and you managed to wet yourself. Cowardly, indeed.

                    • No, I merely told you that you're wrong, it still up to the voters to decide who handles the process

                    • You argue an inarguable theoretical point, and gun down any practical inputs as "distractions" and "excuses". I attribute this to your immeasurable coolness.

                    • gun down any practical inputs as "distractions" and "excuses".

                      Because they aren't practical for all the extremely obvious reasons that you prefer to wave off, you're looking for a one sided deal

                    • "Practical" in what sense? The rich promise to rob the middle class to feed the poor. The poor, pragmatically, sell their vote to the highest dickhead. Ain't capitalism swell?

                    • Yeah, isn't that funny how the middle class votes for the same thing? Is that pragmatism too? Personally I call it "foolish", but, you know, it's the "system's" fault

                    • it's the "system's" fault

                      And what is the "system", if not a collection of people? While you've sought to say that I'm attempting to externalize EVERYTHING, an actual, serious analysis would find that there is some breakdown, e.g. 80/20, between internal and external.

                      Honest people need to own the internals they can control, and affect positively the externals that are generally harder to control.

                      What is valuable in these back-and-forth discussion on here is that they help clarify these points.

                      Which is how I can justify the yea

              • Businesses that live and die on their ability to calculate risk get pretty PO'd that they were lied to about the amount of risk they were incurring. Payments don't matter.

    • ...you can go a long way, if you have the proper friends.

      The problem with lies is remember which lie you told to which person and in what context the lie was used.

  • The fact that it's python code is relevant how? (Score:4, Insightful)

    by youn ( 1516637 ) on Wednesday October 11, 2023 @08:23PM (#63919687) Homepage

    A random number generator is pretty standard in all languages

    • Re: (Score:1)

      by Anonymous Coward
      Technically minded people might give a shit, if there were any of those reading this.
      • No, thats a really dumb, non interesting detail. I mean they could have also told us the brand of ram in the server that had the database with the allow_negative column on it. Just completely useless information. It does not matter. no one cares.

        What I do care about is how anyone thought SBF was worthy of investing in. Who are these dumb ass people with millions of dollars to throw around to strange men with poor social skills? And does anyone have their number? I have a project they might be interested in, and unruly trademarkable hair.

        • Re: (Score:2)

          by Veretax ( 872660 )
          It doesn't matter that it was written in Python.

          What does matter? The code was actually 'clean code' (shocker!)

          It was written by the CFO ?????

          THey even named the fields well ???

          What parallel universe is this for a 'Startup' to have such clean code, and obvious to see glaring issue upon prosecution? And from a Block Chain company no less. I could not stop laughing as I read this one. Its so very, very sad.

      • Technically minded people won't give a shit. At least until some tech illiterates run with the "python is used for illegal things, ban it!" bullshit story.

      • Re: The fact that it's python code is relevant how (Score:5, Insightful)

        by NagrothAgain ( 4130865 ) on Thursday October 12, 2023 @10:14AM (#63920565)
        No, it was added because it's a keyword which helps the story get auto-promoted by various search and ranking algorithms.

    • Because it shows the author never intended it to run past the upgrade to the next Python version?! That is, that the fraudsters had no intention of continuing the business indefinitely, but realized they would have to bail at some point in the future.

      Had they intended it to run indefinitely, they would have bought an IBM mainframe and written it in COBOL. But in that case, the prosecution would allege obstruction of justice on the grounds that the DOJ wouldn't be able to find a COBOL programmer to take

    • of course it's relevant... If it's in Python then Guido is in on it too!!!

    • pip install figureManipulator fraudHider (Score:5, Funny)

      by stooo ( 2202012 ) on Thursday October 12, 2023 @01:45AM (#63919973) Homepage

      pip install figureManipulator fraudHider
      Python makes everything easy.

    • Re: (Score:2)

      by necro81 ( 917438 )
      Obviously: if they'd lied with C they might still be in business!

      Cue the Scooby Doo reveal: "I would've gotten away with it, too, if it hadn't been for your lousy Python code!"
    • Presumably to distinguish it from a "code word" used for clandestine communication. The point is not that Python has a random number generator but rather that's not how one normally comes us with the value of an insurance fund. The wrote software (albeit fairly simple software) to support their fraud. This shows that it wasn't maybe an inadvertent mistake or miscommunication.
    • I agree the language doesn't matter, but the fact of using an actual random number generator in your accounting calculations seems like the most blatant thing you could do. Even something like using a number that was right at one time and "forgetting" to update it, or even moving a decimal place over by one, would be more deniable that this.

  • Because Python has no code of conduct (Score:5, Insightful)

    by xwin ( 848234 ) on Wednesday October 11, 2023 @08:29PM (#63919695)
    Python is like guns, can be used to kill people and also for insurance fraud. We should quickly ban it, while we still can. Rust can't be used for such illegal purpose because it has code of conduct which prohibits such use.
    AI which is clearly threatens jobs and our morality is mostly written in Python so double dangerous. Ban it, I tell you.

  • Perl (Score:1)

    by Anonymous Coward
    Would using perl be considered obfuscation? ;)

    • Re: (Score:1)

      by vivian ( 156520 )

      Definitely. Everyone knows it's a write-only language.

    • Would using perl be considered obfuscation? ;)

      Yes.

      Only Perl-meisters understand and read Perl code but they are sworn to perpetual silence when they become Perl-meisters.

    • Re: (Score:2)

      by youn ( 1516637 )

      Not if you already speak fluent klingon ... in that case, speaking the perl code out loud sounds like poetry :p

  • This is clear evidence that python is a tool for fraud and must be banned. If you're not a criminal, you have no reason to use python, anyway.

    The government demands backdoor access to all operating systems to find anyone using python in order to impose the proper penalties.

  • Maybe they should have used C++ instead, those insensitive clods!

  • The more I read about FTX/Alameda, the more they sound like Ponzi schemes.

    • That's pretty much Crypto in general though.

      At least with stocks, you may actually get a dividend someday, or the company will liquidate and return your share of the assets to you. There's actually a presence with value, assuming massive fraud hasn't taken place, like with Theranos.

      With Crypto, you're stuck hoping that there's a "greater fool" who is willing to pay you more money(or assets) than you paid, later on. There will never be a dividend, liquidation of assets, etc...

      I'll note that I don't favor h

    • Re:Ponzi scheme (Score:4, Informative)

      by careysub ( 976506 ) on Thursday October 12, 2023 @03:16AM (#63920019)

      More like a control fraud scheme on top of a Ponzi scheme. Two (or more) frauds in one. That's how SBF went from zero to $36 billion in two years.

      Crypto issuing exchanges have been dubbed a "flywheel Ponzi". You aren't paying off early investors with later investors money as in a classic Ponzi. Instead you create a big batch of tokens ("coins") and sell some of them (possibly to a shill buyer) and then claim that value for all the tokens and show that as your balance sheet, then use that to either entice investors or take out loans, and then use that cash to pump the token price further - continuing the flywheel.

      But on top of the SBF was running an Enronesque scheme where two companies supposedly operating independently (though both owned by SBF) practiced self-dealing - almost all of the assets claimed by his trading firm Alameda were actually just tokens minted by FTX, not real or tradeable assets at all (this revelation by CoinDesk is what brought about the FTX collapse). Oh and then there were the hidden negative balances, the fake insurance fund noted in TFS, the "compnay purchases" for private use, lots of scams being run at once.

      • Re: (Score:2)

        by necro81 ( 917438 )

        Crypto issuing exchanges have been dubbed a "flywheel Ponzi". You aren't paying off early investors with later investors money as in a classic Ponzi. Instead you create a big batch of tokens ("coins") and sell some of them (possibly to a shill buyer) and then claim that value for all the tokens and show that as your balance sheet, then use that to either entice investors or take out loans, and then use that cash to pump the token price further - continuing the flywheel.

        The analogy is apt: spin a flywheel

  • "Madoff and other employees on [floor] 17 punched in the stock prices on the IBM AS/400 and would just enter stock prices that would square with his fake returns." This stuff was likely COBOL. See https://www.informationweek.co... [informationweek.com]
    • And it's amazing that they got away with it for so long. Because the exchange publishes a tape of every transaction and if anybody had compared the purported Madoff transactions to the tapes, they would have seen that the stated trades didn't happen.

  • The fact that they wrote code in Python to perpetrate a fraud is as much as an indictment of Python as the fact that they wrote their prospectus in English is an indictment of English.

  • Scammers do scammy things, news at 11.

    I'm sure the whole cryptocurrency "industry" is rife with crap like this.

  • Maybe bitcoin started out innocently enough, or maybe it was some massive operation by the NSA or some other organization. But, the whole environment was ripe for fraud and fraud did come to it, to basically become the norm. I know a bunch of people who were pulled into it, some of whom had decent 'net savvy but not knowledge of how the real financial market operates. Some people, such as the guy who installed this insulation in my house, didn't have any practical knowledge and probably lost everything. I a

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