What’s wrong with what FTX did?

[NatMorton]

From today’s WSJ (paywall):

Caroline Ellison, a close associate of FTX founder Sam Bankman-Fried, apologized in court this week as she pleaded guilty to fraud and other offenses, telling a judge that she and others conspired to steal billions of dollars from customers of the doomed crypto exchange while misleading investors and lenders.

“I am truly sorry for what I did,” Ms. Ellison, the former chief executive of Mr. Bankman-Fried’s crypto-trading firm, Alameda Research, said in a New York federal court, according to a transcript of the hearing made available Friday. “I knew that it was wrong.”

Ms. Ellison, 28 years old, and former FTX chief technology officer Gary Wang, 29, pleaded guilty Monday during separate hearings without notice to the public. Both agreed to cooperate with the government’s investigation in exchange for the prospect of lighter sentences.

Ms. Ellison, a former romantic partner of Mr. Bankman-Fried, pleaded guilty to seven criminal counts, including fraud, conspiracy and money laundering. During her hearing, she admitted to conspiring to use billions of dollars from FTX customer accounts to repay loans Alameda had taken out to make risky investments.

So as I understand it, people paid money into a fund, and then the fund manager effectively loaned the money to itself and spent that money. I fail to see how this can be a problem considering that’s exactly how the federal government administers the Social Security Trust Fund.

 

[US&THEM]

From today’s WSJ (paywall):


So as I understand it, people paid money into a fund, and then the fund manager effectively loaned the money to itself and spent that money. I fail to see how this can be a problem considering that’s exactly how the federal government administers the Social Security Trust Fund.

Wow, just wow.

 

[ttwtt78640]

From today’s WSJ (paywall):


So as I understand it, people paid money into a fund, and then the fund manager effectively loaned the money to itself and spent that money. I fail to see how this can be a problem considering that’s exactly how the federal government administers the Social Security Trust Fund.

The key difference is that the federal government can demand that folks keep funding it and/or borrow (print?) more money, while FTX (et al) can’t.

 

[NatMorton]

Wow, just wow.

Did you not know the US government has been spending your SS contributions all along?

 

[US&THEM]

Did you not know the US government has been spending your SS contributions all along?

The SS has oversight etc, I guess you thought Madoff was awesome too?

 

[Bok Tuklo]

American securities. Rock solid. We will stiff our senior citizens before we miss a single interest payment on your treasuries.

Buy T-Bonds. Granny should have.

 

[OrphanSlug]

It was only a matter of time before someone who does not understand law, government, or economics tried to compare what TFX did to how government ran funds operate.

 

[NatMorton]

The SS has oversight etc, I guess you thought Madoff was awesome too?

How does that “oversight” get your money back to you?

And no, I don’t think Madoff was awesome. Do you really think the question in the OP’s title isn’t rhetorical?

 

[NatMorton]

American securities. Rock solid. We will stiff our senior citizens before we miss a single interest payment on your treasuries.

Buy T-Bonds. Granny should have.

It doesn’t matter how solid the investment is, It still creates the conflict of interest. When your investment manager lends your money to himself, there’s a problem. The better the terms of the deal are for him the worse they are for you. A fiduicary is meant to be working on your behalf, not his.

Outside of Washington’s reality bubble, any investment manager caught paying the bills with his clients’ (i.e. granny’s) money will go right were the FTX crew is heading: prison.

 

[US&THEM]

How does that “oversight” get your money back to you?

And no, I don’t think Madoff was awesome. Do you really think the question in the OP’s title isn’t rhetorical?

So don’t take it when you’re eligible, that will show em!

 

[NatMorton]

So don’t take it when you’re eligible, that will show em!

I would have preferred that they never take it. I could do better managing my own retirement investments.

And speaking of Madoff, here you are defending a program that must suck in new clients to pay the benefits to older clients. For all intends and purposes, Bernie ran, and the feds run, what is commonly called a Ponzi scheme. Good show.

 

[ttwtt78640]

It doesn’t matter how solid the investment is, It still creates the conflict of interest. When your investment manager lends your money to himself, there’s a problem. The better the terms of the deal are for him the worse they are for you. A fiduicary is meant to be working on your behalf, not his.

Outside of Washington’s reality bubble, any investment manager caught paying the bills with his clients’ (i.e. granny’s) money will go right were the FTX crew is heading: prison.

OK, but what investment alternative for the ’trust me’ fund would be better? Should the federal government invest in (selected?) private corporations (which it taxes and regulates) instead?

 

[ttwtt78640]

How does that “oversight” get your money back to you?

And no, I don’t think Madoff was awesome. Do you really think the question in the OP’s title isn’t rhetorical?

Once that money has been taken by the government then it’s no longer ‘your money’.

 

[NatMorton]

Once that money has been taken by the government then it’s no longer ‘your money’.

Bingo.

To you other question, it’s a perfectly reasonable one, but if we’re going to have a government-managed pension fund, then there’s really no other alternative than to invest in privates that the government also regulates. While problematic, it’s less so than the government spending your investment before you retire. That’s the trap. With your investment long gone before you retire, new workers must be shanghaied into the program to fund payments to you. At least with real investments, those securities can be sold to fund your retirement income.

 

[Bok Tuklo]

It doesn’t matter how solid the investment is, It still creates the conflict of interest. When your investment manager lends your money to himself, there’s a problem. The better the terms of the deal are for him the worse they are for you. A fiduicary is meant to be working on your behalf, not his.

Outside of Washington’s reality bubble, any investment manager caught paying the bills with his clients’ (i.e. granny’s) money will go right were the FTX crew is heading: prison.

If that’s how the Social Security System worked, you would be making an interesting point.

 

[NatMorton]

If that’s how the Social Security System worked, you would be making an interesting point.

That’s exactly how it works. The SS Trust Fund is little more than an accounting gimmick. We pay money in, the government lends that money to itself, and then it spends our money. When we retire, the money paid to us comes from those who enrolled in the program after us. It’s a classic Ponzi scheme with the only difference being it’s not illegal. Everything else is pretty much the same.

 

[ttwtt78640]

Bingo.

To you other question, it’s a perfectly reasonable one, but if we’re going to have a government-managed pension fund, then there’s really no other alternative than to invest in privates that the government also regulates. While problematic, it’s less so than the government spending your investment before you retire. That’s the trap. With your investment long gone before you retire, new workers must be shanghaied into the program to fund payments to you. At least with real investments, those securities can be sold to fund your retirement income.

Your SS ‘contributions’ were spent long before you reached retirement age. That’s how ‘pay as you go’ systems work - current workers fund current retirees.

BTW, if there was no SS ‘contribution’ surplus then there would have been no SS ‘trust me’ fund.

 

[NatMorton]

Your SS ‘contributions’ were spent long before you reached retirement age. That’s how ‘pay as you go’ systems work - current workers fund current retirees.

Okay, but other than SS, aren’t “pay as you” pension programs illegal?

BTW, if there was no SS ‘contribution’ surplus then there would have been no SS ‘trust me’ fund.

Not sure what you mean here.

 

[Bok Tuklo]

That’s exactly how it works.

No. It’s not.

The SS Trust Fund is little more than an accounting gimmick. We pay money in, the government lends that money to itself, and then it spends our money. When we retire, the money paid to us comes from those who enrolled in the program after us. It’s a classic Ponzi scheme with the only difference being it’s not illegal. Everything else is pretty much the same.

Our money goes to pay current retirees and other costs while any surplus is invested in securities not available to the public. Those treasuries are redeemable at any time and not only on their maturity date. They also are guaranteed by the full faith and credit of the United States.

The US Dollar is not a Ponzi Scheme.

 

[US&THEM]

I would have preferred that they never take it. I could do better managing my own retirement investments.

And speaking of Madoff, here you are defending a program that must suck in new clients to pay the benefits to older clients. For all intends and purposes, Bernie ran, and the feds run, what is commonly called a Ponzi scheme. Good show.

Madoff committed fraud, when had the SSA done so too?

 

[ttwtt78640]

Okay, but other than SS, aren’t “pay as you” pension programs illegal?

Nope, and many of them are protected (guaranteed?) by the federal government.

Does the federal government insure pension benefits?

Not sure what you mean here.

Only excess (annual) SS ‘contributions’ were placed into the SS ‘trust me’ fund. Since that is no longer the case, the SS ‘trust me’ fund is currently being used (depleted) to make up for the current difference between (annual) SS ‘contributions’ and SS (annual) benefit payments.

If (when?) the SS ‘trust me’ fund is exhausted then SS benefit levels will either be reduced to the level of (then current) SS ‘contributions’ and/or funded by using federal general fund revenues to make up (at least part of) the difference.

Social Security’s funds have a new, later-projected depletion date of 2035. How Congress may shore up the program

Congress is on the hook to make sure Social Security can pay benefits in full and on time. Here's what changes legislators may consider.

www.cnbc.com

 

[VySky]

That’s exactly how it works. The SS Trust Fund is little more than an accounting gimmick. We pay money in, the government lends that money to itself, and then it spends our money. When we retire, the money paid to us comes from those who enrolled in the program after us. It’s a classic Ponzi scheme with the only difference being it’s not illegal. Everything else is pretty much the same.

SS was paid into in order to receive the payment entitlement. There is no entitlement (return on investment) for Crypto which carries risk. SS as designed does not.

 

[Lord Tammerlain]

OK, but what investment alternative for the ’trust me’ fund would be better? Should the federal government invest in (selected?) private corporations (which it taxes and regulates) instead?

Canada's equivalent does

 

[NatMorton]

SS was paid into in order to receive the payment entitlement. There is no entitlement (return on investment) for Crypto which carries risk. SS as designed does not.

No sure what you mean here. Anyway you slice it, the federal government spends your SS contributions and then must tax someone else to pay for your benefits. It's not an investment program in any sense of the term.

 

[OrphanSlug]

Social security is not an investment vehicle, while social security does have attributes of a ponzi scheme all you really have is a government social safety net program based on an accounting ledger and special issued intergovernmental debt, and all cryptocurrencies are an open ponzi scheme.

The OP ignorantly and rhetorically trying to bind what FTX did with how social security operates is nothing more than his endless series of government is all bad nonsense.