Sam Bankman Fried (SDBF) is a legendary con man. But the NYT might not tell you that...

Since SBF's empire was revealed to be a lie, mainstream news organizations and commentators have failed to give readers a straightforward assessment. The New York Times and Wall Street Journal have uncovered many key facts about the scandal, but they have also soft-peddled Bankman-Fried's intent and culpability.

It's clear that the FTX crypto exchange and Alameda Research committed fraud to steal money from users and investors. That’s why a recent New York Times interview was widely derided for seeming to frame FTX’s collapse as the result of mismanagement rather than malfeasance. A Wall Street Journal article lamented FTX's loss of charitable donations, bolstering Bankman's philanthropic pose. Matthew Yglesias, court chronicler of the neoliberal status quo, seemed to whitewash his own entanglements by crediting SBF's money with helping Democrats in 2020 – sidestepping the likelihood that the money was embezzled.

Many outlets have called what happened to FTX a "bank run" or a "run on deposits," but Bankman-Fried insists the company was overleveraged and disorganized. Both attempts to frame the fallout obscure the core issue: customer funds misused.

Because banks lend customer funds to generate returns, they can experience "bank runs." If everyone withdraws at once, they can experience a short-term cash crunch but there won't be a long-term problem.

Crypto exchanges like FTX aren't banks. They don't do bank-style lending, so a withdrawal surge shouldn't strain liquidity. FTX promised customers it wouldn't lend or use their crypto.

Alameda's balance sheet blurs SBF's crypto empire.

The funds were sent to Alameda Research, where they were apparently gambled away. This is massive theft. According to a bankruptcy document, up to 1 million customers could be affected.

In less than a month, reporting and the bankruptcy process have uncovered a laundry list of decisions and practices that would constitute financial fraud if FTX had been a U.S.-regulated entity, even without crypto-specific rules. These ploys may be litigated in U.S. courts if they enabled the theft of American property.

The list is very, very long.

The many crimes of Sam Bankman-Fried and FTX

At the heart of SBF's fraud are the deep and (literally) intimate ties between FTX and Alameda Research, a hedge fund he co-founded. An exchange makes money from transaction fees on user assets, but Alameda trades and invests its own funds.

Bankman-Fried called FTX and Alameda "wholly separate" and resigned as Alameda's CEO in 2019. The two operations were closely linked. Bankman-Fried and Alameda CEO Caroline Ellison were romantically linked.

These circumstances enabled SBF's sin.  Within days of FTX's first signs of weakness, it was clear the exchange was funneling customer assets to Alameda for trading, lending, and investing. Reuters reported on Nov. 12 that FTX sent $10 billion to Alameda. As much as $2 billion was believed to have disappeared after being sent to Alameda. Now the losses look worse.

It's unclear why those funds were sent to Alameda or when Bankman-Fried betrayed his depositors. On-chain analysis shows most FTX to Alameda transfers occurred in late 2021, and bankruptcy filings show both lost $3.7 billion in 2021.

SBF's companies lost millions before the 2022 crypto bear market. They may have stolen funds before Terra and Three Arrows Capital, which killed many leveraged crypto players.

FTT loans and prints

CoinDesk's report on Alameda's FTT holdings ignited FTX and Alameda Research. FTX created this instrument, but only a small portion was traded publicly; FTX and Alameda held the rest. These holdings were illiquid, meaning they couldn't be sold at market price. Bankman-Fried valued its stock at the fictitious price.

FTT tokens were reportedly used as collateral for loans, including FTX loans to Alameda. Close ties between FTX and Alameda made the FTT token harder or more expensive to use as collateral, reducing the risk to customer funds.

This use of an internal asset as collateral for loans between clandestinely related entities is similar to Enron's 1990s accounting fraud. These executives served 12 years in prison.

Alameda's margin liquidation exemption

Alameda Research had a "secret exemption" from FTX's liquidation and margin trading rules, according to legal filings by FTX's new CEO.

FTX, like other crypto platforms and some equity or commodity services, offered "margin" or loans for trades. These loans are usually collateralized, meaning borrowers put up other funds or assets. If a margin trade loses enough money, the exchange will sell the user's collateral to pay off the initial loan.

Keeping asset markets solvent requires liquidating bad margin positions. Exempting Alameda would give it huge advantages while exposing other FTX users to hidden risks. Alameda could have kept losing positions open while closing out competitors. Alameda could lose more on FTX than it could pay back, leaving a hole in customer funds.

The exemption is criminal in multiple ways. FTX was fraudulently marketed overall. Instead of a level playing field, there were many customers.

Above them all, with shotgun poised, was Alameda Research.

Alameda front-running FTX listings

Argus says there's circumstantial evidence that Alameda Research had insider knowledge of FTX's token listing plans. Alameda was able to buy large amounts of tokens before the listing and sell them after the price bump.

If true, these claims would be the most brazenly illegal of Alameda and FTX's alleged shenanigans. Even if the tokens aren't formally classified as securities, insider trading laws may apply.

In a similar case this year, an OpenSea employee was charged with wire fraud for allegedly insider trading. This employee faces 20 years in prison for front-running monkey JPEGs.

Huge loans to executives

Alameda Research reportedly lent FTX executives $4.1 billion, including massive personal loans. Bankman-Fried received $1 billion in personal loans and $2.3 billion for an entity he controlled, Paper Bird. Nishad Singh, director of engineering, was given $543 million, and FTX Digital Markets co-CEO Ryan Salame received $55 million.

FTX has more smoking guns than a Texas shooting range, but this one is the smoking bazooka – a sign of criminal intent. It's unclear how most of the personal loans were used, but liquidators will have to recoup the money.

The loans to Paper Bird were even more worrisome because they created another related third party to shuffle assets. Forbes speculates that some Paper Bird funds went to buy Binance's FTX stake, and Paper Bird committed hundreds of millions to outside investments.

FTX Inner Circle: Who's Who

That included many FTX-backed VC funds. Time will tell if this financial incest was criminal fraud. It fits Bankman-pattern Fried's of using secret flows, leverage, and funny money to inflate asset prices.

FTT or loan 'bailouts'

Also. As the crypto bear market continued in 2022, Bankman-Fried proposed bailouts for bankrupt crypto lenders BlockFi and Voyager Digital. CoinDesk was among those deceived, welcoming SBF as a J.P. Morgan-style sector backstop.

In a now-infamous interview with CNBC's "Squawk Box," Bankman-Fried referred to these decisions as bets that may or may not pay off.

But maybe not. Bloomberg's Matt Levine speculated that FTX backed BlockFi with FTT money. This Monopoly bailout may have been intended to hide FTX and Alameda liabilities that would have been exposed if BlockFi went bankrupt sooner. This ploy has no name, but it echoes other corporate frauds.

Secret bank purchase

Alameda Research invested $11.5 million in the tiny Farmington State Bank, doubling its net worth. As a non-U.S. entity and an investment firm, Alameda should have cleared regulatory hurdles before acquiring a U.S. bank.

In the context of FTX, the bank's stake becomes "ominous." Alameda and FTX could have done more shenanigans with bank control. Compare this to the Bank for Credit and Commerce International's failed attempts to buy U.S. banks. BCCI was even nefarious than FTX and wanted to buy U.S. banks to expand its money-laundering empire.

The mainstream's mistakes

These are complex and nuanced forms of fraud that echo traditional finance models. This obscurity helped Bankman-Fried masquerade as an honest player and likely kept coverage soft after the collapse.

Bankman-Fried had a scruffy, nerdy image, like Mark Zuckerberg and Adam Neumann. In interviews, he spoke nonsense about an industry full of jargon and complicated tech. Strategic donations and insincere ideological statements helped him gain political and social influence.

SBF' s'Effective' Altruism Blew Up FTX

Bankman-Fried has continued to muddy the waters with disingenuous letters, statements, interviews, and tweets since his con collapsed. He's tried to portray himself as a well-intentioned but naive kid who made some mistakes. This is a softer, more pernicious version of what Trump learned from mob lawyer Roy Cohn. Bankman-Fried doesn't "deny, deny, deny" but "confuse, evade, distort."

It's mostly worked. Kevin O'Leary, who plays an investor on "Shark Tank," repeats Bankman-SBF's counterfactuals.  O'Leary called Bankman-Fried a "savant" and "probably one of the most accomplished crypto traders in the world" in a Nov. 27 interview with Business Insider, despite recent data indicating immense trading losses even when times were good.

O'Leary's status as an FTX investor and former paid spokesperson explains his continued affection for Bankman-Fried despite contradictory evidence. He's not the only one promoting Bankman-Fried. The disgraced son of two Stanford law professors will defend himself at Wednesday's DealBook Summit.

SBF's fraud and theft rival those of Bernie Madoff and Jho Low. Whether intentionally or through malign ineptitude, the fraud echoes Worldcom and Enron.

The Perverse Impacts of Anti-Money-Laundering

The principals in all of those scandals wound up either sentenced to prison or on the run from the law. Sam Bankman-Fried clearly deserves to share their fate.

Read the full article here.

ERC165 (or EIP-165) is a standard utilized by various open-source smart contracts like Open Zeppelin or Aavegotchi.

What's it? You must implement? Why do we need it? I'll describe the standard and answer any queries.

What is ERC165

ERC165 detects and publishes smart contract interfaces. Meaning? It standardizes how interfaces are recognized, how to detect if they implement ERC165, and how a contract publishes the interfaces it implements. How does it work?

Why use ERC165? Sometimes it's useful to know which interfaces a contract implements, and which version.

Identifying interfaces

An interface function's selector. This verifies an ABI function. XORing all function selectors defines an interface in this standard. The following code demonstrates.

// SPDX-License-Identifier: UNLICENCED
pragma solidity >=0.8.0 <0.9.0;

interface Solidity101 {
    function hello() external pure;
    function world(int) external pure;
}

contract Selector {
    function calculateSelector() public pure returns (bytes4) {
        Solidity101 i;
        return i.hello.selector ^ i.world.selector;
        // Returns 0xc6be8b58
    }

    function getHelloSelector() public pure returns (bytes4) {
        Solidity101 i;
        return i.hello.selector;
        // Returns 0x19ff1d21
    }

    function getWorldSelector() public pure returns (bytes4) {
        Solidity101 i;
        return i.world.selector;
        // Returns 0xdf419679
    }
}

This code isn't necessary to understand function selectors and how an interface's selector can be determined from the functions it implements.

Run that sample in Remix to see how interface function modifications affect contract function output.

Contracts publish their implemented interfaces.

We can identify interfaces. Now we must disclose the interfaces we're implementing. First, import IERC165 like so.

pragma solidity ^0.4.20;

interface ERC165 {
    /// @notice Query if a contract implements an interface
    /// @param interfaceID The interface identifier, as specified in ERC-165
    /// @dev Interface identification is specified in ERC-165. 
    /// @return `true` if the contract implements `interfaceID` and
    ///  `interfaceID` is not 0xffffffff, `false` otherwise
    function supportsInterface(bytes4 interfaceID) external view returns (bool);
}

We still need to build this interface in our smart contract. ERC721 from OpenZeppelin is a good example.

// SPDX-License-Identifier: MIT
// OpenZeppelin Contracts (last updated v4.5.0) (token/ERC721/ERC721.sol)

pragma solidity ^0.8.0;

import "./IERC721.sol";
import "./extensions/IERC721Metadata.sol";
import "../../utils/introspection/ERC165.sol";
// ...

contract ERC721 is Context, ERC165, IERC721, IERC721Metadata {
  // ...

  function supportsInterface(bytes4 interfaceId) public view virtual override(ERC165, IERC165) returns (bool) {
    return
      interfaceId == type(IERC721).interfaceId ||
      interfaceId == type(IERC721Metadata).interfaceId ||
      super.supportsInterface(interfaceId);
  }
  
  // ...
}

I deleted unnecessary code. The smart contract imports ERC165, IERC721 and IERC721Metadata. The is keyword at smart contract declaration implements all three.

Kind (interface).

Note that type(interface).interfaceId returns the same as the interface selector.

We override supportsInterface in the smart contract to return a boolean that checks if interfaceId is the same as one of the implemented contracts.

Super.supportsInterface() calls ERC165 code. Checks if interfaceId is IERC165.

function supportsInterface(bytes4 interfaceId) public view virtual override returns (bool) {
    return interfaceId == type(IERC165).interfaceId;
}

So, if we run supportsInterface with an interfaceId, our contract function returns true if it's implemented and false otherwise. True for IERC721, IERC721Metadata, andIERC165.

Conclusion

I hope this post has helped you understand and use ERC165 and why it's employed.

Have a great day, thanks for reading!

Overview

Ethereum blockchain is a network of nodes that validate transactions. Any network node can be queried for blockchain data for free. To write data as a transition requires processing and writing to each network node's storage. Fee is paid in ether and is also called as gas.

We'll examine how user-initiated transactions flow across the network and into the blockchain.

Flow of transactions

• A user wishes to move some ether from one external account to another. He utilizes a cryptocurrency wallet for this (like Metamask), which is a browser extension.

• The user enters the desired transfer amount and the external account's address. He has the option to choose the transaction cost he is ready to pay.

• Wallet makes use of this data, signs it with the user's private key, and writes it to an Ethereum node. Services such as Infura offer APIs that enable writing data to nodes. One of these services is used by Metamask. An example transaction is shown below. Notice the “to” address and value fields.

var rawTxn = {
    nonce: web3.toHex(txnCount),
    gasPrice: web3.toHex(100000000000),
    gasLimit: web3.toHex(140000),
    to: '0x633296baebc20f33ac2e1c1b105d7cd1f6a0718b',
    value: web3.toHex(0),
    data: '0xcc9ab24952616d6100000000000000000000000000000000000000000000000000000000'
};

• The transaction is written to the target Ethereum node's local TRANSACTION POOL. It informed surrounding nodes of the new transaction, and those nodes reciprocated. Eventually, this transaction is received by and written to each node's local TRANSACTION pool.

• The miner who finds the following block first adds pending transactions (with a higher gas cost) from the nearby TRANSACTION POOL to the block.

• The transactions written to the new block are verified by other network nodes.

• A block is added to the main blockchain after there is consensus and it is determined to be genuine. The local blockchain is updated with the new node by additional nodes as well.

• Block mining begins again next.

The image above shows how transactions go via the network and what's needed to submit them to the main block chain.

References

ethereum.org/transactions How Ethereum transactions function, their data structure, and how to send them via app. ethereum.org

Would you abandon your bank for Apple?

Banks are struggling.

• not as a result of inflation

• not due to the economic downturn.

• not due to the conflict in Ukraine.

But because they’re underestimating Apple.

Slowly but surely, Apple is looking more like a bank.

An easy new savings account like Apple

Apple has a new savings account.

Apple says Apple Card users may set up and manage savings straight in Wallet.

• No more charges

• Colorfully high yields

• With no minimum balance

• No minimal down payments

Most consumer-facing banks will have to match Apple's offer or suffer disruption.

Users may set it up from their iPhones without traveling to a bank or filling out paperwork.

It’s built into the iPhone in your pocket.

So now more waiting for slow approval processes.

Once the savings account is set up, Apple will automatically transfer all future Daily Cash into it. Users may also add these cash to an Apple Cash card in their Apple Wallet app and adjust where Daily Cash is paid at any time.

Apple Pay and Apple Wallet VP Jennifer Bailey:

Savings enables Apple Card users to grow their Daily Cash rewards over time, while also saving for the future.

Bailey says Savings adds value to Apple Card's Daily Cash benefit and offers another easy-to-use tool to help people lead healthier financial lives.

Transfer money from a linked bank account or Apple Cash to a Savings account. Users can withdraw monies to a connected bank account or Apple Cash card without costs.

Once set up, Apple Card customers can track their earnings via Wallet's Savings dashboard. This dashboard shows their account balance and interest.

This product targets younger people as the easiest way to start a savings account on the iPhone.

Why would a Gen Z account holder travel to the bank if their iPhone could be their bank?

Using this concept, Apple will transform the way we think about banking by 2030.

Two other nightmares keep bankers awake at night

Apple revealed two new features in early 2022 that banks and payment gateways hated.

• Tap to Pay with Apple

• Late Apple Pay

They startled the industry.

Tap To Pay converts iPhones into mobile POS card readers. Apple Pay Later is pushing the BNPL business in a consumer-friendly direction, hopefully ending dodgy lending practices.

Tap to Pay with Apple

iPhone POS

Millions of US merchants, from tiny shops to huge establishments, will be able to accept Apple Pay, contactless credit and debit cards, and other digital wallets with a tap.

No hardware or payment terminal is needed.

Revolutionary!

Stripe has previously launched this feature.

Tap to Pay on iPhone will provide companies with a secure, private, and quick option to take contactless payments and unleash new checkout experiences, said Bailey.

Apple's solution is ingenious. Brilliant!

Bailey says that payment platforms, app developers, and payment networks are making it easier than ever for businesses of all sizes to accept contactless payments and thrive.

I admire that Apple is offering this up to third-party services instead of closing off other functionalities.

Slow POS terminals, farewell.

Late Apple Pay

Pay Apple later.

Apple Pay Later enables US consumers split Apple Pay purchases into four equal payments over six weeks with no interest or fees.

The Apple ecosystem integration makes this BNPL scheme unique. Nonstick. No dumb forms.

Frictionless.

Just double-tap the button.

Apple Pay Later was designed with users' financial well-being in mind. Apple makes it easy to use, track, and pay back Apple Pay Later from Wallet.

Apple Pay Later can be signed up in Wallet or when using Apple Pay. Apple Pay Later can be used online or in an app that takes Apple Pay and leverages the Mastercard network.

Apple Pay Order Tracking helps consumers access detailed receipts and order tracking in Wallet for Apple Pay purchases at participating stores.

Bad BNPL suppliers, goodbye.

Most bankers will be caught in Apple's eye playing mini golf in high-rise offices.

The big problem:

• Banks still think about features and big numbers just like other smartphone makers did not too long ago.

• Apple thinks about effortlessness, seamlessness, and frictionlessness that just work through integrated hardware and software.

Let me know what you think Apple’s next power moves in the banking industry could be.

It's ok and even desired to be unprofitable if you're gaining revenue at a reasonable cost and have 100%+ net dollar retention, meaning you never lose customers and expand them. To estimate the acceptable cost of new SaaS revenue, we compare new revenue to operating loss and payback period. If you pay back the customer acquisition cost in 1.5 years and never lose them (100%+ NDR), you're doing well.

To evaluate payback period, we compared new revenue to net operating loss for the last 73 SaaS companies to IPO since October 2017. (55 out of 73). Here's the data. 1/(new revenue/operating loss) equals payback period. New revenue/operating loss equals cost of new revenue.

Payback averages a year. 55 SaaS companies that weren't profitable at IPO got a 1-year payback. Outstanding. If you pay for a customer in a year and never lose them (100%+ NDR), you're establishing a valuable business. The average was 1.3 years, which is within the 1.5-year range.

New revenue costs $0.96 on average. These SaaS companies lost $0.96 every $1 of new revenue last year. Again, impressive. Average new revenue per operating loss was $1.59.

Loss-in-operations definition. Operating loss revenue COGS S&M R&D G&A (technical point: be sure to use the absolute value of operating loss). It's wrong to only consider S&M costs and ignore other business costs. Operating loss and new revenue are measured over one year to eliminate seasonality.

Operating losses are desirable if you never lose a customer and have a quick payback period, especially when SaaS enterprises are valued on ARR. The payback period should be under 1.5 years, the cost of new income < $1, and net dollar retention 100%.