Grok 3 AI Now Free on X – Here’s What You Need to Know
X's AI chatbot, Grok 3, is now free for all users, removing the previous paid subscription requirement. The latest version introduces DeepSearch for web research and Think mode for problem-solving. However, paid subscribers of X Premium+ and SuperGrok will still get exclusive benefits like increased access and early features such as Voice Mode. The cost of X Premium+ has also jumped to $40 per month. Users can access Grok 3 through X, its web portal, or mobile apps, and can upload various file types for AI analysis.
Grok 3 AI is now free for everyone, giving users access to its most advanced features.
Premium subscribers receive exclusive perks, such as early access to Voice Mode and extended usage limits.
X Premium+ subscription costs have increased, now requiring users to pay $40 per month.
How AI is Changing Jobs: Anthropic’s Economic Index Reveals Key Trends
Anthropic’s new Economic Index analyzes AI’s impact on the job market using millions of anonymized Claude.ai conversations. The report shows AI is widely used in software development and technical writing, with mid-to-high wage jobs seeing the most benefit. AI is primarily augmenting human capabilities (57%) rather than automating tasks (43%). The findings aim to help policymakers and researchers navigate AI’s evolving role in the economy.
AI is mainly used in software development and writing, with limited impact on manual labor fields.
AI is more likely to enhance work than replace it, with 57% of tasks being augmented.
Mid-to-high wage jobs benefit the most from AI adoption, while lower-wage jobs see minimal impact.
EU Unveils €200 Billion AI Investment Plan to Compete Globally
The European Commission has announced a €200 billion investment initiative to advance AI development in Europe. €20 billion will be allocated for AI gigafactories, which will help train large-scale AI models. This move follows a €109 billion AI investment plan in France and comes as the US ramps up AI spending to $500 billion. The InvestAI initiative will support both large enterprises and smaller companies, ensuring Europe remains competitive in the AI race.
The EU is investing €200 billion in AI development, including €20 billion specifically for gigafactories.
France has also pledged €109 billion for AI research, increasing European efforts to compete globally.
InvestAI will help fund AI innovation and startups, allowing smaller businesses to access advanced technology.
Crypto vs. Banks: Congress Probes ‘Operation Chokepoint 2.0’
Crypto businesses in the US have struggled to access banking services, sparking allegations of government-led debanking efforts under what’s being called "Operation Chokepoint 2.0." Critics claim that federal regulators informally pressured banks to sever ties with crypto companies. The issue has now gained political traction under the Trump administration, leading to congressional hearings to investigate whether federal agencies improperly influenced banking policies. Some banks are reconsidering their stance, potentially easing restrictions on crypto firms.
Crypto firms claim they are being unfairly debanked, allegedly due to informal government pressures on banks.
Congress is holding hearings on 'Operation Chokepoint 2.0', investigating whether regulators targeted crypto companies.
Some banks are reevaluating their stance on crypto, possibly leading to fewer restrictions on industry banking.
AI and Creativity: Tool or Threat to Human Artists?
AI-generated content is rapidly advancing, raising concerns in art, music, and writing industries. While AI tools enhance creativity and efficiency, they also spark debates over originality, copyright, and job security. Some artists embrace AI as a collaborative tool, while others fear it could replace human creativity. Companies are increasingly investing in AI-generated media, fueling discussions on whether AI should be credited as a creator. As legal frameworks struggle to keep up, the industry faces critical questions about ownership and ethics.
AI is transforming creative industries, from art to music, raising questions about its long-term impact.
Some artists embrace AI as a creative tool, while others worry it threatens human originality.
AI-generated content challenges copyright laws and ownership rules, leading to legal and ethical concerns.
Gemini 2.0: Google’s Free Model Outshines OpenAI in Science and Math
Google has unveiled Gemini 2.0 Flash Thinking, a cutting-edge AI model that rivals OpenAI's premium offerings by being both advanced and free during beta testing. With standout features like million-token processing capabilities and enhanced reasoning transparency, the model sets benchmarks in mathematics and science tasks, outperforming previous iterations and competitors. Additionally, Gemini 2.0 integrates native code execution for direct programming within the system and boasts improved safeguards against contradictions. Industry analysts suggest its accessibility and transparency could redefine AI development, challenging OpenAI's dominance and making the technology more approachable for developers and researchers worldwide.
Performance & Transparency: Gemini 2.0 excels in advanced tasks and reveals its reasoning process, addressing AI’s "black box" problem.
Million-Token Context Window: The model processes vast datasets simultaneously, enabling breakthroughs in research and analytics.
Strategic Release: Google's free beta version may attract users away from OpenAI's premium $200 subscription.
Stargate: $500 Billion AI Partnership Set to Transform U.S. Economy
President Donald Trump has announced the launch of Stargate, a $500 billion AI infrastructure initiative spearheaded by OpenAI, Oracle, and SoftBank. Initially starting with a $100 billion investment in Texas, the project aims to build data centers and energy facilities to support AI development. Trump emphasized the partnership's potential to transform the U.S. economy, while leaders like Masayoshi Son (SoftBank), Sam Altman (OpenAI), and Larry Ellison (Oracle) hailed the initiative as a defining project for this era. Though initiated under the Biden administration, Stargate signals the U.S.'s commitment to leading AI innovation amidst global competition.
Massive Investment: Stargate’s $500 billion funding underscores the importance of AI infrastructure in the U.S. economy.
Strategic Partnerships: OpenAI, Oracle, and SoftBank are pooling resources to develop cutting-edge data and energy infrastructure.
AI Leadership: The project reflects America’s ambition to stay ahead in the global AI race, particularly against China.
Trump Pardons Silk Road Founder Ross Ulbricht, Sparking Debate
President Donald Trump has pardoned Ross Ulbricht, the founder of the infamous Silk Road marketplace, who was serving a life sentence for facilitating online drug sales and other illicit activities. Ulbricht, known by his pseudonym “Dread Pirate Roberts,” created Silk Road in 2011, a platform that operated on the dark web using cryptocurrency. Though prosecutors linked the site to drug overdose deaths and murder-for-hire conspiracies, Ulbricht denied responsibility for user actions on the platform. Trump cited Ulbricht’s case as an example of government overreach, with the pardon appealing to libertarian and cryptocurrency communities advocating for his release.
Silk Road's Infamy: The dark web marketplace facilitated over $200 million in illegal transactions and was shut down in 2013.
Pardon’s Appeal: Trump’s pardon highlights his alignment with libertarian voters and cryptocurrency supporters.
Ongoing Debate: Critics argue about justice for Ulbricht versus the ethical and legal implications of his actions.
Biden’s AI Risk Order Revoked: A Shift Towards Deregulation
President Donald Trump has repealed a 2023 executive order issued by Joe Biden that mandated stricter oversight of AI development to address risks to national security, public safety, and the economy. Biden’s order required developers of high-risk AI systems to submit safety test results to the federal government and established standards for testing AI systems for potential threats. The Trump administration argued that these measures hindered AI innovation and removed them in favor of promoting free-market-driven AI development. Critics fear that the repeal could exacerbate AI’s risks, such as cybersecurity vulnerabilities and ethical concerns, without proper safeguards.
Policy Reversal: Biden’s AI safety measures were removed, prioritizing rapid AI growth over regulatory oversight.
Innovation vs. Risk: The repeal raises concerns about unchecked AI development potentially leading to safety and security threats.
Partisan Divide: Highlights differing approaches to AI regulation, with Trump’s focus on deregulation.
OpenAI’s Operator: The Future of AI-Driven Task Automation
OpenAI is set to launch Operator, a "computer use agent" that can perform tasks directly in a user’s browser, representing a significant step toward AI-driven task automation. Operator will assist users by navigating online platforms, performing tasks like finding flights or drafting emails. While the system relies on multimodal AI to analyze text and visuals, it keeps users involved in critical steps, such as completing transactions. Despite its potential, Operator raises concerns about misuse, like spamming and bypassing restrictions, and could encounter reliability issues similar to early self-driving cars. OpenAI’s push for this functionality reflects the broader race to create general AI capable of replacing human workflows.
AI for Automation: Operator enables task automation, such as navigating websites and performing online actions.
Ethical Concerns: Potential misuse, like spamming and data privacy risks, highlights the need for robust safeguards.
AI Evolution: The feature represents a step toward achieving artificial general intelligence by bridging productivity gaps.
Update: OpenAI Unveiled "Operator" in the following livestream on Jan 23, 2024 (just after this post was published):
Author: Malik Datardina, CPA, CA, CISA. Malik works at Auvenir as a Sr. AI Product Manager who is working to transform the engagement experience for accounting firms and their clients. The opinions expressed here do not necessarily represent UWCISA, UW, Auvenir (or its affiliates), CPA Canada or anyone else. This post was written with the assistance of an AI language model. The model provided suggestions and completions to help me write, but the final content and opinions are my own.
FTX Fallout: Sam Bankman-Fried handed a 25-Year Sentence
Sam Bankman-Fried, co-founder and former CEO of FTX, has been sentenced to 25 years in prison by the Southern District of New York Judge Lewis Kaplan for fraud and money laundering charges related to the crypto exchange's operations. This sentence comes after Bankman-Fried was found guilty on all seven counts, with a possible maximum of 110 years, during his trial. In addition to prison time, he is ordered to pay an $11 billion forfeiture to the U.S. government. The sentencing reflects the severity of the crimes, including the misuse of over $8 billion in customer funds. Bankman-Fried's case has been highlighted as a significant indicator for future legal actions within the crypto industry, emphasizing the need for deterrence against similar fraudulent activities. The outcome also underscores the absence of parole in the federal system, though good behavior could lead to a sentence reduction under the First Step Act.
SBF25: Special Offer From UWCISA'S Coffee Break PD
With Sam Bankman-Fried (SBF) now facing 25 years, understanding the FTX debacle is crucial. Learn more about what went wrong with our Crypto Double Bill course. In recognition of this significant moment, we're offering a special $25 discount.
The course consists of two standalone chapters:
🔹 #1 Bitcoin Basics Dive into the world of Bitcoin with an insightful backgrounder, perfect for beginners and those that want to brush up on their crypto knowledge.
🔹#2 FTX Exchange Fraud Explore the intriguing rise and fall of SBF and FTX, featuring the acclaimed work of Cold Fusion, a popular YouTuber renowned for his insightful tech content, thorough exploration of major frauds, and engaging documentary style.
🔥 Exclusive Limited Time Offer: Use coupon code SBF25 by April 25th to unlock your $25 discount and dive into the course for only $24! 🔥
Seize this opportunity to reflect on the FTX lessons and enrich your understanding of cryptocurrency’s dynamic landscape.
For more on SBF's sentencing, check Coffeezilla's take:
From Anonymous Reviews to Public Profiles: Users get "Glassdoored"
Glassdoor, traditionally a platform for anonymous employer reviews, has begun adding users' real names to profiles without their consent, utilizing public sources for identification. This change follows Glassdoor's acquisition of the professional networking app Fishbowl, which requires identity verification. Despite assurances of anonymity, this shift has raised data privacy concerns, with users like Monica discovering that opting out is not straightforward and could lead to potential retaliation from employers. The company's insistence on non-anonymity for profile names contradicts its previous policies and has led to user pushback and account deletions. Glassdoor defends its practices, emphasizing user options for anonymity while integrating Fishbowl features, but the blend of Glassdoor and Fishbowl data introduces legal and security risks for users, sparking debate over the platform's commitment to user privacy and anonymity.
Key Takeaways:
Glassdoor has controversially started adding users' real names to their profiles without consent, citing identity verification needs following its acquisition of Fishbowl.
Users face difficulties in opting out, risking exposure and retaliation from employers, contrary to Glassdoor's previous commitment to anonymity and privacy.
Always treat information posted online as public. If you want it to stay private, keep it to yourself.
Structuring this as an "acqui-hire" enables Microsoft to reduce the risk of antitrust scrutiny and other complexities that could have come with purchasing Suleyman's company.
Amidst Microsoft's strategic AI advancements, Google faces setbacks with its AI technologies, striving to overcome recent challenges in image-generation and chatbot functionalities.
Empathy at $9/Hour: Nvidia's AI Agents Redefine Patient Interactions
Nvidia has partnered with Hippocratic AI to introduce AI-powered "empathetic health care agents" that surpass human nurses in efficiency and cost-effectiveness on video calls. These agents, leveraging Nvidia's technology and trained on Hippocratic AI's health care-focused LLM, aim to establish stronger human connections with patients through enhanced conversational reactions. Tested by over 1,000 nurses and 100 licensed physicians in the U.S., these bots have demonstrated superior performance across various metrics compared to both human nurses and other AI models. The collaboration highlights the potential of AI in addressing the health care worker shortage in the U.S., offering a cost-efficient alternative at $9 per hour, significantly lower than the median hourly rate of $39.05 for nurses. This development underscores the evolving role of AI in enhancing health care delivery and patient outcomes.
Key Takeaways:
Nvidia and Hippocratic AI's collaboration introduces AI health care agents outperforming human nurses in effectiveness and empathy on video calls.
The AI agents, costing $9 per hour, present a cost-effective solution to the health care worker shortage, contrasting with the higher hourly pay for nurses.
Tested by health care professionals, these AI agents have outshined both their human and AI counterparts in various health care-related tasks, promising an innovative shift in patient care.
Author: Malik Datardina, CPA, CA, CISA. Malik works at Auvenir as a GRC Strategist who is working to transform the engagement experience for accounting firms and their clients. The opinions expressed here do not necessarily represent UWCISA, UW, Auvenir (or its affiliates), CPA Canada or anyone else. This post was written with the assistance of an AI language model. The model provided suggestions and completions to help me write, but the final content and opinions are my own.
The rise of robot wranglers highlights the ongoing need for human oversight in increasingly automated work environments.
Despite their technological advancements, robots often require human intervention to correct errors and guide their actions.
The interaction between human workers and robots is evolving into a collaborative dynamic, emphasizing the importance of both in achieving operational success.
Google is contemplating a rebrand of its forthcoming Assistant, previously linked with Bard, to "Gemini," as identified in a recent teardown of the Google app by 9to5Google. This analysis revealed changes in the app's code, suggesting a shift in naming from "Assistant with Bard" to "Gemini." This rebranding effort reflects Google's exploration of names for its large language model (LLM) technologies, despite potential confusion among users accustomed to the Bard designation. Gemini, which encompasses several variants including Nano, Pro, and Ultra, represents Google's new LLM, and the rebranding to "Gemini" could lead to complexities, especially with the introduction of a subscription service named "Gemini Advanced," initially known as "Bard Advanced." The potential for confusion extends to future iterations of Google's LLM, raising questions about the sustainability of the "Gemini" brand name.
Key Takeaways:
Google may rename its upcoming Assistant from "Bard" to "Gemini," based on code changes spotted in a Google app teardown.
The rebranding introduces "Gemini" as the new face of Google's large language model technologies, with variations like Nano, Pro, and Ultra.
The change might confuse users, especially with the launch of "Gemini Advanced" subscription service, and raises questions about future branding consistency.
Germany's €2 Billion Bitcoin Seizure: A Landmark in Cyber Law Enforcement
German authorities have confiscated approximately €2 billion worth of bitcoins, marking potentially the largest seizure of its kind in the nation's history. The operation in the eastern state of Saxony led to the seizure of 50,000 bitcoins linked to two individuals suspected of operating a piracy website up until the end of 2013. These suspects, aged 40 and 37, are believed to have acquired the bitcoins through revenues generated from their illicit website, engaging in unauthorized commercial exploitation of copyrighted works and subsequent commercial money laundering. The bitcoins were voluntarily transferred to an official wallet of the Federal Criminal Police Office (BKA), signaling a significant step in the ongoing investigation, though no charges have yet been filed. The case highlights the intersection of digital currency and criminal activity, underscoring the challenges and complexities faced by law enforcement in tracing and managing digital assets.
Key Takeaways:
German police have seized 50,000 bitcoins worth around €2 billion in Saxony, possibly the largest seizure of its kind in Germany.
The bitcoins were linked to two men suspected of running a piracy website and engaging in commercial money laundering.
The seized bitcoins were voluntarily transferred to a wallet of the Federal Criminal Police Office, with the investigation still ongoing and no charges filed yet.
Bitcoin Unveiled: The Surprising Traceability of Cryptocurrency Transactions
The narrative of Bitcoin's anonymity was significantly challenged by the work of Sarah Meiklejohn, a young mathematician whose research revealed the cryptocurrency's transactions to be far more traceable than previously believed. Meiklejohn's investigation into Bitcoin's blockchain technology uncovered that, contrary to the crypto-anarchist ideal of a fully anonymous digital currency, the public ledger of Bitcoin transactions provides a tool for researchers, tech companies, and law enforcement to trace and identify users' activities. This revelation has had profound implications for the world of cybercrime, aiding in solving major crimes, including the takedown of dark-web drug markets, and leading to significant law enforcement seizures. Meiklejohn's approach, combining meticulous transaction tracking with innovative clustering techniques, showcased the blockchain's transparency and the potential to undermine the privacy of those who misuse the currency for illicit purposes.
Key Takeaways:
Sarah Meiklejohn's research unveiled the traceability of Bitcoin transactions, challenging the perception of the cryptocurrency as an anonymous digital currency.
The investigation into the blockchain technology led to significant breakthroughs in cybercrime investigations, including major drug market takedowns and law enforcement seizures.
Meiklejohn's methods demonstrate the potential for transparency within the blockchain, highlighting the risks for users involved in illicit activities.
Matt Wolfe is a popular AI developer and educator known for sharing his insights on AI, no-code technologies, tech, and futurism through various platforms such as YouTube and his website, FutureTools.io. He curates lists of AI tools for different needs and shares his expertise to help others navigate the evolving landscape of digital tools and technologies. Below is a summary of his review of the Apple Vision Pro. For his full review, watch this video:
The Apple Vision Pro has stirred considerable excitement, offering an immersive experience that is notably distinct from other virtual reality headsets. With a price tag of nearly $44,000 after taxes for the 512 GB model, it represents a significant investment into the future of VR and AR technologies. The unboxing experience aligns with Apple's high standards, presenting a product that exudes quality. The device comes with a range of accessories, including a cleaning cloth, an extra padded light seal, an alternate band, a power brick, and a USB-C cable, ensuring users have everything they need for an optimal experience.
Key Takeaways:
The pass-through quality is impressive, although not as flawless as some early reviews suggested, with minor issues like LED light distortion.
Despite concerns about its weight, the Apple Vision Pro is surprisingly comfortable for extended use, with less eye fatigue compared to other VR headsets like the Meta Quest.
The device offers unparalleled immersion, especially with realistic environments and detailed hand tracking, which enhances the overall user experience.
Multitasking capabilities are a standout feature, allowing users to manage multiple screens and applications effortlessly within their field of view.
However, the device has its drawbacks, including limitations in low-light conditions, a somewhat restricted field of view, and a lack of a substantial app selection at launch.
Author: Malik Datardina, CPA, CA, CISA. Malik works at Auvenir as a GRC Strategist that is working to transform the engagement experience for accounting firms and their clients. The opinions expressed here do not necessarily represent UWCISA, UW, Auvenir (or its affiliates), CPA Canada or anyone else. This post was written with the assistance of an AI language model. The model provided suggestions and completions to help me write, but the final content and opinions are my own.
By now we have all heard about Silicon Valley Bank’s (SVB) sudden collapse and we are wondering whether we are on the precipice of a 2008 scale meltdown.After all it is the second largest bank failure in U.S. history. Even more concerning is the recent rattling at Credit Suisse. In this post we'll explore, some key takeaways from the pundits and publishers out there.
Examining the Connection Between Silvergate Bank’s Collapse and SVB’s Bank Run
A few weeks ago, the well-known cryptocurrency bank, Silvergate, suffered a sudden collapse. As a prominent institution within the world of crypto, Silvergate served as a crucial entry and exit point for individuals looking to convert their cryptocurrency into fiat currency. It also maintained substantial exposure to both Alameda Research and FTX.
In contrast, Silicon Valley Bank (SVB) maintains no direct connections with the cryptocurrency sector or Silvergate Bank. However, the dramatic downfall of Silvergate likely instilled enough fear among SVB depositors, prompting them to trigger a panic. For a more in-depth exploration of the Silvergate collapse, check out Wall Street Millennial’s take on the situation:
Unveiling Risk Management Flaws: What did Warren Buffett say about low tides?
Warren Buffett once said, “You don’t find out who’s been swimming naked until the tide goes out.” This sentiment rings true for SVB, which suffered from a maturity mismatch between its depositors' on-demand withdrawals and the long-term debt it held. The bank was exposed to interest rate risks but took no action, leaving it vulnerable.
How did things go so wrong?
When looking at what happened at SVB, we need to go back in time an examine the impact of the zero interest rate policy that's been in place for decades. It resulted in “the search for yield”. This search for yield funded everything from mortgage-backed securities, cryptocurrencies, investments in emerging markets as well as risky investments in the oil sector. And this is what likely prompted the executive management at SVB to lock in their money in long term debt. Specifically, SVB owned over $80bn of mortgage-backed securities with 97% of them being 10+ year duration at a weighted average yield of 1.56% (link).
Interestingly, SVB contemplated managing this risk but decided against it. As noted on Bloomberg:
“In late 2020, the firm’s asset-liability committee received an internal recommendation to buy shorter-term bonds as more deposits flowed in, according to documents viewed by Bloomberg. That shift would reduce the risk of sizable losses if interest rates quickly rose. But it would have a cost: an estimated $18 million reduction in earnings, with a $36 million hit going forward from there”
Then inflation struck. This caused the Fed to aggressively reverse its zero-interest rate policy. The swift increase in interest rates led to a significant decline in the value of SVB’s debt holdings, as the value of debt falls when interest rates rise.
To deal with this widening hole in their balance sheet, management failed to raise $2.25 billion. This left SVB unable to cover the unexpected withdrawal of $42 billion in deposits (that occurred in 1 day!), as the value of the debt they held had severely diminished and could not cover the outflows. For more on the numbers, check out Patrick Boyle’s take:
Furthermore, the absence of a risk officer from April 2022 to January 2023 compounded these issues. Moreover, the CAO was none other than the former CFO of Lehman! For more on this check out Cold Fusion’s take:
The Race to escape the Sinking Ship: Who will be left holding the bag?
Venture capitalists, known for their interconnectedness through WhatsApp groups, began to realize the bank's shortcomings. They themselves were quite vulnerable as 90% of SVB's deposits were uninsured, in contrast to the industry average of 52% (link). As noted in this Bloomberg Odd Lots podcast, SVB was not actually dealing with a diverse set of clients. Instead, they were dealing with a handful of VCs. Consequently, the clients pulled out their funds in unison as a response to the request from their respective investors.
The Ripple Effect: Contagion Risks Loomed
The inability of Silicon Valley to access cash for payroll could have spelled disaster for numerous startups. This cash flow issue would have also generated incentives for customers to avoid smaller banks, potentially triggering bank runs on other vulnerable institutions. It would also lead to consolidation of customers around the “too big to fail” banks, as people will not trust banks that are the same size or smaller than SVB.
Questionable Timing: Bonuses and Stock Sales
The timing of bonus payouts and stock sales raised eyebrows, with bonuses ranging from $12,000 for associates to $140,000 for managing directors issued the day FDIC took over the bank. (link) Silicon Valley Bank CEO Greg Becker's stock sales, totaling nearly $30 million over two years, also drew scrutiny. Most notably, Becker sold $3.6 million worth of shares just days before the bank disclosed a substantial loss that led to its stock plunge and eventual collapse. (link)
Capitalism on the way up, Socialism on the way down?
The US Treasury jumped into shore up ALL deposits. The new "Bank Term Funding Program" will offer loans of up to one year to lenders that pledge collateral, which will be valued at par. Management and shareholders, however, will not be bailed out.
The Biden administration and other government officials have emphasized that the FDIC intervention is not a bailout, seemingly more concerned about potential backlash than addressing investors' needs. Their apprehension likely stems from the possibility of sparking a new Occupy Wall Street or Tea Party movement, as Uncle Sam's aid tends to favor those deemed "too big to fail" rather than offering support to smaller, struggling entities.
And the Biden Administration has good reason to be aware of this perception.
As reported in the Washington Post, prominent venture capitalists and tech executives, including LinkedIn founder Reid Hoffman and investor Ron Conway, leveraged their connections and influence to lobby Democratic lawmakers and administration officials for intervention in the bank crisis. As prolific donors to Democrats, including Biden, they worked with Pelosi and Gov. Newsom to pressure the White House and Treasury Department. Over 600 tech industry executives joined a call with Rep. Ro Khanna, who then emerged as a vocal advocate for the Biden administration to support the bank's depositors and prevent broader financial repercussions. Washington Post summarized the situation as follows:
“The lobbying blitz reflected a broader sea change in the normally libertarian tech industry — one that typically tries to ward off federal intervention. Now, many of those same voices were calling on the Biden administration to act and protect an ecosystem in which they had a large stake.”
Ironically, it was none other than the CEO of SVB, Greg Becker, who lobbied back in 2015 to evade the Dodd frank regulatory constraints and thereby get lighter scrutiny. Here is an excerpt from this article:
“Touting “SVB’s deep understanding of the markets it serves, our strong risk management practices,” Becker argued that his bank would soon reach $50 billion in assets, which under the law would trigger “enhanced prudential standards,” including more stringent regulations, stress tests, and capital requirements for his and other similarly sized banks…Becker insisted that $250 billion was a more appropriate threshold…“Without such changes, SVB likely will need to divert significant resources from providing financing to job-creating companies in the innovation economy to complying with enhanced prudential standards and other requirements,” wrote Becker…”
Commenting on the contradiction between this attitude and the SVB bailout demanded by the 600 tech execs, Scott Galloway, a prof at NYU’s Stern School of Business, offers a succinct and insightful summary of the underlying dynamics (see here and here):
"We have capitalism on the way up and socialism on the way down."
Sure, this protected the depositors. And yes, it was not for the shareholders or management. However, one cannot deny that it was the special access to the powerbrokers that brought in the FDIC to save the day. In the absence of such privileged access, the account holders would have likely met the same fate as mortgage holders who were left stranded in the 2008 crisis.
Author: Malik Datardina, CPA, CA, CISA. Malik works at Auvenir as a GRC Strategist that is working to transform the engagement experience for accounting firms and their clients. The opinions expressed here do not necessarily represent UWCISA, UW, Auvenir (or its affiliates), CPA Canada or anyone else. This post was written with the assistance of an AI language model. The model provided suggestions and completions to help me write, but the final content and opinions are my own.
Sam Bankman-Fried (SBF) was scheduled to testify in front of congress on Tuesday. Forbes caught a copy of his testimony, which is available here. However, this testimony won’t be delivered. Instead, SBF got arrested in the Bahamas. The US Department of Justice (DoJ), in a joint conference with the SEC and CFTC, unveiled the following 8 charges:
Conspiracy to Commit Wire Fraud on Customers
Wire Fraud on Customers
Conspiracy To Commit Wire Fraud on Lenders
Wire Fraud on Lenders
Conspiracy to Commit Commodities Fraud
Conspiracy to Commit Securities Fraud
Conspiracy to Commit Money Laundering
Conspiracy to Defraud the United States and Violate the Campaign Finance Laws
CryptoSlatereported that “the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have both filed separate charges against the ex-CEO…The SEC has charged SBF with offering securities for sale and selling securities for fraud. Specifically, the charges fall under the Securities Exchange Act of 1934 and the Securities Act of 1933 pertaining to anti-fraud provisions…Further, the CFTC charged SBF with fraudulent misstatements and omissions.”
The SEC complaint is available here (and here is their press release). The CFTC’s complaint is available here (and here is their press release). The full press conference is available here.
Video #1 – Will SBF’s Ill Advised Media Tour contribute to his Downfall?
Since the November collapse, SBF has been giving interviews (e.g. NYTimes, ABC, WSJ, BBC). This is of course against the advice of counsel. Regardless, he has been talking up a storm, claiming to be the incompetent CEO and then apologizing for his screwups. That is, he was able to successfully bob-and-weave during these interviews and avoid admission of fraud.
That was until he was interviewed by Coffeezilla.
Coffeezilla admitted he too got outmaneuvered when he attempted to pin him down here and here. However, by reviewing his mistake and the mistake of others, he cornered SBF in this video and got him to admit to the lack of segregation of funds:
SBF, in contrast to his other interviews, got annoyed and accused Coffeezilla of monopolizing the interview time. Coffeezilla easily refutes this claim, noting SBF was factually incorrect. That being said, it would be surprising if this interview is not captured as part of the evidence that the DoJ, SEC, and CFTC will ultimately use against SBF.
Video #2 – WSJ Overview on the Players and Places
The following gives a good overview of what is happening. This includes the jurisdictions involved, the charges laid, and the Congressional hearings that are occurring in parallel.
See here for Coffeezilla’s analysis of the charges. The video also includes commentary from Legal Eagle.
Video #3 – Summary of the Criminality at FTX and Alameda
FTX’s CEO, John J. Ray III, testified before congress about his findings so far. Ray was the same CEO that managed the Enron bankruptcy and has previously said that he has never seen “a complete failure of corporate controls and such a complete absence of trustworthy financial informationas occurred [at FTX]”. This video, from the Washington Post, seems to capture the essence of the criminality that was a foot at the crypto-exchange and the hedge fund:
Video #4 – Did the multi-Billion Dollar FTX use QuickBooks and Slack?
For the poor state of governance and controls, see Ray’s opening remarks during his congressional testimony:
Video #5 – The Nature of Crypto is making it hard for Ray to Locate FTX’s Assets
Locating assets in a bankruptcy is usually a matter of following the paper trail. Admittedly, FTX has poor records as noted in the last video. However, the problem is compounded by the ethereal nature of crypto/digital assets. See WSJ’s summary of Ray’s testimony, which highlights this unique challenge within FTX’s bankruptcy proceedings:
The FTX story continues to evolve. There is definitely more to discuss, as additional details come to light. However, another story that will be explored in future post(s) is the contagion that has spread through the crypto-verse due to FTX and the other collapses in the nascent industry.
Author: Malik Datardina, CPA, CA, CISA. Malik works at Auvenir as a GRC Strategist that is working to transform the engagement experience for accounting firms and their clients. The opinions expressed here do not necessarily represent UWCISA, UW, Auvenir (or its affiliates), CPA Canada or anyone else.
In our last post, we looked at the epic rise of SBF and FTX. In this post, we examine the Ten Days of November that shook FTX to its core and resulted in its spectacular collapse.
Post #1: The CoinDesk FTX Timeline
The best place to start is this timeline, which is taken from this CoinDesk post. I’ve also added the amount withdrawn from FTX, which was taken from this Reuters article:
“That balance sheet is full of FTX – specifically, the FTT token issued by the exchange that grants holders a discount on trading fees on its marketplace. While there is nothing per se untoward or wrong about that, it shows Bankman-Fried’s trading giant Alameda rests on a foundation largely made up of a coin that a sister company invented, not an independent asset like a fiat currency or another crypto. The situation adds to evidence that the ties between FTX and Alameda are unusually close.”
As noted in the above timeline, this is what prompted Changpeng Zhao (CZ) to tweet this and then caused the billions to be withdrawn, as mentioned in the Reuters article.
Post #3: Prelude to the FTX Collapse
The first of Coffeezilla’s video on the collapse really captures not just the rivalry between SBF and CZ, but the killer-business logic that was potentially at play. Far from the crypto-utopian visions of an egalitarian ecosystem, we see the same sort of cutthroat competition in the banking world itself. For example, one theory holds that Bear-Stearns collapse was triggered in the 2007-2008 Financial Crisis. The reason? Payback. Bear-Stearns did not help out in the Long-Term Capital Management (LTCM) bailout and so Goldman-Sachs returned the favour almost 20 years to the day.
Post #4: FTX and the Mystery of the Stolen Crypto
This video, published 3 days after the last, explores the complex web of relationships that is FTX (far more complex than Lehman), but zooms in on the entanglement between Alameda Research and FTX. The big reveal here is that an Alameda insider noted that “not only did they [Alameda Research] have access to FTX's back end [but] they [also] managed withdrawals for FTX and had a giant line of credit that they could draw on, which seems like partially may have been users funds something that no separate entity would normally have”. The insider was corroborated by the Wall Street Journal.
Post #5: An Inside Look at the Chaos and Ineptitude at FTX/Alameda
Shout out to Tim Bauer for passing on this link from MilkyEggs! (Bloomberg’s Matt Levine, also referred to the post here with all the necessary caveats). It gives more details around the sheer chaos and ineptitude that existed at FTX and Alameda. With respect to the chaos, it gives some details around SBF’s mental state. It is quite the contrast to the image that was portrayed to the outside world, which we saw in the first video in the last post. With respect to ineptitude, it highlights the “farcically simplistic” accounting records the company kept.
In terms of the top three takeaways, it firstly casts doubts on the origin story of SBF. The post alleges (based on an insider) that SBF quickly lost all the wealth he made from those bitcoin US vs Japan arbitrage trades. Secondly, it gives some insight into the inordinate amount of risk SBF was taking. Lastly, it attempts to breakdown the losses incurred by FTX-Alameda. That is, they attempt to piece together where the money - $15.5 billion in total – was spent. Also, do check out the postscript where they “found” another $3 billion in losses. Of course, this is not an official audit or anything like that. However, it’s nice to get a more wholistic understanding of the FTX-Alameda situation – beyond the puff pieces in the mainstream press.
In our next post, we will begin exploring the aftermath of FTX collapse.
Author: Malik Datardina, CPA, CA, CISA. Malik works at Auvenir as a GRC Strategist that is working to transform the engagement experience for accounting firms and their clients. The opinions expressed here do not necessarily represent UWCISA, UW, Auvenir (or its affiliates), CPA Canada or anyone else.
