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Grant Demaree

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The difficulty with this position is that it assumes the funds were stolen. We're still waiting for a court to decide that. A couple possibilities

  • What if FTX was law-abiding (just stupid) until recently. At the time Amy received her funds, FTX hadn't yet started committing fraud
  • What if 20% of FTX's losses are due to fraud, but 80% are due to some non-criminal combination of negligence and risk seeking?

In both cases, Amy is just an innocent bystander. It's reasonable for her to buy insurance

Alternatively, if it turns out that FTX was entirely a fraud, then Bill still pays out the entire value of the clawback. The defrauded people are actually better off, since Bill ensures the funds will still be available

Insurance is just a good way to deal with uncertainty. It's a positive-sum trade with a positive externality:

  • Amy reduces her risk in exchange for a negative EV
  • Bill gets a positive EV in exchange for extra risk
  • People seeking clawbacks are more likely to be made whole

Thanks Constantin! I've reached out to the group, and I'm very much looking forward to meeting you all

Many thanks! That's really close to where I'll be

I should be arriving in Germany on July 6th. Very much looking forward to getting involved with the community