> not sure why the CEO of Binance would have wanted to acquire FTX if he really thought it was in such a bad state
FTX could have just been illiquid. With a lot of loans to other crypto players who would do fine if FTX were rescued. Turns out, they weren’t. They were fundamentally insolvent.
FTX loaned money to Alameda, the crypto hedge-fund made a series of bets and probably put some cash in illiquid assets too, but mostly irresponsible bets. Crypto market collapsed, bets that were worth billions with a decent liquidity now became worth millions with not so much liquidity.
They turned to their most harsh competitor hoping for a bailout kinda like how Microsoft saved Apple in the 90s . All that didn't happen, it was the the straw that broke the camel's back.
That's about it, when you are leveraged adverse market events can literally put any company out of business, no matter how giant it is. Chapter 11 is not the end of the world for old companies making real stuff that people will always want (say General Motors or Hertz), but in crypto where everything is about reputation there is no way FTX will ever be heard of ever again.
In the case of the crypto market adverse events of massive proportions repeat themselves every 5 years or so. It happened this year , together with inflation. It was due, at some point the chickens had to come home to roost.....whatever the fuck that means lol.
A better comparison would be a stock brokerage that took your money to buy specific stocks on your behalf but then did something totally different, including “investing” in illiquid assets.
If they had just bought the stock you requested, then they could just liquidate your stock at market price when you said you want to sell.
This was not the situation that FTX was/is in.
Instead, the way FTX allocated money/assets was suspicious (at best) if not flat out irresponsible and deceptive.
Also, FTX was not and is not a bank, and the idea that this is levering in the same way regulated banks lever is laughable.
> As someone who lost a little bit through this whole debacle I think it is because we willingly gave our money to FTX.
That's not the whole picture though. If I invest in some risky stock (or even what I thought was not a risky one) and it tanks, sure I feel bad but it's part of the deal so it's ok.
But if I invest in something risky and I lose the money not through investment risk but simply because the fund manager outright stole my money, I'd be very angry.
No, stop trying to spin this. It's a stereotypical crypto story.
> Sam, Caroline, and everyone at the top of FTX and Alameda have very close family ties to key power brokers on Wall Street, which is how they were able to run this scam.
Who was Do Kwon's wall street family tie?
> FTX has also lobbied extensively for harsh regulations on DeFi, which is a key reason that he was hated by people in the cryptocurrency space, and adored by Wall Street.
Centralized exchange lobbies against decentralized exchange, isn't that just business?
> The only reason FTX got caught is because of evidence they left on-chain.
Really? Source? From what I know it was just good old balance sheet (probably an Excel file, even) that got leaked.
> Any other investment fund might have been able to sweep it all under the rug, but since the massive payout from FTX to Alameda was visible for the world to see, the corruption was obvious, and the whole thing collapsed
Utter bull. FTX paid Alameda a long time ago. No one knew this story until 2 days ago because none of this works the way you are talking about.
Are you intentionally trying to mislead people? The whole point at that time was that their claims to solvency were entirely predicated on an indefensible valuation of their FTT holdings. We've now seen, as expected, that that FTT valuation was totally bogus.
Because he was concerned they were insolvent and were using customer funds to cover trading losses and buy penthouses.
Turns out they were insolvent and using customer funds to cover trading losses and buying penthouses.
Unless CZ held a gun to SBFs head and made him lever up, lose billions then double down, take customer funds to the casino and try to win back $10billion then its kinda hard to blame CZ.
> ? It was public that FTX money came from running a crypto exchange, but that FTX's CEO (SBF) secretly diverted customer funds to his hedge fund (Alameda) doesn't seem like something people would have discovered in due diligence.
I'm guessing algebra is difficult for journalists.
> Major investors, with lots of money on the line, also didn't catch this.
Major investors had all the incentives to keep the scam going as they stood to make big money from the scam.
Journalists should have the incentives to expose the scams, except they were not in this ( and probably some other ) case because they were either getting money from the scam or were trying to be the best cheerleaders possible in hope of getting money from the scam.
What the article says about market making on FTX is true, but that doesn't bring in billions. The uninformed retail order flow for the crypto market is not large enough for that. It probably would've been a ~$10M/year business, or something on that order. Great, but who wants a few million? Can't even do political stuff with that. They wanted billions! And the only obvious way to get there is by making huge risky directional bets on shitcoins and other crypto ventures, which is what happened. Instead of building a sound (okay, still shady because you're front-running) business with Alameda, SBF decided to gamble away the money on VC-style bets trying to become a trillionaire.
> That all of these decisions that somehow always leave the entity unharmed/better off at the expense of others were not made with intentionality and/or any remote understanding of their consequences?
Robinhood just had to borrow a billion dollars. Having to get a billion dollar emergency bail out is not the sign of a sinister plot, it's the sign of a colossal fuck up.
> I refuse to believe that such a massive entity with so much resources at it's disposal has a think-tank consisting of two interns and a comatose member of middle-management.
There are a fair number of signs that Robinhood is a mess. This isn't the first time the company has run afoul of their own success and wound up screwing over investors.
> Entity X faces no real repercussions.
I didn't say they shouldn't be responsible for the consequences of their mistake. My point was that it's more likely this is a screw up than some sinister plan on their part.
We're on the same page as far as this last bit goes for sure. Regardless of whether it was a screw up or malice, they should be the ones paying the price (though sadly I suspect we both know they won't).
> compare the earnings of NASDAQ with the "earnings" of FTX
Yes? Everyone knew that volume in crypto was too high and likely irrational. But that wasn't much indication that FTX was behaving fraudulently: they seemed to be just doing the straightforward work of helping match buyers and sellers and taking a cut.
> if he has that much time to be a clown what are the odds of him actually running a company
Lots of CEOs seem to do things like this; again that's not a strong signal. Also doesn't have anything to do with algebra.
> fact that FTX was selling coins without delivering them
I think you missed the point parent was making about the fraud of accepting money for $crypto_thing and not actually buying $crypto_thing and just moving the money to the Alameda hedge fund. All of that purchasing never impacted the prices of $crypto_thing.
The other thing that will be interesting is if they uncover fraud around $crypto_things that were supposedly tracking actual SEC regulated securities as a derivative and if any Wall Street finance firms were using those FTX derivatives as part of their business.
> who were told their money was theirs was in fact lent to Alameda.
Even if we assume for a second that this wasn’t some sort of overt theft scheme and not only just an accounting failure with double counted deposits, what was the least bad scenario here?
That SBF et al were so obsessed with their altruistic charity stuff that they thought they could gamble their billions and turn it into 100 billion and become neo-Bill Gates?
Some kids who had no rules making crazy high risk bets on other crypto stuff, blindly believing in their ability and leveraging their parent company’s name to over extend themselves… Then FTX came to the rescue with customer deposits and hoping growth would cover the downside, while not telling anyone or changing controls as far back as April 2021?
FTX could have just been illiquid. With a lot of loans to other crypto players who would do fine if FTX were rescued. Turns out, they weren’t. They were fundamentally insolvent.
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