FTX's current CEO, in charge of the bankruptcy, explained why SBF was, once more, full of it. The accounting by which FTX.us would be solvent relies on the $250m that LedgerX owns (FTX.us bought LedgerX). The problem is that... These $250m came from Alameda and is money stolen from customers and investors as part of the multiple frauds SBF committed.
No, FTX was making bank in fees. They just got greedy and loaned customer funds the SBF’s hedge fund to gamble with. Hedge fund went bust and now the loans default and the collateral which was just funny money to begin with is worthless.
> This may be the biggest embezzlement of customer funds held in custody in history.
I wouldn't be surprised to learn that the amount of actual customer funds that went in were much smaller than claimed.
Keep in mind FTX was mostly 'perpetuals' -- fake assets. It might be that a lot of the customer funds were just fictional gains, also may be that a lot of them were paper value owned by SBF entities.
I've been trying to find anyone I personally know that had FTX exposure and so far I'm coming up dry.
Note that FTX told their customers that they would not invest their deposits. Customers who opted in to margin lending could lend money to other customers but even in that case FTX went far beyond what they promised to their customers. It would be more accurate IMO to say that FTX embezzled (or just plain stole) customer deposits.
This is just old-fashioned fraud. SBF had a Jane Street (trad fi) background. FTX didn't operate a blockchain or develop any blockchain technology on their own. They operated a trading platform that was run on Python and SQL. Then they embezzled funds and hid the trail.
FTX was insanely profitable (100s of millions in revenue, low expenses). If SBF hadn't have taken customer money they'd still be around. Even now the CEO overseeing bankruptcy has recovered 90 percent of customer assets. Their downfall was absolutely accounting shenanigans, not an issue with the core business.
Their product was letting people take leveraged gambles on crypto, so arguably not a social good.
tl;dw: It's hard to get SBF to admit to fraud involving Alameda because he can fall back on the excuse that he wasn't the CEO and didn't know what was happening (even though there's every chance he actually did). So the youtuber hit him with a more targeted question: if FTX guarantees deposits are not traded, why were deposits not able to be withdrawn -- where did they go? He gets SBF to admit that they were commingling regular deposits with funds from customers doing riskier things like margin trading, and during the run those riskier users withdrew funds that should have been deposits that were set aside in a separate pool. That exposed regular depositors to risk contrary to what was laid out in the TOS. SBF gets mad and lashes out.
FTX took customer deposits and invested them in their failing hedge fund which lost tons of money. That was not childish incompetence, that was malicious and calculated fraud.
FTX firm headed by SBF collapses after failing to process user withdrawals. Mismanaged funds and risky trades are to blame. Victims and prominent figures within the crytposphere allege fraud.
Funny how when it comes to most stories, "Business is killing babies... says person (random person on twitter)" is good enough.
FTXs terms didn’t allow them to use customer’s money as deployable capital. That’s SBF committing fraud and doesn’t change the low transaction costs and speed of the network, much like madoff didn’t make the concept of cash worthless.
I thought FTX was not fraudulent from the beginning. It only went that way when Alameda started losing cash (it was originally very profitable). When, instead of just letting it die, SBF decided to use customer money to save it (and also to pay himself and others bonuses and buy people free houses and other shit)?
The central issue is whether FTX user funds were used in violation of the terms of service. Whenever that question comes up, the open and honest SBF rolls over and plays dumb. He doesn't have the details. His dashboard didn't show it. He lost track of "important things." He doesn't "know what to tell you."
Everything was an "embarrassing mistake."
SBF's problem is that the only way for FTX to become insolvent is that user funds were being used in violation of the terms of service.
Perhaps this is a noob question but are those 2 related? When SBF was ordered to hand over $300M of tokens did he create $300M of FTT - technically complying with the order but not at the same time - that does sound like an SBF play. He previously stated that FTX weren't trading with customer deposits, technically true - the deposits were loaned to Alamada who were trading with them.
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