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12:38 PM · Nov 7, 2022 2) FTX has enough to cover all client holdings. [0] 4:03 PM · Nov 8, 2022 2) Our teams are working on clearing out the withdrawal backlo

12:38 PM · Nov 7, 2022 2) FTX has enough to cover all client holdings. [0] 4:03 PM · Nov 8, 2022 2) Our teams are working on clearing out the withdrawal backlog as is. This will clear out liquidity crunches; all assets will be covered 1:1. This is one of the main reasons we’ve asked Binance to come in. [1] has enough to cover all client holdings ---> not enough to cover all client holding in 24 hours. Either they lost a billion or so dollars of client segregated funds in a day down the back of the sofa or it was a lie the whole time.

ramish94 4y ago
He mentions that they have everyone’s money, and then the very next tweet says “we’ll clear out liquidity crunches”. Literally a contradiction.
- shapefrog 4y ago
  “we’ll clear out liquidity crunches” - they have everyone’s money if they get more money from someone else.
- mistercheph 4y ago
  Giving them the benefit of doubt, this is not a contradiction. The statement means that they have enough illiquid assets to cover the withdrawal that they are working on converting into liquidity.
  - viscanti 4y ago
    But they're meant to store the customer assets in a cold wallet. They're not meant to invest them in illiquid assets that would need to be liquidated to give people their money. If it's not a contradiction, it's an intentionally misleading statement to avoid admitting they let Alameda Research invest the money when the entities are supposed to be completely separated.
    - shawabawa3 4y ago
      The extremely charitable read is that 1. They have all the funds 2. Many are in cold storage or otherwise inaccessible in short term 3. Their cold storage restore process is so slow they need emergency help to provide liquidity in the meantime Seems more like that they've either embezzled client funds or been hacked/lost some cold storage keys
      - viscanti 4y ago
        In that scenario they could point to some of the wallets to help calm the fears the money isn't available. Or they could approach a number of different lenders who would be comfortable lending at high interest rates if the money is there but slow to access. They only sell if we're in the non-charitable case.
      - astrange 4y ago
        The normal way to handle this would be insurance or a line of credit, not selling your company to your competitor overnight.
  - wmf 4y ago
    They're totally solvent but no one is willing to lend them money?
    - lokar 4y ago
      “Every banker knows that if he has to prove that he is worthy of credit, however good may be his arguments, in fact his credit is gone.”
  - miohtama 4y ago
    FTX/Alameda holds tons of illiquid FTT tokens that they cannot sell and which Binance was dumping. Thus, they might have not technically lied. But they were still wrong from the accounting perspective - they surely understood that FTT token cannot be used to cover gaps in large scale. It was the question that matters "how fast you can process user withdrawals and with what risk" Sam owns 8% of Robin Hood that is worth around ~$1B - he could sell that and cover some of the gap. But what we do not know yet is the size of the gap in time and space. FTX had $6B withdrawals pending on Tuesday.
    - lancesells 4y ago
      > Sam owns 8% of Robin Hood that is worth around ~$1B - he could sell that and cover some of the gap. Not knowing too much about this space have you ever seen anything like this happen? A CEO using their personal wealth to cover their customers funds seems unlikely.
      - tanseydavid 4y ago
        Free Jon Corzine!
      - dmitrygr 4y ago
        > have you ever seen anything like this happen? A CEO using their personal wealth to cover their customers funds No, but I would love to see it happen, enforced by a court, and backed by a promise of jail time if the CEO fails to comply in a timely fashion.
      - fantasyman1 4y ago
        > A CEO using their personal wealth to cover their customers funds seems unlikely. It’s in the category of “desperately wants to be true” of crypto crash denial. I’ve been lampooning people defending FTX in Hacker News all day. This is what I come here for!
      - FormerBandmate 4y ago
        This isn’t a thing, limited liability (which is the fundamental principle that distinguishes corporations from partnerships) prevents this. The only way would be if SBF was charged with defrauding FTX
  - appleflaxen 4y ago
    IMO this would contradict what the GP comment asserts: that SBF said "We don't invest client assets (even in treasuries)".
    - sroussey 4y ago
      I thought FTX Alemeda (the trading side) invested into their own token, which is tanking thus causing problems. Alemeda has like $14b assets and $8b in liabilities. But of that $14b, $5b are in their own token (FTT) which is kinda?? worth nothing at this very moment. So now the assets and liabilities are more equally matched, but less margin for shifting values of tokens. I don’t know, but the derivative of their assets looks scary the last 24hr. Disclaimer: not a crypto person
  - lottin 4y ago
    What do you mean illiquid? Worthless?
    - piva00 4y ago
      Illiquid just means that you can't cash it in quickly. Cash is 100% liquid while a house is illiquid you might have millions US$ parked there but only if you manage to sell it, then you convert it into liquid cash. Liquidity is a measure of how easy it'd be to trade a thing for another thing you want.
      - lottin 4y ago
        Agreed, but in this case these tokens have suddenly become 'illiquid' because they have just become worthless. It seems that here the term 'illiquid' is being used as a euphemism.
      - oldgradstudent 4y ago
        > Liquidity is a measure of how easy it'd be to trade a thing for another thing you want. It is also very hard to trade worthless things for expensive things you want. Insolvent institutions like to claim they are illiquid when in reality they are insolvent. We've seen this happen over and over during the 2008 crisis.
- drexlspivey 4y ago
  There is a time delta between the statements, assets worth $10B on one day could be worth $5b the next
- crystaln 4y ago
  It’s not a contradiction. It’s easy to have illiquid funds. For example cold storage or locked funds.
  - zeven7 4y ago
    But cold storage and locked funds lead to you taking out a loan or just saying "sorry, it's going to be a while, our funds are locked". You know what you don't do if your funds are illiquid? Sell to your competitor over night.
spuz 4y ago
Remember that blockchain transactions are slow and FTX has over 1m users. Even in the most positive of scenarios, I would not be surprised if it took days to clear the backlog of withdrawal requests.
- zoklet-enjoyer 4y ago
  Slow blockchain transactions and it would be shocking if they didn't stake user assets. Most (all?) proof of stake chains have lock up periods. Atom and other Cosmos chains are usually 21 days.
- EVa5I7bHFq9mnYK 4y ago
  Indeed, all Bitcoin blocks today are full. There is no physical possibility to withdraw all those funds. That's why Binance must implement Lightning deposits/withdrawals, like Kraken did.
  - smoldesu 4y ago
    Adding L2 chains to this equation dumps the frying pan into the fire. We don't need more points-of-failure, it's bad enough as-is.
    - EVa5I7bHFq9mnYK 4y ago
      Inability to process more than 5 tx a second for entire world is a major point-of-failure that L2 chain cures.
      - kinakomochidayo 4y ago
        Should’ve just increased the blocksize, instead of implementing some crap L2 solution.
        EVa5I7bHFq9mnYK 4y ago
        Thats the same as to say: let's buy a couple more servers rather than replace bubble sort in our code by qsort.
yucky 4y ago
If everybody walked into their bank right now to withdrawal, they couldn't cover either. Right?
- pcai 4y ago
  But their point was: FTX doesn't purport to be a bank
  - kikokikokiko 4y ago
    It doesn't purport to be a HUGE PONZI either, but... Just another normal day in crypto land.
    - astrange 4y ago
      I mean, the CEO does literally tell people he's running a Ponzi. https://www.bloomberg.com/news/articles/2022-04-25/sam-bankman-fried-described-yield-farming-and-left-matt-levine-stunned https://www.bloomberg.com/news/articles/2022-04-25/sam-bankm...
  - kasey_junk 4y ago
    https://www.fdic.gov/news/press-releases/2022/ftx-harrison-letter.pdf https://www.fdic.gov/news/press-releases/2022/ftx-harrison-l... Well…
- rhaway84773 4y ago
  And that’s why banks are heavily regulated and get protections. If FTX wanted protections against a bank run they could also choose to be regulated as a bank. Cryptocons want us to both treat crypto scams as banks and not banks depending on what suits them in the moment, just like they want us to treat cryptocurrencies as assets or currencies based on what suits their argument in the moment. All to hide the fact that it’s a mediocre technology which has been surpassed by many other technologies for most of its possible uses and is nothing more than a Ponzi scheme designed to enrich its original backers.
- rchaud 4y ago
eftychis 4y ago
As other people said, usually a lot of assets are illiquid in 24 hours. You can say I have money to buy this house, but if I ask you for the money the next 24 hours, most people will say they need more time to liquidate. It is actually irresponsible to the users (risk management wise) to be keeping all that cash in hand 24/7. The easiest bad case example: are you keeping all your savings under your mattress? Edit/to commenters below: I understand there are emotions, but that's simply how things work. As other fellow commenters noted, banks do not keep or even promise they do keep your money($) under their "mattress." Say you deposited in EUR. The exchange and everyone borrows in USD, so your EUR become USD -- no way out of it. EUR goes down, and then there is a bank run. Even if as the bank were irresponsible and kept 100% liquid, they can not serve everyone 1:1 in 24h. Nobody can give you that guarantee, besides your local grocery store. We are thinking these things at the wrong scale. We are not trying to shift blame away from FTX -- already the whole relationship was sketchy. But claims about keeping 100% USD with a 24h cashout in a worldwide scale is not something on the table right now. I get worried when people feel comfortable believing those statements.
- candiddevmike 4y ago
  I'm not a business masquerading as a bank, lol.
  - beambot 4y ago
    Banks don't have cash on hand equal to assets either...
    - shapefrog 4y ago
      The CEO of a band has never say they have everyones money sitting in the safe waiting for them to pick it up whenever they wanted it. FTX CEO litterally said that in his tweet.
      - beambot 4y ago
        My read of the situation: SBF's comments were about assets (balance sheet) rather than FTX's liquidity. I believe SBF was saying (paraphrasing) "Our balance sheet is fine; FTX doesn't invest customer assets; we're processing withdrawals as fast as possible." That's different than saying "we have 100% liquidity." Banks make similar statements all the time -- they require regular audits of assets (stress tests) and maintain some minimum levels of liquidity.
chx 4y ago
> it was a lie the whole time. how many of these y'all need before you learn: all crypto is a scam. It never was anything else, it never will be anything else because it can not be anything else. There's an awful lot of fancy piled on the simple fact that all crypto"currencies" are negative sum games. The only disagreement is whether this is an entirely new type of scam , a "Nakamoto Scheme" or the difference between these and the classic Ponzi are irrelevant like the difference between a CRT and a HDTV and then we are looking at a Ponzi.
- LudwigNagasena 4y ago
  Ok, why is this statement not true then: > There's an awful lot of fancy piled on the simple fact that all "currencies" are negative sum games. ?
  - chx 4y ago
    Because it is currency itself that you measure everything else against. What my sentence meant is that without transaction fees it would be a zero sum game -- ie if you undid all crypto-money transactions then nothing is left -- but with transaction fees their sum is a negative number. But you need to measure this in something. Note how stocks are decidedly not like this because if you undid all stock-money transactions the sum would be positive because of buybacks and dividends.
    - LudwigNagasena 4y ago
      > Because it is currency itself that you measure everything else against. So what? I cannot see the significance of that. There are many possible measures of value. > if you undid all transactions then nothing is left -- but with transaction fees their sum is a negative number. But you need to measure this in something. Yes? So what's the important difference between cryptocurrencies and traditional currencies?
      - chx 4y ago
        The thing is you can buy anything in this world for money. That's what money is for. Thus, we measure these things in money.
somuchfordonor 4y ago
You forgot 8 hours ago: Hacker News commenters are in total denial: https://news.ycombinator.com/item?id=33518961 https://news.ycombinator.com/item?id=33518961
- kranke155 4y ago
  This is yet another episode in the continuing saga “HN consensus is bad at predicting tech”.
xs83 4y ago
>>Our teams are working on clearing out the withdrawal backlog as is The "as is" worries me here

ramish94 4y ago

He mentions that they have everyone’s money, and then the very next tweet says “we’ll clear out liquidity crunches”. Literally a contradiction.

shapefrog 4y ago
“we’ll clear out liquidity crunches” - they have everyone’s money if they get more money from someone else.
mistercheph 4y ago
Giving them the benefit of doubt, this is not a contradiction. The statement means that they have enough illiquid assets to cover the withdrawal that they are working on converting into liquidity.
- viscanti 4y ago
  But they're meant to store the customer assets in a cold wallet. They're not meant to invest them in illiquid assets that would need to be liquidated to give people their money. If it's not a contradiction, it's an intentionally misleading statement to avoid admitting they let Alameda Research invest the money when the entities are supposed to be completely separated.
  - shawabawa3 4y ago
    The extremely charitable read is that 1. They have all the funds 2. Many are in cold storage or otherwise inaccessible in short term 3. Their cold storage restore process is so slow they need emergency help to provide liquidity in the meantime Seems more like that they've either embezzled client funds or been hacked/lost some cold storage keys
    - viscanti 4y ago
      In that scenario they could point to some of the wallets to help calm the fears the money isn't available. Or they could approach a number of different lenders who would be comfortable lending at high interest rates if the money is there but slow to access. They only sell if we're in the non-charitable case.
    - astrange 4y ago
      The normal way to handle this would be insurance or a line of credit, not selling your company to your competitor overnight.
- wmf 4y ago
  They're totally solvent but no one is willing to lend them money?
  - lokar 4y ago
    “Every banker knows that if he has to prove that he is worthy of credit, however good may be his arguments, in fact his credit is gone.”
- miohtama 4y ago
  FTX/Alameda holds tons of illiquid FTT tokens that they cannot sell and which Binance was dumping. Thus, they might have not technically lied. But they were still wrong from the accounting perspective - they surely understood that FTT token cannot be used to cover gaps in large scale. It was the question that matters "how fast you can process user withdrawals and with what risk" Sam owns 8% of Robin Hood that is worth around ~$1B - he could sell that and cover some of the gap. But what we do not know yet is the size of the gap in time and space. FTX had $6B withdrawals pending on Tuesday.
  - lancesells 4y ago
    > Sam owns 8% of Robin Hood that is worth around ~$1B - he could sell that and cover some of the gap. Not knowing too much about this space have you ever seen anything like this happen? A CEO using their personal wealth to cover their customers funds seems unlikely.
    - tanseydavid 4y ago
      Free Jon Corzine!
    - dmitrygr 4y ago
      > have you ever seen anything like this happen? A CEO using their personal wealth to cover their customers funds No, but I would love to see it happen, enforced by a court, and backed by a promise of jail time if the CEO fails to comply in a timely fashion.
    - fantasyman1 4y ago
      > A CEO using their personal wealth to cover their customers funds seems unlikely. It’s in the category of “desperately wants to be true” of crypto crash denial. I’ve been lampooning people defending FTX in Hacker News all day. This is what I come here for!
    - FormerBandmate 4y ago
      This isn’t a thing, limited liability (which is the fundamental principle that distinguishes corporations from partnerships) prevents this. The only way would be if SBF was charged with defrauding FTX
- appleflaxen 4y ago
  IMO this would contradict what the GP comment asserts: that SBF said "We don't invest client assets (even in treasuries)".
  - sroussey 4y ago
    I thought FTX Alemeda (the trading side) invested into their own token, which is tanking thus causing problems. Alemeda has like $14b assets and $8b in liabilities. But of that $14b, $5b are in their own token (FTT) which is kinda?? worth nothing at this very moment. So now the assets and liabilities are more equally matched, but less margin for shifting values of tokens. I don’t know, but the derivative of their assets looks scary the last 24hr. Disclaimer: not a crypto person
- lottin 4y ago
  What do you mean illiquid? Worthless?
  - piva00 4y ago
    Illiquid just means that you can't cash it in quickly. Cash is 100% liquid while a house is illiquid you might have millions US$ parked there but only if you manage to sell it, then you convert it into liquid cash. Liquidity is a measure of how easy it'd be to trade a thing for another thing you want.
    - lottin 4y ago
      Agreed, but in this case these tokens have suddenly become 'illiquid' because they have just become worthless. It seems that here the term 'illiquid' is being used as a euphemism.
    - oldgradstudent 4y ago
      > Liquidity is a measure of how easy it'd be to trade a thing for another thing you want. It is also very hard to trade worthless things for expensive things you want. Insolvent institutions like to claim they are illiquid when in reality they are insolvent. We've seen this happen over and over during the 2008 crisis.
drexlspivey 4y ago
There is a time delta between the statements, assets worth $10B on one day could be worth $5b the next
crystaln 4y ago
It’s not a contradiction. It’s easy to have illiquid funds. For example cold storage or locked funds.
- zeven7 4y ago
  But cold storage and locked funds lead to you taking out a loan or just saying "sorry, it's going to be a while, our funds are locked". You know what you don't do if your funds are illiquid? Sell to your competitor over night.

spuz 4y ago

Remember that blockchain transactions are slow and FTX has over 1m users. Even in the most positive of scenarios, I would not be surprised if it took days to clear the backlog of withdrawal requests.

zoklet-enjoyer 4y ago
Slow blockchain transactions and it would be shocking if they didn't stake user assets. Most (all?) proof of stake chains have lock up periods. Atom and other Cosmos chains are usually 21 days.
EVa5I7bHFq9mnYK 4y ago
Indeed, all Bitcoin blocks today are full. There is no physical possibility to withdraw all those funds. That's why Binance must implement Lightning deposits/withdrawals, like Kraken did.
- smoldesu 4y ago
  Adding L2 chains to this equation dumps the frying pan into the fire. We don't need more points-of-failure, it's bad enough as-is.
  - EVa5I7bHFq9mnYK 4y ago
    Inability to process more than 5 tx a second for entire world is a major point-of-failure that L2 chain cures.
    - kinakomochidayo 4y ago
      Should’ve just increased the blocksize, instead of implementing some crap L2 solution.
      - EVa5I7bHFq9mnYK 4y ago
        Thats the same as to say: let's buy a couple more servers rather than replace bubble sort in our code by qsort.

yucky 4y ago

If everybody walked into their bank right now to withdrawal, they couldn't cover either. Right?

pcai 4y ago
But their point was: FTX doesn't purport to be a bank
- kikokikokiko 4y ago
  It doesn't purport to be a HUGE PONZI either, but... Just another normal day in crypto land.
  - astrange 4y ago
    I mean, the CEO does literally tell people he's running a Ponzi. https://www.bloomberg.com/news/articles/2022-04-25/sam-bankman-fried-described-yield-farming-and-left-matt-levine-stunned https://www.bloomberg.com/news/articles/2022-04-25/sam-bankm...
- kasey_junk 4y ago
  https://www.fdic.gov/news/press-releases/2022/ftx-harrison-letter.pdf https://www.fdic.gov/news/press-releases/2022/ftx-harrison-l... Well…
rhaway84773 4y ago
And that’s why banks are heavily regulated and get protections. If FTX wanted protections against a bank run they could also choose to be regulated as a bank. Cryptocons want us to both treat crypto scams as banks and not banks depending on what suits them in the moment, just like they want us to treat cryptocurrencies as assets or currencies based on what suits their argument in the moment. All to hide the fact that it’s a mediocre technology which has been surpassed by many other technologies for most of its possible uses and is nothing more than a Ponzi scheme designed to enrich its original backers.
rchaud 4y ago

eftychis 4y ago

As other people said, usually a lot of assets are illiquid in 24 hours. You can say I have money to buy this house, but if I ask you for the money the next 24 hours, most people will say they need more time to liquidate. It is actually irresponsible to the users (risk management wise) to be keeping all that cash in hand 24/7. The easiest bad case example: are you keeping all your savings under your mattress? Edit/to commenters below: I understand there are emotions, but that's simply how things work. As other fellow commenters noted, banks do not keep or even promise they do keep your money($) under their "mattress." Say you deposited in EUR. The exchange and everyone borrows in USD, so your EUR become USD -- no way out of it. EUR goes down, and then there is a bank run. Even if as the bank were irresponsible and kept 100% liquid, they can not serve everyone 1:1 in 24h. Nobody can give you that guarantee, besides your local grocery store. We are thinking these things at the wrong scale. We are not trying to shift blame away from FTX -- already the whole relationship was sketchy. But claims about keeping 100% USD with a 24h cashout in a worldwide scale is not something on the table right now. I get worried when people feel comfortable believing those statements.

candiddevmike 4y ago
I'm not a business masquerading as a bank, lol.
- beambot 4y ago
  Banks don't have cash on hand equal to assets either...
  - shapefrog 4y ago
    The CEO of a band has never say they have everyones money sitting in the safe waiting for them to pick it up whenever they wanted it. FTX CEO litterally said that in his tweet.
    - beambot 4y ago
      My read of the situation: SBF's comments were about assets (balance sheet) rather than FTX's liquidity. I believe SBF was saying (paraphrasing) "Our balance sheet is fine; FTX doesn't invest customer assets; we're processing withdrawals as fast as possible." That's different than saying "we have 100% liquidity." Banks make similar statements all the time -- they require regular audits of assets (stress tests) and maintain some minimum levels of liquidity.

chx 4y ago

> it was a lie the whole time. how many of these y'all need before you learn: all crypto is a scam. It never was anything else, it never will be anything else because it can not be anything else. There's an awful lot of fancy piled on the simple fact that all crypto"currencies" are negative sum games. The only disagreement is whether this is an entirely new type of scam , a "Nakamoto Scheme" or the difference between these and the classic Ponzi are irrelevant like the difference between a CRT and a HDTV and then we are looking at a Ponzi.

LudwigNagasena 4y ago
Ok, why is this statement not true then: > There's an awful lot of fancy piled on the simple fact that all "currencies" are negative sum games. ?
- chx 4y ago
  Because it is currency itself that you measure everything else against. What my sentence meant is that without transaction fees it would be a zero sum game -- ie if you undid all crypto-money transactions then nothing is left -- but with transaction fees their sum is a negative number. But you need to measure this in something. Note how stocks are decidedly not like this because if you undid all stock-money transactions the sum would be positive because of buybacks and dividends.
  - LudwigNagasena 4y ago
    > Because it is currency itself that you measure everything else against. So what? I cannot see the significance of that. There are many possible measures of value. > if you undid all transactions then nothing is left -- but with transaction fees their sum is a negative number. But you need to measure this in something. Yes? So what's the important difference between cryptocurrencies and traditional currencies?
    - chx 4y ago
      The thing is you can buy anything in this world for money. That's what money is for. Thus, we measure these things in money.

somuchfordonor 4y ago

You forgot 8 hours ago: Hacker News commenters are in total denial: https://news.ycombinator.com/item?id=33518961 https://news.ycombinator.com/item?id=33518961

kranke155 4y ago
This is yet another episode in the continuing saga “HN consensus is bad at predicting tech”.

xs83 4y ago

>>Our teams are working on clearing out the withdrawal backlog as is The "as is" worries me here