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It shouldn't work this way. Customer funds should be segregated from whatever prop trading the rest of the business is doing. The only way this happens is if t

• barry-cotter 4y ago
  > Customer deposits should meet liabilities 1:1. If they don't, somebody is lying. That’s not how banking works. You hold illiquid assets. Sometimes they move in price. If they move enough in price you’re insolvent. Limiting bank runs is a genuinely hard problem.
  • zeven7 4y ago
    Exchanges aren't banks, and crypto exchanges especially shouldn't be banks. Crypto is liquid and can be redeemed in its own denomination instantly if you hold it in a simple wallet. That's what exchanges should be doing. They shouldn't be doing fractional reserve banking, and a run shouldn't be possible. Preventing runs on a crypto exchange is exceedingly easy if the operators aren't taking risks with client funds.
    • eru 4y ago
      Well, it seems the word 'exchange' in this case is used with a different meaning when applied to FTX than the meaning you have in mind.
      • stale2002 4y ago
        Which is exactly the problem. This should be illegal, and people who do this should go to jail. Customer funds should be 1 to 1 backed with assets.
        • deleted 4y ago
          [deleted]
        • vba616 4y ago
          Are you saying that fractional reserve banking should be illegal, or that insolvent banks should be illegal? I think the second one already basically is. Or at least with a real bank, they get shut down and the FDIC bails the depositors out. Educated rumor is suggesting FTX may be insolvent, not only the victim of a bank run type scenario.
        • eru 4y ago
          As long as noone is being lied to, I don't see any problems. Case A, tell your customers that their funds have asset backing, and have asset backing: fine. Case B: tell your customers that their funds have no asset backing, and have no asset backing: fine. (Those customers deserve what they get.) Case C: tell your customers nothing, and do whatever you feel like: fine. (Those customers deserve what they get.) Case D: tell your customers that their funds have asset back, and have no asset backing: bad.
          • stripedfish7 4y ago
            Except none of these 4 cases happened with FTX. SBF claimed that assets WERE backed, while it appears that they were not.
            • eru 4y ago
              That would be case D, wouldn't it be?
              • HelloNurse 4y ago
                Assets backed with lies and cryptobullshit. At least someone has had a learning opportunity.
          • stale2002 4y ago
            > As long as noone is being lied to That is exactly what is happening. There is lots of lies being told, with no transparency, and then people's money disappears. Instead of that, if people money disappears, we should arrest the people who made it disappear.