19 ms·

FTX balance sheet, revealed

238 points by parenthesis 4y ago

Marazan 4y ago
Im genuinely intrigued by the $2.2 billion in SRM The peak market capitalisation of SRM was less than 1.5 billion (according to coinmarketcap.com ) . So how could FTX's holdings every be valued at 2.2 billion?
- Marazan 4y ago
  Ah, I think FT story made a mistake, it isn't 2.2 billion dollars of SRM, it is 2.2 billion tokens. Biiiiiiiiig difference.
  - clarkeni 4y ago
    It’s 2.2 billion dollars - but it’s using fully diluted value rather than circulating supply market cap.
    - Marazan 4y ago
      Yeah, you are right. That is still bonkers crazy nuts.
      - grey-area 4y ago
        Even more bonkers is who minted all of those coins? Was it FTX?
neonate 4y ago
https://archive.ph/OcWsC https://archive.ph/OcWsC
TotoHorner 4y ago
So... is this guy just a complete sociopath or something? Telling everyone what regulations should be (and buying politicans) to ensure consumer protection while simultaneously sifting away 90% of consumer funds? How does a person lie that much?
- AmericanOP 4y ago
  He ran the inverse Theranos playbook. Instead of a supremely polished persona, he hard-committed to the sweaty geek. Confidence, man.
  - Miserlou57 4y ago
    I once played poker in a Reno poker room. It was structured betting, not all in madness like on TV. I was probably 21 and sitting down with a mixed group, but mostly old timers. I was not new to poker, but I occasionally got the allowed bets wrong. I did really well that night. It could have been luck but I like to think I gamed them with my behavior, by pretending to be stupid. Like in a Guy-Ritchie movie plot twist kind of way.
  - pigtailgirl 4y ago
    -- apparently he was jacked to the hilt on adderall 24/7 --
    - bmitc 4y ago
      It sure seemed like it in all his interviews. He can’t keep his leg still and always looked like he just came from an all night LAN party. Also, the phrase “jacked to the hilt” just makes me giggle. I’ve always thought it was funny.
  - b0b10101 4y ago
    it's still the theranos playbook, it's just a different image projected. and it still serves the same role - tapping into SV narratives and preconceptions to create an image that is super appealing to investors, the media and employees in order to spin up the hype flywheel, and excuse inconsistencies and misbehaviour. fundamentally both still took advantage of contrasting their traditionally inscrutable fields to contrast their highly visible images and paper over any skepticism. either way the failing is the same - investors failed to preform adequate due diligence and lent their credibility to things they didn't fully understand because they were distracted by the charisma of the founder and were worried that they would miss potentially outsized gains. as long as large amounts of capital keep flowing to private markets (especially VCs) this will continue happening
collaborative 4y ago
Was he managing funds with a 10% fractional banking policy?
- TotoHorner 4y ago
  Nope. Was constantly telling users that funds were 100% backed.
  - collaborative 4y ago
    Backed by liquidity or by assets? I thought the article said that 90% of the funds were liabilities
    - djbebs 4y ago
      Exchange business models are supposed to be 100% different from banks. If exchanges are using fractional reserves of any kind or amount, they have already committed fraud.
      - shawabawa3 4y ago
        Also people are missing that banks having 10% reserves doesn't mean their assets are 10% of their liabilities It means they have 10% of their deposits held as cash. The remaining 90+% is in liquid marketable securities (usually mortgages and other loans which are freely traded if they need the liquidity)
        imtringued 4y ago
        Also, when you transfer money from one bank to another, that other bank may buy the assets of your bank or it lends the reserves to your bank. When cash is withdrawn banks can still borrow reserves from the central bank. That is kind of the whole point why we have central bank intermediation and why every country has adopted it.
- stephen_g 4y ago
celestialcheese 4y ago
Incredible. To call all those "Less Liquid" tokens not "Illiquid" is a mastery in self-delusion. $2.1B SRM $981M SOL and then all the shitcoins built on those "technologies" where the tokens are their "shares" in those investments. But to call those tokens valuable assumes there's value in MAPS/OXY etc. But MAPS has a total market cap of $3.9m today - the forced liquidations in these positions will 100% crush these coins. Even SOL and SRC. Hell - other than their Robinhood position and the fiat and fiat-tokens, there's almost nothing of real value once these liquidations happen. My guess is less than $700m recoverable, so if you get an offer for >$0.10/dollar on your deposits from a vulture bankruptcy fund, I'd take it.
- celestialcheese 4y ago
  Oh, and completely forgot about the "hack" https://twitter.com/SlowMist_Team/status/1591429649430519810 https://twitter.com/SlowMist_Team/status/1591429649430519810 So even the less-shit coins SOL are just getting siphoned off. I'd take $0.05/dollar now.
- rippercushions 4y ago
  MtGox went bust in 2014, and it took them seven years of legal wrangling to come up with an acceptable valuation of the tokens. But MtGox was also based in a single country (Japan) and the vast majority of its funds were in a single crypto (BTC), whose value today remains far higher than it was back in 2014 ($300 or so), which is a big incentive for everybody to come to an agreement fast. FTX will be exponentially more complex on all counts: more jurisdictions, more tokens and almost certainly severely marked down valuations. BTC
  - celestialcheese 4y ago
    Yup - i'm a party in the Mt. Gox and it's just an endless stream of weird japanese legalese. Didn't have much so never got approached for a buyout, but if offered I would have taken it.
- fallingknife 4y ago
  SOL trades $100s of millions per day, which is actually extremely liquid in investment terms. "Less than liquid" is actually quite accurate for lesser known crypto. It's how assets like syndicated debt, that trade much less often, would be described on a balance sheet. "Illiquid" would be more like equity in a private company, where there is no active secondary market at all.
deleted 4y ago
[deleted]
rippercushions 4y ago
What the fresh hell? This isn't even an actual accounting balance sheet. He was trying to convince investors to put billions of dollars of actual money into FTX, and the best he could do is the sketchiest one-page Excel ever, complete with comments like "Hidden, poorly internally labled fiat@ account" (sic) worth 8 billion and warnings about typos! No wonder CZ got cold feet.
- pavlov 4y ago
  Somehow this same level of sloppiness, disorganization and disrespect was a mark of a great disruptive innovator just two months ago. In the Sequoia profile they greatly admire how Bankman-Fried plays League of Legends while pitching to investors, and takes naps in his office when he’s supposed to be in meetings. How surprised can they realistically act that their genius lost 8 billion dollars in a “hidden, poorly internally labeled account”. The investment industry needs to face their role in this debacle. The Ontario teachers’ pension fund sent tens of millions to FTX with apparently no due diligence. That money ended up in the pockets of crypto insiders and also funded promotion like Super Bowl ads that sucked more retail dollars into FTX. Some of those poor FTX customers who are facing a 100% loss on their crypto “investment” may have been teachers from Ontario. Pension funds and VCs don’t generally invest in gambling and drugs. Why do they invest in crypto?
  - fallingknife 4y ago
    Remember how the immaculately organized and professional appearing Wall St. firms did the exact same shit back in 2008? The only difference is really that they had the political clout to get a government bailout.
    - csin 4y ago
      https://www.theonion.com/crypto-confidence-soars-after-ceo-defrauds-customers-ju-1849773647 https://www.theonion.com/crypto-confidence-soars-after-ceo-d...
    - vkou 4y ago
AmericanOP 4y ago
My mental model of the blockchain industry is akin to FTXs balance sheet. I see an endless string of branded code servicing similar technologies, but where are the customer inputs putting in the billions needed to support the industry? Is blockchain liquidating crypto valuations into developer salaries with a VC subsidy?
- collaborative 4y ago
  Is banking liquidating bank account funds into banker salaries? Sry for being the advocate of the devil and I am by no means a crypto fan
  - AmericanOP 4y ago
    Banks are the medium for money created by the government to reach the economy. So perhaps one can say banker salaries are the vig on inflation.
  - imtringued 4y ago
    They take a cut on every loan that is successful, they don't take those fees from bank account balances, the borrower is ultimately paying for it.
kumarvvr 4y ago
Unable to open the archived link, any alternative sources for the actual document?
- JoachimSchipper 4y ago
  The article links to https://d1e00ek4ebabms.cloudfront.net/production/7ab64a3b-6ce0-47cc-96ac-5e2d2a8c5d6c.png https://d1e00ek4ebabms.cloudfront.net/production/7ab64a3b-6c...
Shank 4y ago
The "before this week" column seems to be attempting to draw sympathy by saying "but everything was fine before, seriously!" when in reality it just proved that, even in the best of worlds, they had an extremely optimistic view of the entire crypto ecosystem, including its liquidity. I can't believe they seriously held that much of their total value in their own issued token. That's just preposterous. Imagine if JP Morgan Chase's entire value was in JP Morgan Chase stock, and they just reported that as their value in cash. It's like recursive valuation.
- wumpus 4y ago
  Remember the Wirecard collapse, where there was a fake bank account in the Phillipines that allegedly had $2.1 billion USD in it? This is the crypto equivalent.
  - KirillPanov 4y ago
    Garnished with a dash of Bernie Madoff.
  - wyclif 4y ago
    Yes, it was actually two accounts: BDO Unibank and Bank of the Philippine Islands.
  - odiroot 4y ago
    I wonder if (some of) SEC will play the same role in this story as BaFin played in Wirecard's.
  - _fat_santa 4y ago
    The hole in Wirecard's balance sheet almost doesn't seem that bad when you see what kind of hole FTX has.
  - everybodyknows 4y ago
    Has there been any attempt at reform of BaFin in the aftermath -- or has bureaucratic inertia absorbed all such impulses?
- 4y ago
lysecret 4y ago
Wait will the forced liquidation crush a large part of crypto ?
- donavanm 4y ago
  Well… your anchors of eth and btc are down about 25% in the last few days. And their reported “assets” are huge chunks of the total market value for a lot of these tiny sketch coins. So yeah, I expect its going to be rough when this get liquidated or it simply turns out your counterparties are actually the sketchy exchanges who dont have anything to back it up.
- Aramgutang 4y ago
  There isn't much there to liquidate that still has any worth. They didn't have significant holdings of any of the major assets. That's kind of the main reason they were insolvent.
  - coffeebeqn 4y ago
    They also had this “hack” a day or two ago so it’s unclear what is left
bagels 4y ago
Direct link to the image of sheet itself: https://d1e00ek4ebabms.cloudfront.net/production/7ab64a3b-6ce0-47cc-96ac-5e2d2a8c5d6c.png https://d1e00ek4ebabms.cloudfront.net/production/7ab64a3b-6c...
- deleted 4y ago
  [deleted]
password4321 4y ago
The stories so far (HN items with >100 comments): Tuesday 11/08 129 https://news.ycombinator.com/item?id=33518961 https://news.ycombinator.com/item?id=33518961 FTX Appears to Have Stopped Processing Withdrawals, On-Chain Data Show (theblock.co) 747 https://news.ycombinator.com/item?id=33520585 https://news.ycombinator.com/item?id=33520585 Binance to acquire FTX (bloomberg.com) 110 https://news.ycombinator.com/item?id=33523274 https://news.ycombinator.com/item?id=33523274 FTX Token, FTT down by more than 80% in less than 24 hours (ftx.com) Wednesday 11/09 430 https://news.ycombinator.com/item?id=33535161 https://news.ycombinator.com/item?id=33535161 FTX’s financial black hole leaves Binance balking at rescue plan (bloomberg.com) 420 https://news.ycombinator.com/item?id=33537821 https://news.ycombinator.com/item?id=33537821 We will not pursue the potential acquisition of FTX (twitter.com/binance) Thursday 11/10 189 https://news.ycombinator.com/item?id=33541790 https://news.ycombinator.com/item?id=33541790 Ftx.com Has Probably Collapsed (effectivealtruism.org) 197 https://news.ycombinator.com/item?id=33547102 https://news.ycombinator.com/item?id=33547102 The Sam Bankman-Fried empire crumbled. What happened? (mollywhite.net) 516 https://news.ycombinator.com/item?id=33547863 https://news.ycombinator.com/item?id=33547863 FTX tapped into customer accounts to fund risky bets, setting up its downfall (wsj.com) Friday 11/11 108 https://news.ycombinator.com/item?id=33558225 https://news.ycombinator.com/item?id=33558225 FTX Yikes (rekt.news) 1168 https://news.ycombinator.com/item?id=33561234 https://news.ycombinator.com/item?id=33561234 FTX to file for U.S. bankruptcy, CEO resigns (reuters.com) Saturday 11/12 800 https://news.ycombinator.com/item?id=33570274 https://news.ycombinator.com/item?id=33570274 FTX faces potential hack, sees mysterious outflows totaling more than $600M (coindesk.com) 174 https://news.ycombinator.com/item?id=33571734 https://news.ycombinator.com/item?id=33571734 FTX investor Sequoia removed its glowing profile of Sam Bankman-Fried (businessinsider.com) 174 https://news.ycombinator.com/item?id=33575281 https://news.ycombinator.com/item?id=33575281 FTX held less than $1B in liquid assets against $9B in liabilities (ft.com) 139 https://news.ycombinator.com/item?id=33577311 https://news.ycombinator.com/item?id=33577311 FTX hacker identity discovered by Kraken Exchange team? (cryptoslate.com) >> https://news.ycombinator.com/item?id=33577437 https://news.ycombinator.com/item?id=33577437 FTX balance sheet, revealed (ft.com) ^^ You are here ^^
- password4321 4y ago
  And if you had an "FTX" alert on HN/Twitter, you'd have seen: Sunday 11/06 1 https://news.ycombinator.com/item?id=33494404 https://news.ycombinator.com/item?id=33494404 Due to “recent revelation” Binance is liquidating their FTX Token holdings (twitter.com/cz_binance) > Context: Friday 11/04 254 https://news.ycombinator.com/item?id=33464494 https://news.ycombinator.com/item?id=33464494 Crypto trading firm Alameda Research might be insolvent (dirtybubblemedia.substack.com) -- All in time for: Tuesday 11/07 -> Monday 11/06 ("yesterday") https://news.ycombinator.com/item?id=33518961#33520094 https://news.ycombinator.com/item?id=33518961#33520094 > I admit I did panic and tried to withdraw my funds yesterday. They just processed it today. A bit delayed but still processing. -- "Get Out" vibes for sure.
celestialcheese 4y ago
Good tweet on decoding the illiquid assets https://mobile.twitter.com/metavestor/status/1591200259035648000 https://mobile.twitter.com/metavestor/status/159120025903564...
thebeastie 4y ago
FTX violated ancient banker wisdom: don’t get high on your own supply.
pigtailgirl 4y ago
"What are President tokens? President tokens are ERC-20 tokens that will be redeemable for either $1 or $0 based on if Trump wins or loses the Presidential election. These markets act as tradeable prediction markets where the market price of TRUMPWIN should be roughly equal to the probability that Trump will win the election and the market price of TRUMPLOSE should be roughly equal to 1 minus that probability. TRUMPWIN and TRUMPLOSE are based on the President 2020 Futures Contracts on FTX." jfc...
- libraryatnight 4y ago
  Someone just mint the Camacho coins already
  - RantyDave 4y ago
    Camacho was a good president. He knew he was out of his depth, sought the best advice he could and was willing to take politically difficult risks for the good of his people. Unlike, say....
- SnowHill9902 4y ago
  That’s actually very useful. It’d allow one to hedge risks with new synthetic derivatives instead of creating weird proxies with stocks.
  - UncleMeat 4y ago
    I, for one, do not like the trend of the financialization of everything. It is surveillance capitalism times 1000. Where all human behavior becomes an object to bet on.
  - pigtailgirl 4y ago
    -- dont have issue with the coin - "jfc smh" FTX was holding it - such a strange bet --
mudrockbestgirl 4y ago
Okay, but... how? How did they manage to lose so much money by running a popular exchange that should bring in tons of fees? Even if they were gambling with part of the deposits, how can they lose 90% of all assets? You'd have to be actively trying to lose money to be this bad... Also, where does Alameda fit into the picture?
- mym1990 4y ago
  They were probably leveraging heavily in some sectors, on top of siphoning those incoming fees to line pockets. Once you leverage, it is extremely easy to lose everything in a span…but also easy to gain!
- lordnacho 4y ago
  Seems like Alameda was critical to the how of it. What's not clear to me is what they gambled on that lost money. Business model ought to be simple, the exchange earns loads of fees, and Alameda makes markets on it, earning spreads. Just putting a lid on the risk there should be enough to keep people occupied, no need to print your own money for extra leverage.
  - grey-area 4y ago
    SBF is a con artist. There is no point looking for a legitimate business because there wasn’t one.
    - HDThoreaun 4y ago
      Running an exchange is a legitimate business that should make tons of money if you're not embezzling customer funds.
      - grey-area 4y ago
        It was not a legitimate business, there were almost zero controls on cashflow.
  - 4y ago
blue_light_man 4y ago
The only lesson I learend from this whole debacle is never trust people and organisations you know from the Internet no matter how famous or humble or good they are. Trust the tech. But never the people. Especially for financial advices. Be it Sequoia. Or Yc. PG, Chamath, Mark Cuban ,Balaji or the Collision brothers. Tom Brady or SBF or CZ. Never fucking trust people or organisations. They are all here for their financial upsides. Only trust the tech. The maths. If you can't do the work you would be fucked by them. That's all. I am not saying PG did something shady. I am saying even a well regarded figure like him in this community should not be taken for granted unless they back their claims by sold evidence.
- deleted 4y ago
  [deleted]
- aaronbrethorst 4y ago
  you definitely shouldn't trust NFL quarterbacks. https://people.com/sports/former-packers-quarterback-brett-favre-allegedly-used-welfare-funds-for-college-volleyball-stadium/ https://people.com/sports/former-packers-quarterback-brett-f...
- throwaway0asd 4y ago
  What I learned from this mess: nothing new. If anything this just reinforces what should already be painfully obvious: invest in real world value that you understand. I have not seen the real world value of crypto or understand how that makes makes outside of itself. Even before crypto currency markets were a thing and were like setting money on fire. I apply that reasoning to all investments. Sure, I miss out on all the easy money hype trains, but the investment decisions are almost always safe and still better than market average.
  - naijaboiler 4y ago
    the Warren Buffet mantra to investing. Been working now for 70+ years.
- mym1990 4y ago
jjallen 4y ago
The thing that I always wondered about with FTX (and Binance frankly) is how did they get so big so quickly. What did they have that caused so many people to use _their_ exchange. This is still unexplained and was a major red flag. Usually to grow that big takes many years. Just look at Coinbase.
- mudrockbestgirl 4y ago
  I don't know about FTX, but Binance has been shady from the very beginning. They got large quickly because they listed all kinds of **coins, had negative trading fee promotions, and in general did lots of shady growth hacking marketing tactics and partnerships. If you wanted to gamble altcoins, those would be on Binance, but not listed on Coinbase. That was many years ago when they started out of course. I'm curious where they are today. In my mind, the shady image of Binance hasn't changed, but maybe they got lucky with their investments and are actually fully backed and profitable now. Who knows... Coinbase used to be US-only, and is still very US-centric. Binance and FTX are international. They only opened US exchanges later, but they are separate, and tiny compared to their international footprint. I'm also curious how FTX got so big. When they started, the market seemed saturated with exchanges already, and they didn't really have differentation.
  - password4321 4y ago
    Still get emails from Binance constantly: "Earn 3.6%/3.9%/4.1% when you stake ... FTM/ONE/ROSE". Just scrolling down, they offered 15% on DOT back in August!
    - dna_polymerase 4y ago
      They offered this because it’s the staking reward the Polkadot network rewards for staking your coins. Binance just offers you to stake with them and in turn gives you part of the rewards. The 15% are paid in DOT though, so your dollar return is dependent on DOTs performance.
  - rkagerer 4y ago
grey-area 4y ago
FTX likely printed SRM token out of thin air to prop up their balance sheet. https://mobile.twitter.com/LucasNuzzi/status/1591595908239888384 https://mobile.twitter.com/LucasNuzzi/status/159159590823988...
bmitc 4y ago
Does he really expect anyone to believe his “poorly labeled internal ... account” story? How can you have $8 BILLION mislabeled? As in, if he transferred or loaned it to Alameda, literally no one was asking: wait, where did this sum of money, so large that it is a massive percentage of our value and could crash the company, come from? Despite all the idiocies that we’re learning about, it is still hard to believe. Another thing is, it seems like this spreadsheet was hand-crafted by Sam Bankman-Fried just before their emergency meetings this past week. Why wasn’t this something that already existed for all top executives to see? How was it not just a printable document or report but was instead something he just typed up? Because no, it is not obvious that a balance sheet of a supposedly multi-billion dollar company would contain typos. Typos!? I mean, come on. Then again, I have worked with people similar to how Sam Bankman-Fried seems to operate. Not the possible sociopathic tendencies he appears to have but the sort of twitchy smarts he does seem to have. People like that can sometimes think so fast with a lot of confidence that they create this wake of stuff behind them as they work. They “solve” (i.e., move through) problems so fast, that everyone gets lost in the wake and can’t catch up to find all the mistakes left behind or tie the loose ends together. They consider a problem solved if it’s essentially solved but doesn’t have details thought out or if there are possible mistakes that can be “easily” solved in ways not apparent to anyone else. If there’s no one around to slow these types of workers down, it can be complete chaos where you have one person spearheading away through the bushes, while everyone else is getting slapped in the face with the branches snapping back and thorns. At some point everyone gives up trying to follow. Then the person is off on their own where they lose sight of whatever actual problem they were solving and lose track of the bigger picture. It is entirely possible that that is a component of what has happened here, coupled with some sociopathy, megalomania, and billions of dollars of funding in Sam Bankman-Fried’s case.
- jiggawatts 4y ago
  > you have one person spearheading away through the bushes, while everyone else is getting slapped in the face with the branches snapping back and thorns. You just described me about 15 years ago. I've learned my lesson and avoid "unsupportable solutions" these days like the plague, but I still get pulled aside occasionally and get told quietly that nobody understands why I'm talking about solutions to problems that haven't even come up yet.
irusensei 4y ago
The whole thing that is bugging me is that they made big political donations to both D and R. They use the money they conjured out of thin air and backed politicians with it. They probably backed the politicians who were most friendly to them. Those politicians might have won and that dirty money might have done a difference. Does that sound moral to you? I think it’s absolutely terrifying. Every candidate that received that money should have their relation to Scam Bankman-Fraud investigated. It gets worse when you realize his mother and business partner are either related to certain political parties and the SEC chairman.
- raverbashing 4y ago
  Oh so maybe that's what "effective altruism" really means.
- recuter 4y ago
  Sounds like plain old moral hazard to me: https://en.wikipedia.org/wiki/Moral_hazard https://en.wikipedia.org/wiki/Moral_hazard Why people think that such things are limited to any one political party or that progressive liberals are somehow immune from it is beyond me. Used to be a time, about a decade ago, where these very same folks would lose their collective minds when Mitt Romney said stuff like "corporations are people my friend" and "money is speech". I guess if you can't beat them, join them. Heck, SBF even donated to Mitt: https://en.wikipedia.org/wiki/Sam_Bankman-Fried#Political_donations https://en.wikipedia.org/wiki/Sam_Bankman-Fried#Political_do... Instead of fighting to get money out of politics they decided they can just play this game better and their ends justify the means with very predictable results. The only surprising thing is they got caught. Although it remains to be seen whether anybody actually admits fault, goes to jail, or any actual changes are made.
  - tossawayone23 4y ago
    The whole thing stinks to high heaven. https://cdn.discordapp.com/attachments/430493835265835021/1041059453899907072/unknown.png https://cdn.discordapp.com/attachments/430493835265835021/10...
  - 4y ago
macrolime 4y ago
I haven't verified this for veracity, but supposedly a screenshot from tumblr blog of the CEO of Alameda Research "this blog endorses double-or-nothing coin flips and high leverage" https://pbs.twimg.com/media/FhaKXhRXwAEfvKD?format=jpg&name=large https://pbs.twimg.com/media/FhaKXhRXwAEfvKD?format=jpg&name=...
- ealexhudson 4y ago
  I believe it is true, and there was a good thread on twitter about Kelly optimal bets. It seems clear that SBF, and maybe therefore Alameda, didn't really understand the right hand side of the Kelly optimum.
- im3w1l 4y ago
  It's kind of an interesting puzzle though. It obviously doesn't work but breaking down exactly why it doesn't is a bit nuanced. The simplest model we can make is that the market will instantly jump either up or down. Why does the strategy not work in this case? If it jumps up you win. But if it jumps down you lose not just your stake, but you actually go into debt because of slippage. However if you add the possibility of call bankrupcy to discharge the debt, then it actually does work. On the other hand if you use a more realistic (but not fully, of course) continous model, then it doesn't work. Why? Because there are such a high proportion of paths the price can take where it reaches your stopout before it reaches your payout. It could go down (game over) up up up, or it could go up up down up down down up down down (game over). I believe you can use martingale theory to prove that it doesn't work.
Dowwie 4y ago
To what extent were responsible members of the financial industry hired to try to turn FTX into a legitimate financial company? Was everyone a "brilliant outsider", irreverent to hundreds of years of industry wisdom?
PYTHONDJANGO 4y ago
Please post an URL to the excel file, thanks!
vasco 4y ago
Martin Shkreli (pharma bro) did a livestream on youtube[0] going over it a few days ago. Yes, he is out of jail. [0] https://youtu.be/XnwRMaW-Kdc https://youtu.be/XnwRMaW-Kdc
tasubotadas 4y ago
I am quite surprised that nobody is talking about VCs (Sequoia) that happily poured money into this. What was their plan? Were they blind? Were they hoping to cash out before it crashed? Major investors usually get full visibility into the company.
- mayankkaizen 4y ago
  This is the most important thing I was wondering about. If crypto businesses are shady and Ponzi schemes and these crypto guys are working mostly behind the scene, why would a VC like Sequoia invest in such firms? I somehow feel firms like Sequoia gave these crypto stuff some credibility and positive exposure. It was like, "don't worry, their business is legit and booming.'
  - hiq 4y ago
    > why would a VC like Sequoia invest in such firms? I thought the rationale was already widely known by now: https://en.wikipedia.org/wiki/Greater_fool_theory https://en.wikipedia.org/wiki/Greater_fool_theory Or in more charitable terms: if an investment has a positive expected return according to their model (meaning that they think they can sell their shares / tokens in the case of some VCs), they do it.
    - lupire 4y ago
      Who was the greater fool? Sequoia gave SBF money and SBF stole it.
      - hiq 4y ago
        Sure, I didn't say their model was correct.
  - ilrwbwrkhv 4y ago
    Some kaching on the side. ;) Seriously though, a lot of influencers promoting this stuff have been getting paid in cold hard US dollars to promote these scams. How do I know? I spoke to influencers to talk about my portfolio companies and many of them told me the crazy amount of cash they were getting paid from these scammers. Think 25,000 for a channel with hardly 100k followers. That's why I feel like Sequoia partners should be investigated thoroughly. If a terrorist organization gets investments, don't we investigate those investors as well? If you drop morals, like a16z did, by supporting another scammer and gritting on crypto, it's a very lucrative business.
World177 4y ago
They definitely lost money with Luna/UST. [1] I wonder if we'll ever find out how much they lost [1] https://twitter.com/AlamedaTrabucco/status/1523381953239523328 https://twitter.com/AlamedaTrabucco/status/15233819532395233...
jmyeet 4y ago
This is wild. My first question was: who is the CFO who signed off on this? FTX literally has no CFO [1]. How is this possible for a billion dollar company and billions in client assets? How did the investors not insist on an adult to manage the their investment? The CFO, and the credibility they bring to the table based on their track record and reputation, is part of the system that helps prevents situations like this. [1]: https://www.ledgerinsights.com/ftx-warning-signs-no-cfo/ https://www.ledgerinsights.com/ftx-warning-signs-no-cfo/
- SkipperCat 4y ago
  That is literally jaw dropping. I'm almost amazed that the WSJ never picked that up. I just did a quick search on the wsj.com site and saw several articles from this past summer and none even mentioned that. WSJ nailed it with Theranos, missed it with FTX.
d3vmax 4y ago
Remember at the peak how many pro-crypto HN commenters would give all kinds of tech/politics/economic pros of crypto. It was all a sham. Anyone who knows tech and seen the progress from the 90s could smell the shit that is crypto. Unnecessarily difficult than it had to be, to obfuscate the fact it was bullocks through and through.
ekpyrotic 4y ago
Even these accounts are deceiving. The current holdings are valued at today / yesterday's spot rate. Given that many of these holdings are in (comparatively) thinly traded alt-coins, as soon as you try to dispose of these levels of coins / tokens, the price will fall as supply overwhelms demand. Of course, this is represented by the fact that many of the alt-coins are marked as relatively illiquid -- and SBF has put a lackadaisical disclaimer at the top about the shifting price. But the reality is that regardless of how long you wait -- or how much you try to spread the disposals -- you will only ever get a percentage of the current spot rate, given the impact that the sales will always have on the price itself. I can't shake the feeling that SBF might say... "Yes, but once we have reassured the market, etc, etc, these alt-coins might recover in value -- and then we can dispose at this level." And, of course, the merry-go-round starts again.
SilverBirch 4y ago
Using the word "Liquid" in the context of these accounts is... I don't know? Fraudulent? I understand that in the context of real finances things might be illiquid - it might take time to sell your house, or if you're a particularly big holder of stock in a company you founded you might have liquidity problems divesting over time. But it's really just taking the piss describing a lot of this stuff as "illiquid". FTT is a coin that they have made up themselves, which they themselves own the vast majority of, and which only had value in connection to the exchange that they just bankrupted. So no, it isn't "illiquid" its "worthless". It's not just that they'll take a hair cut if they liquidate it quickly, they could never liquidate even a significant portion of this. This whole thing started when CZ tried to liquidate 500m in FTT and the whole of FTX collapsed, they're now claiming their remaining FTT tokens are worth $600m (down from $6Bn). It's just so absurd to suggest you can mark to market like that.
- recuter 4y ago
  When the people who print the real currency are your friends, the people who are supposed to regulate who can print currency are your friends, and the people who lend you massive amounts of real currency are your friends - it is easy to delude yourself into believing that on a long enough time scale some of the plebs will buy your funny money and you will become more liquid and everything will sort of work out somehow. Money creates more money, so if can can create money that creates more money, we're broadening the economy, expanding it all the time.. (https://www.youtube.com/watch?v=M_3T-Af57Pg https://www.youtube.com/watch?v=M_3T-Af57Pg) Sort of similar to how Trump said his own net worth fluctuates day to day sometimes based on his feelings since it is tied to perceptions of the Trump name as a brand. Or how George Costanza said it's not a lie if you believe it. Or how a gambler who is down is sure he can make it back. In other words, yeah, as fraudulent as can be. Lets see if anybody actually goes to jail.
- migueloller 4y ago
  Matt Levine’s writing on this is right along this line. It delineates between liquidity and solvency problems. Worth a read. https://www.bloomberg.com/opinion/articles/2022-11-10/ftx-is-still-looking-for-money#xj4y7vzkg https://www.bloomberg.com/opinion/articles/2022-11-10/ftx-is...
w1nst0nsm1th 4y ago
There should be a newcomer financial book titled "How to get rich quick if you don't mind being a crook". The very first book to read before any other on finance and investment. It would be the like of telling your kid "Beware of the wolf before sending her through the wood to pay a visit to Granny"...
zajio1am 4y ago
Perhaps crypto-exchange could be transparent to third-parties through blockchain(s)? It should not be hard to declare all account numbers, so whole crypto-balance could be online validated.
nullc 4y ago
Short bitcoin, long shitcoin... that's been a slow road to insolvency for most of a decade.
guy_c 4y ago
Based off the balance sheet FTX may have peaked (September 2021) with more than $100 billion of paper gains in "less liquid" assets. Token Last wks Last wks Estimated Peak Peak Peak value price holding price date value FTT $5.9bn $24.00 246m $77.69 09-Sep-2021 $19bn SRM $5.4bn $0.75 7,240m $12.50 13-Sep-2021 $90bn SOL $2.2bn $32.00 70m $258.78 07-Nov-2021 $18bn Just speculation, but once you've "made" $130bn you feel like a genius. You might want to start acting like a hundred billionare. Time to start throwing money around. Especially spending it on anything that helps you realise those gains. But FTT/SOL/SRM is not very liquid. So you use your liquid assets (i.e. your customers' USD, USDT, BTC and ETH). People might wonder where you get all this cash. You don't want to admit you are using customer funds and you only have gains on tokens you printed. So pretend you're genius trader and run a highly profitable exchange.

238 points by parenthesis 4y ago

Im genuinely intrigued by the $2.2 billion in SRM The peak market capitalisation of SRM was less than 1.5 billion (according to coinmarketcap.com ) . So how could FTX's holdings every be valued at 2.2 billion?

Marazan 4y ago
Ah, I think FT story made a mistake, it isn't 2.2 billion dollars of SRM, it is 2.2 billion tokens. Biiiiiiiiig difference.
- clarkeni 4y ago
  It’s 2.2 billion dollars - but it’s using fully diluted value rather than circulating supply market cap.
  - Marazan 4y ago
    Yeah, you are right. That is still bonkers crazy nuts.
    - grey-area 4y ago
      Even more bonkers is who minted all of those coins? Was it FTX?

neonate 4y ago

https://archive.ph/OcWsC https://archive.ph/OcWsC

TotoHorner 4y ago

So... is this guy just a complete sociopath or something? Telling everyone what regulations should be (and buying politicans) to ensure consumer protection while simultaneously sifting away 90% of consumer funds? How does a person lie that much?

AmericanOP 4y ago
He ran the inverse Theranos playbook. Instead of a supremely polished persona, he hard-committed to the sweaty geek. Confidence, man.
- Miserlou57 4y ago
  I once played poker in a Reno poker room. It was structured betting, not all in madness like on TV. I was probably 21 and sitting down with a mixed group, but mostly old timers. I was not new to poker, but I occasionally got the allowed bets wrong. I did really well that night. It could have been luck but I like to think I gamed them with my behavior, by pretending to be stupid. Like in a Guy-Ritchie movie plot twist kind of way.
- pigtailgirl 4y ago
  -- apparently he was jacked to the hilt on adderall 24/7 --
  - bmitc 4y ago
    It sure seemed like it in all his interviews. He can’t keep his leg still and always looked like he just came from an all night LAN party. Also, the phrase “jacked to the hilt” just makes me giggle. I’ve always thought it was funny.
- b0b10101 4y ago
  it's still the theranos playbook, it's just a different image projected. and it still serves the same role - tapping into SV narratives and preconceptions to create an image that is super appealing to investors, the media and employees in order to spin up the hype flywheel, and excuse inconsistencies and misbehaviour. fundamentally both still took advantage of contrasting their traditionally inscrutable fields to contrast their highly visible images and paper over any skepticism. either way the failing is the same - investors failed to preform adequate due diligence and lent their credibility to things they didn't fully understand because they were distracted by the charisma of the founder and were worried that they would miss potentially outsized gains. as long as large amounts of capital keep flowing to private markets (especially VCs) this will continue happening

collaborative 4y ago

Was he managing funds with a 10% fractional banking policy?

TotoHorner 4y ago
Nope. Was constantly telling users that funds were 100% backed.
- collaborative 4y ago
  Backed by liquidity or by assets? I thought the article said that 90% of the funds were liabilities
  - djbebs 4y ago
    Exchange business models are supposed to be 100% different from banks. If exchanges are using fractional reserves of any kind or amount, they have already committed fraud.
    - shawabawa3 4y ago
      Also people are missing that banks having 10% reserves doesn't mean their assets are 10% of their liabilities It means they have 10% of their deposits held as cash. The remaining 90+% is in liquid marketable securities (usually mortgages and other loans which are freely traded if they need the liquidity)
      - imtringued 4y ago
        Also, when you transfer money from one bank to another, that other bank may buy the assets of your bank or it lends the reserves to your bank. When cash is withdrawn banks can still borrow reserves from the central bank. That is kind of the whole point why we have central bank intermediation and why every country has adopted it.
stephen_g 4y ago

celestialcheese 4y ago

Incredible. To call all those "Less Liquid" tokens not "Illiquid" is a mastery in self-delusion. $2.1B SRM $981M SOL and then all the shitcoins built on those "technologies" where the tokens are their "shares" in those investments. But to call those tokens valuable assumes there's value in MAPS/OXY etc. But MAPS has a total market cap of $3.9m today - the forced liquidations in these positions will 100% crush these coins. Even SOL and SRC. Hell - other than their Robinhood position and the fiat and fiat-tokens, there's almost nothing of real value once these liquidations happen. My guess is less than $700m recoverable, so if you get an offer for >$0.10/dollar on your deposits from a vulture bankruptcy fund, I'd take it.

celestialcheese 4y ago
Oh, and completely forgot about the "hack" https://twitter.com/SlowMist_Team/status/1591429649430519810 https://twitter.com/SlowMist_Team/status/1591429649430519810 So even the less-shit coins SOL are just getting siphoned off. I'd take $0.05/dollar now.
rippercushions 4y ago
MtGox went bust in 2014, and it took them seven years of legal wrangling to come up with an acceptable valuation of the tokens. But MtGox was also based in a single country (Japan) and the vast majority of its funds were in a single crypto (BTC), whose value today remains far higher than it was back in 2014 ($300 or so), which is a big incentive for everybody to come to an agreement fast. FTX will be exponentially more complex on all counts: more jurisdictions, more tokens and almost certainly severely marked down valuations. BTC
- celestialcheese 4y ago
  Yup - i'm a party in the Mt. Gox and it's just an endless stream of weird japanese legalese. Didn't have much so never got approached for a buyout, but if offered I would have taken it.
fallingknife 4y ago
SOL trades $100s of millions per day, which is actually extremely liquid in investment terms. "Less than liquid" is actually quite accurate for lesser known crypto. It's how assets like syndicated debt, that trade much less often, would be described on a balance sheet. "Illiquid" would be more like equity in a private company, where there is no active secondary market at all.

deleted 4y ago

[deleted]

rippercushions 4y ago

What the fresh hell? This isn't even an actual accounting balance sheet. He was trying to convince investors to put billions of dollars of actual money into FTX, and the best he could do is the sketchiest one-page Excel ever, complete with comments like "Hidden, poorly internally labled fiat@ account" (sic) worth 8 billion and warnings about typos! No wonder CZ got cold feet.

pavlov 4y ago
Somehow this same level of sloppiness, disorganization and disrespect was a mark of a great disruptive innovator just two months ago. In the Sequoia profile they greatly admire how Bankman-Fried plays League of Legends while pitching to investors, and takes naps in his office when he’s supposed to be in meetings. How surprised can they realistically act that their genius lost 8 billion dollars in a “hidden, poorly internally labeled account”. The investment industry needs to face their role in this debacle. The Ontario teachers’ pension fund sent tens of millions to FTX with apparently no due diligence. That money ended up in the pockets of crypto insiders and also funded promotion like Super Bowl ads that sucked more retail dollars into FTX. Some of those poor FTX customers who are facing a 100% loss on their crypto “investment” may have been teachers from Ontario. Pension funds and VCs don’t generally invest in gambling and drugs. Why do they invest in crypto?
- fallingknife 4y ago
  Remember how the immaculately organized and professional appearing Wall St. firms did the exact same shit back in 2008? The only difference is really that they had the political clout to get a government bailout.
  - csin 4y ago
    https://www.theonion.com/crypto-confidence-soars-after-ceo-defrauds-customers-ju-1849773647 https://www.theonion.com/crypto-confidence-soars-after-ceo-d...
  - vkou 4y ago

AmericanOP 4y ago

My mental model of the blockchain industry is akin to FTXs balance sheet. I see an endless string of branded code servicing similar technologies, but where are the customer inputs putting in the billions needed to support the industry? Is blockchain liquidating crypto valuations into developer salaries with a VC subsidy?

collaborative 4y ago
Is banking liquidating bank account funds into banker salaries? Sry for being the advocate of the devil and I am by no means a crypto fan
- AmericanOP 4y ago
  Banks are the medium for money created by the government to reach the economy. So perhaps one can say banker salaries are the vig on inflation.
- imtringued 4y ago
  They take a cut on every loan that is successful, they don't take those fees from bank account balances, the borrower is ultimately paying for it.

kumarvvr 4y ago

Unable to open the archived link, any alternative sources for the actual document?

JoachimSchipper 4y ago
The article links to https://d1e00ek4ebabms.cloudfront.net/production/7ab64a3b-6ce0-47cc-96ac-5e2d2a8c5d6c.png https://d1e00ek4ebabms.cloudfront.net/production/7ab64a3b-6c...

Shank 4y ago

The "before this week" column seems to be attempting to draw sympathy by saying "but everything was fine before, seriously!" when in reality it just proved that, even in the best of worlds, they had an extremely optimistic view of the entire crypto ecosystem, including its liquidity. I can't believe they seriously held that much of their total value in their own issued token. That's just preposterous. Imagine if JP Morgan Chase's entire value was in JP Morgan Chase stock, and they just reported that as their value in cash. It's like recursive valuation.

wumpus 4y ago
Remember the Wirecard collapse, where there was a fake bank account in the Phillipines that allegedly had $2.1 billion USD in it? This is the crypto equivalent.
- KirillPanov 4y ago
  Garnished with a dash of Bernie Madoff.
- wyclif 4y ago
  Yes, it was actually two accounts: BDO Unibank and Bank of the Philippine Islands.
- odiroot 4y ago
  I wonder if (some of) SEC will play the same role in this story as BaFin played in Wirecard's.
- _fat_santa 4y ago
  The hole in Wirecard's balance sheet almost doesn't seem that bad when you see what kind of hole FTX has.
- everybodyknows 4y ago
  Has there been any attempt at reform of BaFin in the aftermath -- or has bureaucratic inertia absorbed all such impulses?
4y ago

lysecret 4y ago

Wait will the forced liquidation crush a large part of crypto ?

donavanm 4y ago
Well… your anchors of eth and btc are down about 25% in the last few days. And their reported “assets” are huge chunks of the total market value for a lot of these tiny sketch coins. So yeah, I expect its going to be rough when this get liquidated or it simply turns out your counterparties are actually the sketchy exchanges who dont have anything to back it up.
Aramgutang 4y ago
There isn't much there to liquidate that still has any worth. They didn't have significant holdings of any of the major assets. That's kind of the main reason they were insolvent.
- coffeebeqn 4y ago
  They also had this “hack” a day or two ago so it’s unclear what is left

bagels 4y ago

Direct link to the image of sheet itself: https://d1e00ek4ebabms.cloudfront.net/production/7ab64a3b-6ce0-47cc-96ac-5e2d2a8c5d6c.png https://d1e00ek4ebabms.cloudfront.net/production/7ab64a3b-6c...

deleted 4y ago
[deleted]

password4321 4y ago

The stories so far (HN items with >100 comments): Tuesday 11/08 129 https://news.ycombinator.com/item?id=33518961 https://news.ycombinator.com/item?id=33518961 FTX Appears to Have Stopped Processing Withdrawals, On-Chain Data Show (theblock.co) 747 https://news.ycombinator.com/item?id=33520585 https://news.ycombinator.com/item?id=33520585 Binance to acquire FTX (bloomberg.com) 110 https://news.ycombinator.com/item?id=33523274 https://news.ycombinator.com/item?id=33523274 FTX Token, FTT down by more than 80% in less than 24 hours (ftx.com) Wednesday 11/09 430 https://news.ycombinator.com/item?id=33535161 https://news.ycombinator.com/item?id=33535161 FTX’s financial black hole leaves Binance balking at rescue plan (bloomberg.com) 420 https://news.ycombinator.com/item?id=33537821 https://news.ycombinator.com/item?id=33537821 We will not pursue the potential acquisition of FTX (twitter.com/binance) Thursday 11/10 189 https://news.ycombinator.com/item?id=33541790 https://news.ycombinator.com/item?id=33541790 Ftx.com Has Probably Collapsed (effectivealtruism.org) 197 https://news.ycombinator.com/item?id=33547102 https://news.ycombinator.com/item?id=33547102 The Sam Bankman-Fried empire crumbled. What happened? (mollywhite.net) 516 https://news.ycombinator.com/item?id=33547863 https://news.ycombinator.com/item?id=33547863 FTX tapped into customer accounts to fund risky bets, setting up its downfall (wsj.com) Friday 11/11 108 https://news.ycombinator.com/item?id=33558225 https://news.ycombinator.com/item?id=33558225 FTX Yikes (rekt.news) 1168 https://news.ycombinator.com/item?id=33561234 https://news.ycombinator.com/item?id=33561234 FTX to file for U.S. bankruptcy, CEO resigns (reuters.com) Saturday 11/12 800 https://news.ycombinator.com/item?id=33570274 https://news.ycombinator.com/item?id=33570274 FTX faces potential hack, sees mysterious outflows totaling more than $600M (coindesk.com) 174 https://news.ycombinator.com/item?id=33571734 https://news.ycombinator.com/item?id=33571734 FTX investor Sequoia removed its glowing profile of Sam Bankman-Fried (businessinsider.com) 174 https://news.ycombinator.com/item?id=33575281 https://news.ycombinator.com/item?id=33575281 FTX held less than $1B in liquid assets against $9B in liabilities (ft.com) 139 https://news.ycombinator.com/item?id=33577311 https://news.ycombinator.com/item?id=33577311 FTX hacker identity discovered by Kraken Exchange team? (cryptoslate.com) >> https://news.ycombinator.com/item?id=33577437 https://news.ycombinator.com/item?id=33577437 FTX balance sheet, revealed (ft.com) ^^ You are here ^^

password4321 4y ago
And if you had an "FTX" alert on HN/Twitter, you'd have seen: Sunday 11/06 1 https://news.ycombinator.com/item?id=33494404 https://news.ycombinator.com/item?id=33494404 Due to “recent revelation” Binance is liquidating their FTX Token holdings (twitter.com/cz_binance) > Context: Friday 11/04 254 https://news.ycombinator.com/item?id=33464494 https://news.ycombinator.com/item?id=33464494 Crypto trading firm Alameda Research might be insolvent (dirtybubblemedia.substack.com) -- All in time for: Tuesday 11/07 -> Monday 11/06 ("yesterday") https://news.ycombinator.com/item?id=33518961#33520094 https://news.ycombinator.com/item?id=33518961#33520094 > I admit I did panic and tried to withdraw my funds yesterday. They just processed it today. A bit delayed but still processing. -- "Get Out" vibes for sure.

celestialcheese 4y ago

Good tweet on decoding the illiquid assets https://mobile.twitter.com/metavestor/status/1591200259035648000 https://mobile.twitter.com/metavestor/status/159120025903564...

thebeastie 4y ago

FTX violated ancient banker wisdom: don’t get high on your own supply.

pigtailgirl 4y ago

"What are President tokens? President tokens are ERC-20 tokens that will be redeemable for either $1 or $0 based on if Trump wins or loses the Presidential election. These markets act as tradeable prediction markets where the market price of TRUMPWIN should be roughly equal to the probability that Trump will win the election and the market price of TRUMPLOSE should be roughly equal to 1 minus that probability. TRUMPWIN and TRUMPLOSE are based on the President 2020 Futures Contracts on FTX." jfc...

libraryatnight 4y ago
Someone just mint the Camacho coins already
- RantyDave 4y ago
  Camacho was a good president. He knew he was out of his depth, sought the best advice he could and was willing to take politically difficult risks for the good of his people. Unlike, say....
SnowHill9902 4y ago
That’s actually very useful. It’d allow one to hedge risks with new synthetic derivatives instead of creating weird proxies with stocks.
- UncleMeat 4y ago
  I, for one, do not like the trend of the financialization of everything. It is surveillance capitalism times 1000. Where all human behavior becomes an object to bet on.
- pigtailgirl 4y ago
  -- dont have issue with the coin - "jfc smh" FTX was holding it - such a strange bet --

mudrockbestgirl 4y ago

Okay, but... how? How did they manage to lose so much money by running a popular exchange that should bring in tons of fees? Even if they were gambling with part of the deposits, how can they lose 90% of all assets? You'd have to be actively trying to lose money to be this bad... Also, where does Alameda fit into the picture?

mym1990 4y ago
They were probably leveraging heavily in some sectors, on top of siphoning those incoming fees to line pockets. Once you leverage, it is extremely easy to lose everything in a span…but also easy to gain!
lordnacho 4y ago
Seems like Alameda was critical to the how of it. What's not clear to me is what they gambled on that lost money. Business model ought to be simple, the exchange earns loads of fees, and Alameda makes markets on it, earning spreads. Just putting a lid on the risk there should be enough to keep people occupied, no need to print your own money for extra leverage.
- grey-area 4y ago
  SBF is a con artist. There is no point looking for a legitimate business because there wasn’t one.
  - HDThoreaun 4y ago
    Running an exchange is a legitimate business that should make tons of money if you're not embezzling customer funds.
    - grey-area 4y ago
      It was not a legitimate business, there were almost zero controls on cashflow.
- 4y ago

blue_light_man 4y ago

The only lesson I learend from this whole debacle is never trust people and organisations you know from the Internet no matter how famous or humble or good they are. Trust the tech. But never the people. Especially for financial advices. Be it Sequoia. Or Yc. PG, Chamath, Mark Cuban ,Balaji or the Collision brothers. Tom Brady or SBF or CZ. Never fucking trust people or organisations. They are all here for their financial upsides. Only trust the tech. The maths. If you can't do the work you would be fucked by them. That's all. I am not saying PG did something shady. I am saying even a well regarded figure like him in this community should not be taken for granted unless they back their claims by sold evidence.

deleted 4y ago
[deleted]
aaronbrethorst 4y ago
you definitely shouldn't trust NFL quarterbacks. https://people.com/sports/former-packers-quarterback-brett-favre-allegedly-used-welfare-funds-for-college-volleyball-stadium/ https://people.com/sports/former-packers-quarterback-brett-f...
throwaway0asd 4y ago
What I learned from this mess: nothing new. If anything this just reinforces what should already be painfully obvious: invest in real world value that you understand. I have not seen the real world value of crypto or understand how that makes makes outside of itself. Even before crypto currency markets were a thing and were like setting money on fire. I apply that reasoning to all investments. Sure, I miss out on all the easy money hype trains, but the investment decisions are almost always safe and still better than market average.
- naijaboiler 4y ago
  the Warren Buffet mantra to investing. Been working now for 70+ years.
mym1990 4y ago

jjallen 4y ago

The thing that I always wondered about with FTX (and Binance frankly) is how did they get so big so quickly. What did they have that caused so many people to use _their_ exchange. This is still unexplained and was a major red flag. Usually to grow that big takes many years. Just look at Coinbase.

mudrockbestgirl 4y ago
I don't know about FTX, but Binance has been shady from the very beginning. They got large quickly because they listed all kinds of **coins, had negative trading fee promotions, and in general did lots of shady growth hacking marketing tactics and partnerships. If you wanted to gamble altcoins, those would be on Binance, but not listed on Coinbase. That was many years ago when they started out of course. I'm curious where they are today. In my mind, the shady image of Binance hasn't changed, but maybe they got lucky with their investments and are actually fully backed and profitable now. Who knows... Coinbase used to be US-only, and is still very US-centric. Binance and FTX are international. They only opened US exchanges later, but they are separate, and tiny compared to their international footprint. I'm also curious how FTX got so big. When they started, the market seemed saturated with exchanges already, and they didn't really have differentation.
- password4321 4y ago
  Still get emails from Binance constantly: "Earn 3.6%/3.9%/4.1% when you stake ... FTM/ONE/ROSE". Just scrolling down, they offered 15% on DOT back in August!
  - dna_polymerase 4y ago
    They offered this because it’s the staking reward the Polkadot network rewards for staking your coins. Binance just offers you to stake with them and in turn gives you part of the rewards. The 15% are paid in DOT though, so your dollar return is dependent on DOTs performance.
- rkagerer 4y ago

grey-area 4y ago

FTX likely printed SRM token out of thin air to prop up their balance sheet. https://mobile.twitter.com/LucasNuzzi/status/1591595908239888384 https://mobile.twitter.com/LucasNuzzi/status/159159590823988...

bmitc 4y ago

Does he really expect anyone to believe his “poorly labeled internal ... account” story? How can you have $8 BILLION mislabeled? As in, if he transferred or loaned it to Alameda, literally no one was asking: wait, where did this sum of money, so large that it is a massive percentage of our value and could crash the company, come from? Despite all the idiocies that we’re learning about, it is still hard to believe. Another thing is, it seems like this spreadsheet was hand-crafted by Sam Bankman-Fried just before their emergency meetings this past week. Why wasn’t this something that already existed for all top executives to see? How was it not just a printable document or report but was instead something he just typed up? Because no, it is not obvious that a balance sheet of a supposedly multi-billion dollar company would contain typos. Typos!? I mean, come on. Then again, I have worked with people similar to how Sam Bankman-Fried seems to operate. Not the possible sociopathic tendencies he appears to have but the sort of twitchy smarts he does seem to have. People like that can sometimes think so fast with a lot of confidence that they create this wake of stuff behind them as they work. They “solve” (i.e., move through) problems so fast, that everyone gets lost in the wake and can’t catch up to find all the mistakes left behind or tie the loose ends together. They consider a problem solved if it’s essentially solved but doesn’t have details thought out or if there are possible mistakes that can be “easily” solved in ways not apparent to anyone else. If there’s no one around to slow these types of workers down, it can be complete chaos where you have one person spearheading away through the bushes, while everyone else is getting slapped in the face with the branches snapping back and thorns. At some point everyone gives up trying to follow. Then the person is off on their own where they lose sight of whatever actual problem they were solving and lose track of the bigger picture. It is entirely possible that that is a component of what has happened here, coupled with some sociopathy, megalomania, and billions of dollars of funding in Sam Bankman-Fried’s case.

jiggawatts 4y ago
> you have one person spearheading away through the bushes, while everyone else is getting slapped in the face with the branches snapping back and thorns. You just described me about 15 years ago. I've learned my lesson and avoid "unsupportable solutions" these days like the plague, but I still get pulled aside occasionally and get told quietly that nobody understands why I'm talking about solutions to problems that haven't even come up yet.

irusensei 4y ago

The whole thing that is bugging me is that they made big political donations to both D and R. They use the money they conjured out of thin air and backed politicians with it. They probably backed the politicians who were most friendly to them. Those politicians might have won and that dirty money might have done a difference. Does that sound moral to you? I think it’s absolutely terrifying. Every candidate that received that money should have their relation to Scam Bankman-Fraud investigated. It gets worse when you realize his mother and business partner are either related to certain political parties and the SEC chairman.

raverbashing 4y ago
Oh so maybe that's what "effective altruism" really means.
recuter 4y ago
Sounds like plain old moral hazard to me: https://en.wikipedia.org/wiki/Moral_hazard https://en.wikipedia.org/wiki/Moral_hazard Why people think that such things are limited to any one political party or that progressive liberals are somehow immune from it is beyond me. Used to be a time, about a decade ago, where these very same folks would lose their collective minds when Mitt Romney said stuff like "corporations are people my friend" and "money is speech". I guess if you can't beat them, join them. Heck, SBF even donated to Mitt: https://en.wikipedia.org/wiki/Sam_Bankman-Fried#Political_donations https://en.wikipedia.org/wiki/Sam_Bankman-Fried#Political_do... Instead of fighting to get money out of politics they decided they can just play this game better and their ends justify the means with very predictable results. The only surprising thing is they got caught. Although it remains to be seen whether anybody actually admits fault, goes to jail, or any actual changes are made.
- tossawayone23 4y ago
  The whole thing stinks to high heaven. https://cdn.discordapp.com/attachments/430493835265835021/1041059453899907072/unknown.png https://cdn.discordapp.com/attachments/430493835265835021/10...
- 4y ago

macrolime 4y ago

I haven't verified this for veracity, but supposedly a screenshot from tumblr blog of the CEO of Alameda Research "this blog endorses double-or-nothing coin flips and high leverage" https://pbs.twimg.com/media/FhaKXhRXwAEfvKD?format=jpg&name=large https://pbs.twimg.com/media/FhaKXhRXwAEfvKD?format=jpg&name=...

ealexhudson 4y ago
I believe it is true, and there was a good thread on twitter about Kelly optimal bets. It seems clear that SBF, and maybe therefore Alameda, didn't really understand the right hand side of the Kelly optimum.
im3w1l 4y ago
It's kind of an interesting puzzle though. It obviously doesn't work but breaking down exactly why it doesn't is a bit nuanced. The simplest model we can make is that the market will instantly jump either up or down. Why does the strategy not work in this case? If it jumps up you win. But if it jumps down you lose not just your stake, but you actually go into debt because of slippage. However if you add the possibility of call bankrupcy to discharge the debt, then it actually does work. On the other hand if you use a more realistic (but not fully, of course) continous model, then it doesn't work. Why? Because there are such a high proportion of paths the price can take where it reaches your stopout before it reaches your payout. It could go down (game over) up up up, or it could go up up down up down down up down down (game over). I believe you can use martingale theory to prove that it doesn't work.

Dowwie 4y ago

To what extent were responsible members of the financial industry hired to try to turn FTX into a legitimate financial company? Was everyone a "brilliant outsider", irreverent to hundreds of years of industry wisdom?

PYTHONDJANGO 4y ago

Please post an URL to the excel file, thanks!

vasco 4y ago

Martin Shkreli (pharma bro) did a livestream on youtube[0] going over it a few days ago. Yes, he is out of jail. [0] https://youtu.be/XnwRMaW-Kdc https://youtu.be/XnwRMaW-Kdc

tasubotadas 4y ago

I am quite surprised that nobody is talking about VCs (Sequoia) that happily poured money into this. What was their plan? Were they blind? Were they hoping to cash out before it crashed? Major investors usually get full visibility into the company.

mayankkaizen 4y ago
This is the most important thing I was wondering about. If crypto businesses are shady and Ponzi schemes and these crypto guys are working mostly behind the scene, why would a VC like Sequoia invest in such firms? I somehow feel firms like Sequoia gave these crypto stuff some credibility and positive exposure. It was like, "don't worry, their business is legit and booming.'
- hiq 4y ago
  > why would a VC like Sequoia invest in such firms? I thought the rationale was already widely known by now: https://en.wikipedia.org/wiki/Greater_fool_theory https://en.wikipedia.org/wiki/Greater_fool_theory Or in more charitable terms: if an investment has a positive expected return according to their model (meaning that they think they can sell their shares / tokens in the case of some VCs), they do it.
  - lupire 4y ago
    Who was the greater fool? Sequoia gave SBF money and SBF stole it.
    - hiq 4y ago
      Sure, I didn't say their model was correct.
- ilrwbwrkhv 4y ago
  Some kaching on the side. ;) Seriously though, a lot of influencers promoting this stuff have been getting paid in cold hard US dollars to promote these scams. How do I know? I spoke to influencers to talk about my portfolio companies and many of them told me the crazy amount of cash they were getting paid from these scammers. Think 25,000 for a channel with hardly 100k followers. That's why I feel like Sequoia partners should be investigated thoroughly. If a terrorist organization gets investments, don't we investigate those investors as well? If you drop morals, like a16z did, by supporting another scammer and gritting on crypto, it's a very lucrative business.

World177 4y ago

They definitely lost money with Luna/UST. [1] I wonder if we'll ever find out how much they lost [1] https://twitter.com/AlamedaTrabucco/status/1523381953239523328 https://twitter.com/AlamedaTrabucco/status/15233819532395233...

jmyeet 4y ago

This is wild. My first question was: who is the CFO who signed off on this? FTX literally has no CFO [1]. How is this possible for a billion dollar company and billions in client assets? How did the investors not insist on an adult to manage the their investment? The CFO, and the credibility they bring to the table based on their track record and reputation, is part of the system that helps prevents situations like this. [1]: https://www.ledgerinsights.com/ftx-warning-signs-no-cfo/ https://www.ledgerinsights.com/ftx-warning-signs-no-cfo/

SkipperCat 4y ago
That is literally jaw dropping. I'm almost amazed that the WSJ never picked that up. I just did a quick search on the wsj.com site and saw several articles from this past summer and none even mentioned that. WSJ nailed it with Theranos, missed it with FTX.

d3vmax 4y ago

Remember at the peak how many pro-crypto HN commenters would give all kinds of tech/politics/economic pros of crypto. It was all a sham. Anyone who knows tech and seen the progress from the 90s could smell the shit that is crypto. Unnecessarily difficult than it had to be, to obfuscate the fact it was bullocks through and through.

ekpyrotic 4y ago

Even these accounts are deceiving. The current holdings are valued at today / yesterday's spot rate. Given that many of these holdings are in (comparatively) thinly traded alt-coins, as soon as you try to dispose of these levels of coins / tokens, the price will fall as supply overwhelms demand. Of course, this is represented by the fact that many of the alt-coins are marked as relatively illiquid -- and SBF has put a lackadaisical disclaimer at the top about the shifting price. But the reality is that regardless of how long you wait -- or how much you try to spread the disposals -- you will only ever get a percentage of the current spot rate, given the impact that the sales will always have on the price itself. I can't shake the feeling that SBF might say... "Yes, but once we have reassured the market, etc, etc, these alt-coins might recover in value -- and then we can dispose at this level." And, of course, the merry-go-round starts again.

SilverBirch 4y ago

Using the word "Liquid" in the context of these accounts is... I don't know? Fraudulent? I understand that in the context of real finances things might be illiquid - it might take time to sell your house, or if you're a particularly big holder of stock in a company you founded you might have liquidity problems divesting over time. But it's really just taking the piss describing a lot of this stuff as "illiquid". FTT is a coin that they have made up themselves, which they themselves own the vast majority of, and which only had value in connection to the exchange that they just bankrupted. So no, it isn't "illiquid" its "worthless". It's not just that they'll take a hair cut if they liquidate it quickly, they could never liquidate even a significant portion of this. This whole thing started when CZ tried to liquidate 500m in FTT and the whole of FTX collapsed, they're now claiming their remaining FTT tokens are worth $600m (down from $6Bn). It's just so absurd to suggest you can mark to market like that.

recuter 4y ago
When the people who print the real currency are your friends, the people who are supposed to regulate who can print currency are your friends, and the people who lend you massive amounts of real currency are your friends - it is easy to delude yourself into believing that on a long enough time scale some of the plebs will buy your funny money and you will become more liquid and everything will sort of work out somehow. Money creates more money, so if can can create money that creates more money, we're broadening the economy, expanding it all the time.. (https://www.youtube.com/watch?v=M_3T-Af57Pg https://www.youtube.com/watch?v=M_3T-Af57Pg) Sort of similar to how Trump said his own net worth fluctuates day to day sometimes based on his feelings since it is tied to perceptions of the Trump name as a brand. Or how George Costanza said it's not a lie if you believe it. Or how a gambler who is down is sure he can make it back. In other words, yeah, as fraudulent as can be. Lets see if anybody actually goes to jail.
migueloller 4y ago
Matt Levine’s writing on this is right along this line. It delineates between liquidity and solvency problems. Worth a read. https://www.bloomberg.com/opinion/articles/2022-11-10/ftx-is-still-looking-for-money#xj4y7vzkg https://www.bloomberg.com/opinion/articles/2022-11-10/ftx-is...

w1nst0nsm1th 4y ago

There should be a newcomer financial book titled "How to get rich quick if you don't mind being a crook". The very first book to read before any other on finance and investment. It would be the like of telling your kid "Beware of the wolf before sending her through the wood to pay a visit to Granny"...

zajio1am 4y ago

Perhaps crypto-exchange could be transparent to third-parties through blockchain(s)? It should not be hard to declare all account numbers, so whole crypto-balance could be online validated.

nullc 4y ago

Short bitcoin, long shitcoin... that's been a slow road to insolvency for most of a decade.

guy_c 4y ago

Based off the balance sheet FTX may have peaked (September 2021) with more than $100 billion of paper gains in "less liquid" assets. Token Last wks Last wks Estimated Peak Peak Peak value price holding price date value FTT $5.9bn $24.00 246m $77.69 09-Sep-2021 $19bn SRM $5.4bn $0.75 7,240m $12.50 13-Sep-2021 $90bn SOL $2.2bn $32.00 70m $258.78 07-Nov-2021 $18bn Just speculation, but once you've "made" $130bn you feel like a genius. You might want to start acting like a hundred billionare. Time to start throwing money around. Especially spending it on anything that helps you realise those gains. But FTT/SOL/SRM is not very liquid. So you use your liquid assets (i.e. your customers' USD, USDT, BTC and ETH). People might wonder where you get all this cash. You don't want to admit you are using customer funds and you only have gains on tokens you printed. So pretend you're genius trader and run a highly profitable exchange.