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Since they used Serum’s diluted market cap to justify it as an increase in assets, and focused on having more assets than liabilities, it implies they took this

Since they used Serum’s diluted market cap to justify it as an increase in assets, and focused on having more assets than liabilities, it implies they took this higher total asset balance to shoulder liabilities that their existing assets did not cover. Since every dollar they received in customer deposits appeared both in assets and liabilities, the only way they ended up with liabilities that their (non-Serum, non-FTT) assets did not cover, is by exchanging the dollars with something that lost value.

tibbar 4y ago
> Since every dollar they received in customer deposits appeared both in assets and liabilities, the only way they ended up with liabilities that their (non-Serum, non-FTT) assets did not cover, is by exchanging the dollars with something that lost value. That's the way it ought to work in the absence of fraud or theft. But as Matt says, the reason this balance sheet is so insane is that there's no evidence this happened. Only a very small amount of customer dollars could have been used to generate Serum. FTX invented several cryptocurrencies which, at a 10x inflated valuation, obscure the fact that they completely lost $16 billion of assets. In fact, it seems that SBF used a backdoor in his own software to secretly transfer customer funds to Alameda. There's no evidence that any sort of internal accounting actually balanced the books in the way you suggest, which is what's so insane about this whole story.
- lazide 4y ago
  It doesn’t matter how thoroughly you do your double entry accounting if you can’t trust the statement (or there is no statement) you reconcile against. Or no one ever tries to reconcile shit. How does it go again? “ The government are very keen on amassing statistics. They collect them, add them, raise them to the nth power, take the cube root and prepare wonderful diagrams. But you must never forget that every one of these figures comes in the first instance from the village watchman, who just puts down what he damn pleases.” - Josiah Stamp

tibbar 4y ago

> Since every dollar they received in customer deposits appeared both in assets and liabilities, the only way they ended up with liabilities that their (non-Serum, non-FTT) assets did not cover, is by exchanging the dollars with something that lost value. That's the way it ought to work in the absence of fraud or theft. But as Matt says, the reason this balance sheet is so insane is that there's no evidence this happened. Only a very small amount of customer dollars could have been used to generate Serum. FTX invented several cryptocurrencies which, at a 10x inflated valuation, obscure the fact that they completely lost $16 billion of assets. In fact, it seems that SBF used a backdoor in his own software to secretly transfer customer funds to Alameda. There's no evidence that any sort of internal accounting actually balanced the books in the way you suggest, which is what's so insane about this whole story.

lazide 4y ago
It doesn’t matter how thoroughly you do your double entry accounting if you can’t trust the statement (or there is no statement) you reconcile against. Or no one ever tries to reconcile shit. How does it go again? “ The government are very keen on amassing statistics. They collect them, add them, raise them to the nth power, take the cube root and prepare wonderful diagrams. But you must never forget that every one of these figures comes in the first instance from the village watchman, who just puts down what he damn pleases.” - Josiah Stamp