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BlockFi files for bankruptcy as FTX fallout spreads

523 points by kgwgk 4y ago

paulgb 4y ago
> At the start of the year, there were three big North American retail crypto lenders. Now all three are bankrupt. https://twitter.com/kadhim/status/1597250428378705921 https://twitter.com/kadhim/status/1597250428378705921
- redwood 4y ago
  To confirm, what makes Coinbase different is that it's not a lender?
  - aodin 4y ago
    Yes, Coinbase is an exchange
    - JumpCrisscross 4y ago
      > Coinbase is an exchange Not in the conventional sense. It’s a broker with a prop desk.
      - HDThoreaun 4y ago
        Coinbase has a prop desk?
        JumpCrisscross 4y ago
        > Coinbase has a prop desk? Maybe [1], possibly not anymore [2]. [1] https://www.wsj.com/articles/coinbase-tested-group-to-speculate-on-crypto-11663806157 https://www.wsj.com/articles/coinbase-tested-group-to-specul... [2] https://news.yahoo.com/coinbase-never-trades-against-customers-145709295.html https://news.yahoo.com/coinbase-never-trades-against-custome...
  - Auracle 4y ago
    As far as I know only interest you can earn on Coinbase is from staking coins - and Coinbase actually takes a portion of that profit for themselves. I remember looking at all of these now defunct businesses wondering just how they could have such high interest rates on your coins. In what should be a surprise to no one it was too good to be true.
    - NotYourLawyer 4y ago
      If someone offers a risk-free return way above the prevailing risk-free interest rate… there are some risks that aren’t being disclosed. Everybody forgot that for a little while.
      - AlexandrB 4y ago
        "This Time It's Different"
  - jb12 4y ago
    It's not domiciled in North America. In fact, they refuse to tell anyone where their HQ is. EDIT: sorry, got confused. Ignore me.
    - capableweb 4y ago
      Coinbase is probably the most American of all the "American" cryptocurrency exchanges. It's also a publicly traded company on NASDAQ. Not sure where you get the picture that they refuse to tell anyone where the HQ is, it's famously a remote-first company but used to have their HQ in SF.
      - misiti3780 4y ago
        blockfi was based in jersey city also, it just wasnt public.
    - NotYourLawyer 4y ago
      Are you thinking of Binance?
    - deleted 4y ago
      [deleted]
  - SilverBirch 4y ago
    It looks like everyone in crypto has been doing wild and shady stuff, whilst Coinbase has built a respectable business in an industry that doesn't exist. Coinbase was being looked at as a shrinking fish in a growing pond, moving slowly whilst places like FTX ran rings around them, now it turns out FTX was just a straight up scam and loads of the money was actually wash trading, so Coinbase now looks like an expensive and slow business in an industry that doesn't actually exist.
- jdprgm 4y ago
  It's kind of absurd the level of failure in crypto lending. Putting aside anyone with criticisms of all things crypto these should all be based on the very basic and long established business model of taking deposits, making loans, and paying interest. There shouldn't be anything inherently difficult or "scammy" in that and it should be a successful business pillar in the crypto space. Besides the basic business your two other main priorities should be risk mitigation and dealing with liquidity issues. Surely long term some well run company ought to be able to sort this out.
  - mattwilsonn888 4y ago
    Perhaps it was competition with decentralized stable-coin lending protocols offering decent APR for the risk that drove and legitimized such reckless behavior. At least the decentralized protocols were auditable from day 0.
- SilasX 4y ago
  Huh? It looks like it was saying the three are Celsius, Voyager, and BlockFi, but it’s missing a much larger one, Genesis. Although that maybe be going bankrupt to if it can’t get support from its parent company DCG.
  - taormina 4y ago
    Definitely about to go bankrupt. Coffeezilla has a great summary here: https://www.youtube.com/watch?v=TNXYHNdGYfc https://www.youtube.com/watch?v=TNXYHNdGYfc
- webinvest 4y ago
  I haven’t ever seen a crypto lender stay solvent. Unless: A) The money never leaves the platform such as with collateralized margin lending for shorting / leveraging. B) The money is collateralized such as on DeFi with AAVE. BTCJam gave small, well-diversified loans based on credit scores, reputations, business ideas, and identity verifications. They iterated and tried almost everything but they couldn’t get enough money that left the platform to ever return to the platform. Scamming the banks seemed to be way more profitable and lucrative than using borrowed money for economic activities more productive than the borrowed interest costs.
simple-thoughts 4y ago
With projects like blockfi, users get all the disadvantages of the centralized traditional financial system without any of the regulatory protections that have built up over centuries. Terrible for the people with assets in blockfi but extremely predictable. The point of defi is that you can use financial services without a centralized counterparty. People who can’t handle their own keys should be using traditional banks, at least until the technology is improved. Compare to Aave and other actually decentralized lending protocols which are not at risk of bankruptcy.
- sdiacom 4y ago
  Sure, but you can't use DeFi to trade fiat for crypto. You can use DeFi to trade crypto for crypto, or for crypto that pretends to be fiat. Saying "centralised exchanges bad, DeFi good" misses the point that the main use case of centralised exchanges is not covered by DeFi.
  - rahen 4y ago
    > Sure, but you can't use DeFi to trade fiat for crypto. Of course you can, both ways. - https://bisq.network https://bisq.network - https://learn.robosats.com https://learn.robosats.com
    - f00zz 4y ago
      > - https://bisq.network https://bisq.network The last time I looked into this it required a security deposit in BTC.
    - ceejayoz 4y ago
      https://learn.robosats.com/docs/trade-pipeline/ https://learn.robosats.com/docs/trade-pipeline/ > On a private chat, Bob tells Alice how to send him fiat. https://learn.robosats.com/docs/payment-methods/ https://learn.robosats.com/docs/payment-methods/ > You can pay with any method that both you and your peer agree on. This includes the higher risk method such as PayPal, Venmo, and Cash apps. C'mon, that's not trading fiat for crypto. That's "PayPal me some money".
fabian2k 4y ago
Seems to be in the 1-10 billion USD range for assets and liabilities according to the bankruptcy filings (https://twitter.com/web3isgreat/status/1597256105373073409 https://twitter.com/web3isgreat/status/1597256105373073409), so not a small company.
jmclnx 4y ago
> A representative from BlockFi did not immediately respond to requests for comment. Well I am sure the "representative from BlockFi" made out just fine working for BlockFi. I wonder if all these failures will finally tag these crypto companies as ponzi schemes ? Then these people will face real consequences.
- corndoge 4y ago
  “Ponzi scheme” is a specific type of financial fraud and isn’t a synonym for overexposure, excessive leverage, poor management, or even fraud in general. I do not think labeling things as Ponzi schemes which are not Ponzi schemes is helpful. Nor do I understand how that would help with effecting “real consequences.” The consequences faced by company personnel should be consequent to any wrongdoing.
  - whoknew1122 4y ago
    In the legal sense, a 'Ponzi Scheme' has a specific meaning. In conversation, the definition is a bit looser. Sorta like how expressive has a different definition when you say 'that is an expressive programming language' and 'that is an expressive face'. Crypto, as a whole, is about early adopters trying to convince newcomers that crypto has value. If the early adopters can't convince anyone that crypto has value, it's just a bunch of math and wasted electricity. Early adopters try to convince laymen to 'invest' in crypto (i.e. buy crypto from the early adopters). Then the second generation crypto adopters have to find new marks to buy their crypto. Ad infinitum, until someone is left holding the bag. Then you sprinkle in some jpgs that people purchase despite anyone being able to right click and save it, rug pulls, and overall idiocy that happens when you give people billions of dollars without checking to see if they're observing basic organizational principles (i.e. are they running payroll out of a Slack room?). Mingle it all together and you get a house of cards that's remarkably similar to a Ponzi scheme, yet doesn't exactly fit the bill. Sort of like how MLMs are legally distinct from Ponzi schemes for... reasons, I guess. Saying that crypto shouldn't be considered a Ponzi scheme is a bit pedantic when the outcome is the same (i.e. the last person is always holding the bag, so you have to keep trying to convince someone to buy into your idea).
nscalf 4y ago
For what it's worth, all reasonable people in the crypto space want regulation to make sure these types of poor lending practices don't continue. Regulators have been slow and ineffective when it comes to crypto, which has lent itself to the crypto v SEC narrative, but all the adults in the room known there is a need for some regulation.
- frgtpsswrdlame 4y ago
  You don't 'regulate' a ponzi scheme (at least not in the sense that you mean regulation), you prosecute it.
  - liaukovv 4y ago
    By regulate they mean bail out
  - aeternum 4y ago
    Do you also consider fractional reserve banks a ponzi scheme? We have successfully regulated those.
- ARandomerDude 4y ago
  That sounds nice in theory, but of course these companies are free to sit down and hammer out professional standards without the government telling them to. "We really want to be told what to do but nobody will" is code for "I'm not doing anything until the government makes me, and I'll redirect blame to the glacially slow government the whole time."
  - Auracle 4y ago
    That’s easy to say, but that’s going to make those companies uncompetitive. Look at how fast FTX overtook Coinbase, a long established player that - as far as anyone can tell - isn’t doing anything shady.
    - clintonb 4y ago
propter_hoc 4y ago
Somehow these guys peaked at about 900 employees, according to linkedin (https://www.linkedin.com/company/blockfi https://www.linkedin.com/company/blockfi) They've raised about a billion dollars of VC - https://www.crunchbase.com/organization/blockfi-inc/investor_financials https://www.crunchbase.com/organization/blockfi-inc/investor... (note, CB lists $1.4b, of which 400M is debt from FTX, which I imagine they never got) Unbelievable the amount of destruction of value here... it's just total carnage.
- PM_me_your_math 4y ago
  Is it wrong to assume that this is because the industry is mostly built upon a house of cards or because of bad actors? Objectively asking.
  - dragonwriter 4y ago
    The industry is mostly built by bad actors on a house of cards.
    - PM_me_your_math 4y ago
  - traveler01 4y ago
    That's the thing, you only depend on centralized actors if you want to. The entire point of cryptocurrencies are to not depend on centralized institutions that can screw you over.
    - Nursie 4y ago
      Without a centralized actor of some sort, most 'investors' are not going to be able to get into or out of a crypto position. Vanishingly few people care about using the tokens themselves for anything but gambling. These institutions can also screw you over by massively inflating the crypto bubble and then crashing spectacularly, tanking your value and poisoning the public perception of cryptocurrency. The 'point' of cryptocurrency may well be to avoid dependence on centralized institutions, but the effect of cryptocurrency has been to enable all this nonsense. At this point in time you can't say "well it's not crypto's fault!" because it absolutely is. You don't just look at intent when assessing outcomes.
Yhippa 4y ago
Is Coinbase safe?
- reidjs 4y ago
  It is not safe, if you have crypto in coinbase they can steal it the exact same way FTX stole their users crypto. You do not own crypto stored on an exchange
- simple-thoughts 4y ago
  No centralized exchange is safe, including coinbase. Some are doing proof of reserves and audits but these can easily be gamed.
- rvz 4y ago
  No it is not. No exchange or centralized crypto service is. Not your keys, not your coins and also not your NFTs.
- polynomial 4y ago
  "not my keys, not my money."
- soupsranjan 4y ago
  Coinbase is a publicly listed company, with all its assets & liabilities shared in quarterly investor updates. They store all customers assets 1:1 (ie does not re-hypothecate any of customer assets)
  - dvt 4y ago
    Enron was also public, so was Lehman Brothers. The idea that public companies can't game their numbers or commit fraud is provably false. Why anyone would have large sums of crypto (5 or 6 figures+) on an exchange is beyond me.
    - onlyrealcuzzo 4y ago
      Did Lehman commit fraud? My understanding is no.
thinkmcfly 4y ago
What could be done to make the fallout worse? Who's got adversarial strategies about this?
- dehrmann 4y ago
  A sudden drop in the price of certain coins or a lot of depositors causing a bank run.
solotronics 4y ago
Bitcoiners have been saying this whole time not to keep your crypto with a 3rd party and this is exactly why. Satoshis original message about Bitcoin mentions explicitly you don't need any trusted third party. A whole lot of people think they can make money outsmarting the original concepts of Bitcoin and they get scammed in new ways each cycle. https://nakamotoinstitute.org/trusted-third-parties/ https://nakamotoinstitute.org/trusted-third-parties/
- anonymousab 4y ago
  At the same time, storage of value bitcoiners - the majority that titanically dwarfs medium-of-exchange/currency bitcoiners - have been trying to get the average layman to put money into the system as much as possible. More bag holders at any cost. And it turned out that that cost was something that would give the illusion of security, and hide away the technical minutiae that would prevent the system from sucking in those non-technical users. The bitcoin and other crypto communities don't get to have it both ways. You can't pull in average folks with these mechanisms, to increase the value of your holdings, while simultaneously admonishing them for using and trusting the systems set up to bring them into the fold.
  - MrMan 4y ago
    thank you
  - mattwilsonn888 4y ago
    That doesn't make a whole lot of sense. For starters you make assumptions about the motivations of all 'Bitcoiners,' even extending your cynical projection to the ones most vocal about using Bitcoin safely. But let's take the cynical viewpoint. If I, as a hypothetical Bitcoin holder, want the dollar value of my Bitcoin to go and stay up, then the last outcome I desire is for massive volumes of Bitcoin to end up centralized into a few pockets where they will be gambled on and sold when those bets fail. The most cynical Bitcoin holder has it in their interest for all retail holders to custody their own supply. Considering the educated base of Bitcoiners have been screaming and citing examples of what happened with FTX since the protocol's inception, "Not your keys, not your coins," it's rather dubious to try and blame them. The reason people get into the space and trust their coins to some third party is that those people are chasing the end of a market cycle and never even come across or seek out the wisdom of the people that were they in the beginning. 'Bitcoiners' at large, judging by the on chain metrics for holders through negative price action, would much rather the volatile market cycles played out as a smoothed average with each new user coming in educated rather than speculators rushing in at the end by any means necessary.
overkill28 4y ago
> BlockFi has said it had “significant exposure” to FTX and its sister company Alameda Research LLC, including taking a $400 million credit line from FTX U.S. that also gave FTX an option to buy the company. > > BlockFi was one of several struggling crypto firms that signed deals to be rescued by FTX in the past months. The agreement is now in jeopardy as FTX itself sorts through its financial trouble and is subject to federal and state investigations. > > It also holds assets at FTX.com and made loans to crypto trading firm Alameda partly secured by FTX’s FTT tokens. https://www.wsj.com/articles/blockfi-files-for-bankruptcy-as-latest-crypto-casualty-11669649545 https://www.wsj.com/articles/blockfi-files-for-bankruptcy-as... So FTX lent money to BlockFi, and BlockFi lent money to Alameda, and Alameda owed money back to FTX? And BlockFi's money was stored on FTX and denominated in a "currency" that relied on FTX's performance for value? This all lends credence to the theory that we instinctively knew was true: SBF was just doling out money to crypto firms in the spring to prop up the system a little longer, but ultimately it all relied on users injecting new money into the system.
blockfiuser0102 4y ago
this is bad thing for all depositors who are losing money. but good for overall progress of crypto. centralized custodians should be regulated, and users should be educated about the benefits of choosing self custody and decentralized exchanges over unregulated and opaque services. contagion will spread more after this, so expect more centralized services to fall. disclaimer: i am former BlockFi depositor.
- itake 4y ago
  > users should be educated about the benefits of choosing self custody and decentralized exchanges over unregulated and opaque services. Are there any "self custody" or "decentralized exchanges" that offer 8% interest on deposits? I think you are comparing apples and oranges here. disclaimer: I am a current 3-figure BlockFi depositor
  - blockfiuser0102 4y ago
    yes there are dozens of decentralized protocols that claim to offer high yield. but few can really sustain that in reality. safer to not chase such high yield.
    - itake 4y ago
      My understanding of the "high yield" options don't pay out in stable coins. At best, they are vulnerable to impermanent loss and worse the smart contracts get outsmarted with all the coins gone. Staking crypto has lockin periods, whereas blockfi had no lockin period. Can you share an example of a decentralized protocol that offers high yield in a stable coin with less risk than blockfi offered?
      - TimJRobinson 4y ago
        The balancer USD boosted pool currently gives 2.4 - 4.4% returns at the moment (https://app.balancer.fi/#/ethereum/pool/0xa13a9247ea42d743238089903570127dda72fe4400000000000000000000035d https://app.balancer.fi/#/ethereum/pool/0xa13a9247ea42d74323...). Theres another new one on polygon that gives 12% but it will likely drop soon as people discover it: https://app.balancer.fi/#/polygon/pool/0x48e6b98ef6329f8f0a30ebb8c7c960330d64808500000000000000000000075b https://app.balancer.fi/#/polygon/pool/0x48e6b98ef6329f8f0a3... That's about the best you can get in this bear market.
RobLach 4y ago
The pyramid is falling. Get out if you can. Whatever thrives in the rubble will definitely be neat.
- gnrlst 4y ago
  Im really looking forward to this.
  - rahen 4y ago
    It's already happening. The CEX scams are falling one after another. Long live self custody.
- edem 4y ago
  Note that none of the truly decentralized protocols failed so far.
  - riknos314 4y ago
    What does it mean for a protocol to fail? There's multiple layers to the bigger picture: the protocol itself, and the systems that use the protocol to provide value to users. Customers don't actually care about the protocol, they care about receiving value. A protocol is only as valuable as the systems that use it to add value to consumers. I remain unconvinced that any currently existing decentralized crypto system has a net-positive long-term value proposition, regardless of the underlying protocol.
    - edem 4y ago
      That's probably because you've never used any of those.
reiichiroh 4y ago
Still featured prominently on digg.com’s frontpage listing Money.com’s “The Five Best Crypto Exchanges of 2022”
jerf 4y ago
"We do have significant exposure to FTX and associated corporate entities that encompasses obligations owed to us by Alameda" I feel like the term "exposure" was intended as a euphemism, but it is now so thoroughly overused that I am developing a more negative reaction to the term than the words it was intended to hide from. "We had exposure to X" is starting to sound worse to me than "We invested in X and X lost a lot of our money"! The latter sounds like a reasonable thing that happens even to reasonable people but I'm starting to associate the former with more insane things happening to careless people. But maybe that's just because of the sort of things I tend to read.
- Thorentis 4y ago
  Yes agree, and I think this is because the more serious the situation, the more euphemisms will be used by the people in the situation to describe it.
shuntress 4y ago
It is not "fallout" "spreading". It just regular collapse as the supply of bigger fools runs out.
christiangenco 4y ago
My wife and I had about 10% of our life savings in BlockFi. This is a pretty big blow for us, especially while gearing up to start a family. It's easily in the top 5 worst things to happen to me in my life. Is there any hope of individual creditors getting any of their money back? I'm unfamiliar with how bankruptcy works.
- f6v 4y ago
  Off-topic, I had some savings in high-risk stuff(not crypto). Now they’re frozen, almost certainly lost. I’m fine since I knew the risks. Did you not anticipate you might loose your investment there?
- jimmydddd 4y ago
  In traditional bankruptcy proceedings, as you suspected, the little guys are at the extreme back of the line. I would follow the news closely and see if there is any mention of a firm representing individual investors.
- twiddling 4y ago
  Can't get blood from a stone
- woodruffw 4y ago
  I'm sorry for your hardship. My understanding (which is not a professional or legal opinion) is that individual creditors probably come near last in these kinds of bankruptcy proceedings. It's possible that after a prolonged settlement process you may receive some of your money back, but that's not an outcome that I would place substantial faith in. I say this without an ounce of judgement, explicit or implied: can you speak to some of your motivations for putting your life savings into these kinds of vehicles?
  - twiddling 4y ago
    I would build on this and have a frank discussion with your partner about risk tolerance and long term goals around your portfolio. A single exchange failure should not expose you to this much risk.
kgwgk 4y ago
Today's Matt Levine's Money Stuff https://www.bloomberg.com/opinion/articles/2022-11-28/ftx-s-blockfi-rescue-didn-t-work https://www.bloomberg.com/opinion/articles/2022-11-28/ftx-s-... BlockFiles One lesson of traditional finance that crypto is learning these days is: “If you’ve got a bazooka, and people know you’ve got it, you may not have to take it out.” For instance: 1. There is a small opaque crypto lending platform that is rumored to be in trouble. 2. Its depositors want their money back. 3. It doesn’t have their money, either because the money is locked up in long-term loans or because it lost the money or some combination or otherwise. 4. There is a “run on the bank.” 5. To solve the problem, the lending platform agrees to take a desperation bailout from some bigger, more stable, better-known crypto exchange. The big exchange agrees to guarantee the lending platform’s customer deposits, or at least gives it an ample line of credit to pay out depositors. In exchange, the exchange gets to take over the lending platform, and its existing owners get more or less nothing. 6. The run on the bank stops. The depositors don’t want their money back, because now instead of being depositors at the small lending platform, they are depositors of the large stable crypto exchange. Their money is safe, backed by the deep pockets of the large exchange, and they can go back to earning crypto interest or whatever. If you can get a big enough line of credit, you never need to draw on it, because your depositors were worried about your liquidity, and the line of credit resolves those worries. In some rough sense this describes the bailouts this summer of BlockFi Inc. and Voyager Digital Ltd. by Sam Bankman-Fried’s crypto exchange FTX and its affiliated trading firm Alameda Research. 1 BlockFi and Voyager looked risky after some of their borrowers collapsed, so customers rushed to withdraw their money, and BlockFi and Voyager didn’t have enough to give them. And then FTX/Alameda showed up and said, well, we’ll take over your customers. In the case of BlockFi, FTX gave it a line of credit to cash out customers, and got an option to buy the company for some nominal amount of money. In the case of Voyager, it filed for bankruptcy, and FTX offered to come in, move Voyager’s customers to FTX, and cash out anyone who wanted out. In either case the basic point was that FTX had enough money to cash out everyone, so no one needed to cash out. These small rickety crypto firms were rescued by a big safe crypto firm, so the customers could let their money ride. Oops! That was all wrong; FTX had been misplacing tons of its customers money, and did not in fact have enough to bail out everyone else; FTX filed for bankruptcy earlier this month. And today: BlockFi Inc. filed for bankruptcy, the latest crypto firm to collapse in the wake of crypto exchange FTX’s rapid downfall. BlockFi said in a statement that it will use the Chapter 11 process to “focus on recovering all obligations owed to BlockFi by its counterparties, including FTX and associated corporate entities,” adding that recoveries are likely to be delayed by FTX’s own bankruptcy. Chapter 11 bankruptcy allows a company to continue operating while working out a plan to repay creditors. … Citing “a lack of clarity” over the status of bankrupt FTX and Alameda Research, the Jersey City, New Jersey-based company earlier halted withdrawals and said it was exploring “all options” with outside advisers. FTX US is listed in the company’s petition as one of its top unsecured creditors, with a $275 million loan. The company’s largest unsecured creditor, Ankura Trust Company, is owed about $729 million, according to the petition. Ankura acts as a trustee for BlockFi’s interest-bearing crypto accounts, according to its website. BlockFi in July received a capital injection from a now-collapsed FTX US, and also had collateralized loans to Sam Bankman-Fried’s trading firm Alameda Research. It is early yet, and hard to know exactly what happened, but I think it’s something like “as long as people assume you have a bazooka you don’t need to use it, or have it.” When FTX was a $32 billion company that ran a well-regarded crypto exchange, had raised billions of dollars of equity from big investors and was handing out nine-digit credit lines like candy, everyone was like “ah well if FTX is here then everything is fine,” and it was. When FTX was bankrupt and couldn’t fund its credit lines, its beneficiaries quickly collapsed along with it. Here is the bankruptcy docket, and the bankruptcy petition with the list of top creditors. At the top is Ankura, which is the trustee for BlockFi’s crypto interest accounts; if you put your crypto at BlockFi to earn interest, what you have is an unsecured claim on whatever BlockFi has left. In fourth place, owed $30 million, is the US Securities and Exchange Commission, for what’s left of a $100 million securities settlement from happier times this February. In February, BlockFi thought that it was such a good idea to offer interest-bearing crypto accounts that it agreed to a $100 million settlement with the SEC to find a path to legalizing those accounts. In February, the biggest problem with BlockFi’s interest-bearing crypto accounts was that they were not, technically, legal in the US. Now there are much bigger problems! And yet that problem was not small? Meanwhile BlockFi owes FTX $275 million, presumably having drawn that much on its line of credit (and being unable to draw the rest). The details are a little unclear, but one weird little detail is that in FTX’s bankruptcy pleadings it has said that FTX US loaned BlockFi $250 million worth of its own FTT token. We talked about the FTT token a few weeks ago, in tones of horror. Basically the FTT token is a cryptocurrency that is kind of like stock in FTX, a claim on the future cash flows of the exchange. When FTX was a good crypto exchange with a promising future, that claim was very valuable; FTT traded above $50 in March 2022, and was mostly above $25 this summer as BlockFi and Voyager were running into trouble. When FTX was bankrupt, that claim was not worth much; FTT was trading at about $1.29 at noon today. It turned out that FTX’s balance sheet consisted largely of FTT and other, similar tokens that it had made up and that represented bets on the future of FTX’s businesses. Basically FTX took in a lot of real money and … lost it somehow … and convinced itself that the money was still there because it still had a lot of tokens that it had made up? And those tokens did have a market value; they traded in cryptocurrency markets, and so you could calculate how much FTX’s stash of those tokens were worth at their market prices. Of course if FTX had actually tried to sell all those tokens the price would have cratered, so that market value was not real, and now it has collapsed. FTX is not going to sell its stash of FTT and SRM and MAPS tokens for billions of dollars to make all of its customers whole; those tokens were worth billions of dollars when people had confidence in FTX, and now that confidence is shattered and so are the tokens. But back over the summer, FTT was totally a thing! And so it is possible that when FTX extended a loan to BlockFi to shore up its customers’ confidence, it loaned BlockFi tokens. “Here, have some magic beans we made up, people really believe in them,” FTX could have said to BlockFi, and over the summer that would have been enough. “Ah, BlockFi has some FTX magic beans, everything is fine,” customers could have said, and the bank run would have halted. Now the beans no longer work, and BlockFi is bankrupt.
woah 4y ago
Another "crypto" company that was not actually crypto. These guys just held people's money custodially and promised some dumb overblown interest rate. Sure their theme was "crypto" and they have the bitcoin logo on their website, but the underlying mechanism of trusting someone who has a slick app with your money is the opposite of crypto. It seems like silicon valley VCs completely missed the boat on crypto by dumping money on any huckster with a Stanford degree. Instead of asking "is this the end of crypto", maybe we should ask "is this the end of silicon valley".
- zubairq 4y ago
  I agree, none of these companies are crypto companies, just centralised scams. In fact, this is not the end of crypto, but is exactly the opposite. This is the "real beginning" of crypto, as now the benefit of decentralisation and transparency are being understood by a larger number of people. So all in all, this is great news for the crypto industry!
  - bpiche 4y ago
    A real "this is good for bitcoin" in the wild!
    - rnk 4y ago
      Come on, zubairq must be kidding. This is not good for crypto or bitcoin. What problem were we fixing again with crypto?
      - MrMan 4y ago
        smart greedy people who dont yet have enough money have to solve this problem. crypto is an opportunity to convince less-smart greedy people that "centralization" is socialist and bad, and get them to hand over their money.
  - Melting_Harps 4y ago
    > I agree, none of these companies are crypto companies, just centralised scams. In fact, this is not the end of crypto, but is exactly the opposite. This is the "real beginning" of crypto, as now the benefit of decentralisation and transparency are being understood by a larger number of people. So all in all, this is great news for the crypto industry! While I share your enthusiasm, even after countless rugpulls/exitscams/fraud proving centraization is the bane of why this tech was created; I don't share your conclusion as it doesn't reflect reality at all. The 'crypto' market is rife with this and has been sine the Ico mania (and alt boom before that really) so things like NFTs and DeFi are at it's core rely possible of this ignorance which is what most profit from and do so to the detriment to actual viable projects: Bitoin, Monero. In short, all I'm seeing is a price correction, but real projects keep building muh needed infrastructure and 95% of the 'crypto Industry' are the hype tokens exchanges like FTX, Binance fleece the masses with with promises of short lived DeFi yield farming like scams. > It seems like silicon valley VCs completely missed the boat on crypto by dumping money on any huckster with a Stanford degree. Instead of asking "is this the end of crypto", maybe we should ask "is this the end of silicon valley". Agreed, we have been persona non grata in SV for some time; in 2014 I went to the bitcoin job fair in Sunnyvale when I was launching my startup and despite having Standford heavy weights and Vc (like Balaji, Chamath, Dorsey and later Musk) soon realized just how poorly we were received outside of our circles; we represented the uncouth gate-crashers who were supposed to be kept at arm's distance, and only when fortunes were made only then would they even listen to us and even then they hose their own ilk who turn out to be the biggest scammers of all and then blamed us for their failures. There is still time for a correction, but there is a reason as a Californian with a CSU STEM degree and wit family/roots in SV area I went to Boulder instead and never regretted it. With that said SBF went to MIT, and his parents are Stanford professors, it was his GF who headed Alameda that is a Stanford grad.
twiddling 4y ago
something something house of cards
sebastian_z 4y ago
I was a BlockFi customer. I always had the sense that they wanted to do the right thing. They hired people with risk experience in traditional banking, had real customer support, engaged with regulators to get their interest rate product certified, etc. It is really a bit sad that they got entangled into the FTX situation. (I should also say that I withdrew my funds earlier. Otherwise, I may feel differently.)
- itake 4y ago
  It always felt like a facade to me. When 3AC collapsed and they were fined, they didn't really disclose how they 'solved' their liquidity problem. Taking a loan out just kicks the can down the road. They also were handed an amazing deal that no one else was offering without taking a second to wonder why?
  - sebastian_z 4y ago
    I assumed they received the deal because they were legit. :) But yes, agreed, hard to tell from the outside. We will learn more in the bankruptcy proceedings.
unboxingelf 4y ago
I feel sorry for the retail investors caught up in yet another crypto scam. Let me try to articulate my view of what’s actually going on with these seemingly endless scams, in hopes of saving future retail investors some pain: Prominent venture capital firms like A16Z, Sequoia, etc have discovered a new get rich quick scheme: they raise a fund and invest it in a some shitcoin like FTX, SOL, etc. the shitcoin founders use the cash to market and shill the coin, hiring public figures like famous NFL players. Retail investors FOMO into these tokens, boosting prices and attracting more retail investors. Once the market cap of the shitcoin exceeds the VC/investor cost basis, they cash out and let the rest ride. Eventually the shitcoin implodes, but by this time the firms are already onto their next fund and another token. A16Z is on their 4th fund now and it’s $4.5B[0]. There’s an entire political strategy at play as well, where shitcoins are employing folks in DC and lining pockets to further the scam. All of this is possible because there is no regulation on crypto tokens. In reality these are unregulated securities and these large VC firms are exploiting a loop hole for profit. This goes for literally every token starting at ETH and below. [0]: https://a16zcrypto.com/ https://a16zcrypto.com/
- ilrwbwrkhv 4y ago
  This is it. I have not heard this most important argument so clearly and powerfully made before. The VCs need to be thoroughly investigated. It is clear.
- jiggawatts 4y ago
  Just look at their portfolio on their front page for a list of "future scam revelations" and implosions. E.g.: Chia coin is down -98% since its inception, -76% just this year and heading downwards. What does it do other than soak up excessive hard drive inventory? I dunno! I doubt anyone has a use for it.
- pavlov 4y ago
  In this scheme, VCs are cleverly exploiting the fact that US securities law is designed to protect investors foremost. They are investors in these web3 shitcoins, so it’s complicated to prosecute them for anything when the law sees them as the victims. In reality these VCs are co-conspirators in creating these unregulated securities, and hopefully the SEC will eventually make an example out of someone like a16z. Their Coinbase pipeline has been an absolute sham because they’ve had board-level influence on Coinbase which they’ve used to make the crypto exchange list all the shitcoins that a16z just happened to buy six months earlier. This shouldn’t be legal.
parkaboy 4y ago
On the lending-side. I just want to give a big customer shoutout to Unchained Capital (https://unchained.com https://unchained.com) for making it through this mess. I took out some collateralized loans this past year for my startup and looked at both them and BlockFi. I've had the long unfortunate history of being burned several times (Mt Gox, Pirate@40, Friedcat/ASICMiner...). BlockFi of course had a significantly lower interest rate, but Unchained designed their product and messaging around trust (primarily using multisig wallets and promise that they don't rehypothecate)--which, after my experiences, sold me. It was a little painful to go with the higher interest rate, but damn am I now glad that I did.
LatteLazy 4y ago
I have never seen such a strong argument for an end to limited liability before. Dozens of investors funded and enabled FTXs fraud. Their level of incompetence, both to their own investors and to the public in general is astounding. Now they fraud they enabled and cheered on is destroying other peoples savings and businesses. They asked for some basic info on FTXs internal controls and were told to piss off. They asked for some oversight power and we're refused. Then they choose to invest anyway and help this fraud grow. To me, this is like reloading the gun of an armed robber during the robbery. "He seemed like a nice guy" isn't going to cut it here morally even if they're legally in the clear.
trophycase 4y ago
Nexo is probably next but hopefully that should be the last of the implosions for now.
faangiq 4y ago
Coinbase next …
farseer 4y ago
Should we take out all crypto from Coinbase then?

523 points by kgwgk 4y ago

> At the start of the year, there were three big North American retail crypto lenders. Now all three are bankrupt. https://twitter.com/kadhim/status/1597250428378705921 https://twitter.com/kadhim/status/1597250428378705921

redwood 4y ago
To confirm, what makes Coinbase different is that it's not a lender?
- aodin 4y ago
  Yes, Coinbase is an exchange
  - JumpCrisscross 4y ago
    > Coinbase is an exchange Not in the conventional sense. It’s a broker with a prop desk.
    - HDThoreaun 4y ago
      Coinbase has a prop desk?
      - JumpCrisscross 4y ago
        > Coinbase has a prop desk? Maybe [1], possibly not anymore [2]. [1] https://www.wsj.com/articles/coinbase-tested-group-to-speculate-on-crypto-11663806157 https://www.wsj.com/articles/coinbase-tested-group-to-specul... [2] https://news.yahoo.com/coinbase-never-trades-against-customers-145709295.html https://news.yahoo.com/coinbase-never-trades-against-custome...
- Auracle 4y ago
  As far as I know only interest you can earn on Coinbase is from staking coins - and Coinbase actually takes a portion of that profit for themselves. I remember looking at all of these now defunct businesses wondering just how they could have such high interest rates on your coins. In what should be a surprise to no one it was too good to be true.
  - NotYourLawyer 4y ago
    If someone offers a risk-free return way above the prevailing risk-free interest rate… there are some risks that aren’t being disclosed. Everybody forgot that for a little while.
    - AlexandrB 4y ago
      "This Time It's Different"
- jb12 4y ago
  It's not domiciled in North America. In fact, they refuse to tell anyone where their HQ is. EDIT: sorry, got confused. Ignore me.
  - capableweb 4y ago
    Coinbase is probably the most American of all the "American" cryptocurrency exchanges. It's also a publicly traded company on NASDAQ. Not sure where you get the picture that they refuse to tell anyone where the HQ is, it's famously a remote-first company but used to have their HQ in SF.
    - misiti3780 4y ago
      blockfi was based in jersey city also, it just wasnt public.
  - NotYourLawyer 4y ago
    Are you thinking of Binance?
  - deleted 4y ago
    [deleted]
- SilverBirch 4y ago
  It looks like everyone in crypto has been doing wild and shady stuff, whilst Coinbase has built a respectable business in an industry that doesn't exist. Coinbase was being looked at as a shrinking fish in a growing pond, moving slowly whilst places like FTX ran rings around them, now it turns out FTX was just a straight up scam and loads of the money was actually wash trading, so Coinbase now looks like an expensive and slow business in an industry that doesn't actually exist.
jdprgm 4y ago
It's kind of absurd the level of failure in crypto lending. Putting aside anyone with criticisms of all things crypto these should all be based on the very basic and long established business model of taking deposits, making loans, and paying interest. There shouldn't be anything inherently difficult or "scammy" in that and it should be a successful business pillar in the crypto space. Besides the basic business your two other main priorities should be risk mitigation and dealing with liquidity issues. Surely long term some well run company ought to be able to sort this out.
- mattwilsonn888 4y ago
  Perhaps it was competition with decentralized stable-coin lending protocols offering decent APR for the risk that drove and legitimized such reckless behavior. At least the decentralized protocols were auditable from day 0.
SilasX 4y ago
Huh? It looks like it was saying the three are Celsius, Voyager, and BlockFi, but it’s missing a much larger one, Genesis. Although that maybe be going bankrupt to if it can’t get support from its parent company DCG.
- taormina 4y ago
  Definitely about to go bankrupt. Coffeezilla has a great summary here: https://www.youtube.com/watch?v=TNXYHNdGYfc https://www.youtube.com/watch?v=TNXYHNdGYfc
webinvest 4y ago
I haven’t ever seen a crypto lender stay solvent. Unless: A) The money never leaves the platform such as with collateralized margin lending for shorting / leveraging. B) The money is collateralized such as on DeFi with AAVE. BTCJam gave small, well-diversified loans based on credit scores, reputations, business ideas, and identity verifications. They iterated and tried almost everything but they couldn’t get enough money that left the platform to ever return to the platform. Scamming the banks seemed to be way more profitable and lucrative than using borrowed money for economic activities more productive than the borrowed interest costs.

simple-thoughts 4y ago

With projects like blockfi, users get all the disadvantages of the centralized traditional financial system without any of the regulatory protections that have built up over centuries. Terrible for the people with assets in blockfi but extremely predictable. The point of defi is that you can use financial services without a centralized counterparty. People who can’t handle their own keys should be using traditional banks, at least until the technology is improved. Compare to Aave and other actually decentralized lending protocols which are not at risk of bankruptcy.

sdiacom 4y ago
Sure, but you can't use DeFi to trade fiat for crypto. You can use DeFi to trade crypto for crypto, or for crypto that pretends to be fiat. Saying "centralised exchanges bad, DeFi good" misses the point that the main use case of centralised exchanges is not covered by DeFi.
- rahen 4y ago
  > Sure, but you can't use DeFi to trade fiat for crypto. Of course you can, both ways. - https://bisq.network https://bisq.network - https://learn.robosats.com https://learn.robosats.com
  - f00zz 4y ago
    > - https://bisq.network https://bisq.network The last time I looked into this it required a security deposit in BTC.
  - ceejayoz 4y ago
    https://learn.robosats.com/docs/trade-pipeline/ https://learn.robosats.com/docs/trade-pipeline/ > On a private chat, Bob tells Alice how to send him fiat. https://learn.robosats.com/docs/payment-methods/ https://learn.robosats.com/docs/payment-methods/ > You can pay with any method that both you and your peer agree on. This includes the higher risk method such as PayPal, Venmo, and Cash apps. C'mon, that's not trading fiat for crypto. That's "PayPal me some money".

fabian2k 4y ago

Seems to be in the 1-10 billion USD range for assets and liabilities according to the bankruptcy filings (https://twitter.com/web3isgreat/status/1597256105373073409 https://twitter.com/web3isgreat/status/1597256105373073409), so not a small company.

jmclnx 4y ago

> A representative from BlockFi did not immediately respond to requests for comment. Well I am sure the "representative from BlockFi" made out just fine working for BlockFi. I wonder if all these failures will finally tag these crypto companies as ponzi schemes ? Then these people will face real consequences.

corndoge 4y ago
“Ponzi scheme” is a specific type of financial fraud and isn’t a synonym for overexposure, excessive leverage, poor management, or even fraud in general. I do not think labeling things as Ponzi schemes which are not Ponzi schemes is helpful. Nor do I understand how that would help with effecting “real consequences.” The consequences faced by company personnel should be consequent to any wrongdoing.
- whoknew1122 4y ago
  In the legal sense, a 'Ponzi Scheme' has a specific meaning. In conversation, the definition is a bit looser. Sorta like how expressive has a different definition when you say 'that is an expressive programming language' and 'that is an expressive face'. Crypto, as a whole, is about early adopters trying to convince newcomers that crypto has value. If the early adopters can't convince anyone that crypto has value, it's just a bunch of math and wasted electricity. Early adopters try to convince laymen to 'invest' in crypto (i.e. buy crypto from the early adopters). Then the second generation crypto adopters have to find new marks to buy their crypto. Ad infinitum, until someone is left holding the bag. Then you sprinkle in some jpgs that people purchase despite anyone being able to right click and save it, rug pulls, and overall idiocy that happens when you give people billions of dollars without checking to see if they're observing basic organizational principles (i.e. are they running payroll out of a Slack room?). Mingle it all together and you get a house of cards that's remarkably similar to a Ponzi scheme, yet doesn't exactly fit the bill. Sort of like how MLMs are legally distinct from Ponzi schemes for... reasons, I guess. Saying that crypto shouldn't be considered a Ponzi scheme is a bit pedantic when the outcome is the same (i.e. the last person is always holding the bag, so you have to keep trying to convince someone to buy into your idea).

nscalf 4y ago

For what it's worth, all reasonable people in the crypto space want regulation to make sure these types of poor lending practices don't continue. Regulators have been slow and ineffective when it comes to crypto, which has lent itself to the crypto v SEC narrative, but all the adults in the room known there is a need for some regulation.

frgtpsswrdlame 4y ago
You don't 'regulate' a ponzi scheme (at least not in the sense that you mean regulation), you prosecute it.
- liaukovv 4y ago
  By regulate they mean bail out
- aeternum 4y ago
  Do you also consider fractional reserve banks a ponzi scheme? We have successfully regulated those.
ARandomerDude 4y ago
That sounds nice in theory, but of course these companies are free to sit down and hammer out professional standards without the government telling them to. "We really want to be told what to do but nobody will" is code for "I'm not doing anything until the government makes me, and I'll redirect blame to the glacially slow government the whole time."
- Auracle 4y ago
  That’s easy to say, but that’s going to make those companies uncompetitive. Look at how fast FTX overtook Coinbase, a long established player that - as far as anyone can tell - isn’t doing anything shady.
  - clintonb 4y ago

propter_hoc 4y ago

Somehow these guys peaked at about 900 employees, according to linkedin (https://www.linkedin.com/company/blockfi https://www.linkedin.com/company/blockfi) They've raised about a billion dollars of VC - https://www.crunchbase.com/organization/blockfi-inc/investor_financials https://www.crunchbase.com/organization/blockfi-inc/investor... (note, CB lists $1.4b, of which 400M is debt from FTX, which I imagine they never got) Unbelievable the amount of destruction of value here... it's just total carnage.

PM_me_your_math 4y ago
Is it wrong to assume that this is because the industry is mostly built upon a house of cards or because of bad actors? Objectively asking.
- dragonwriter 4y ago
  The industry is mostly built by bad actors on a house of cards.
  - PM_me_your_math 4y ago
- traveler01 4y ago
  That's the thing, you only depend on centralized actors if you want to. The entire point of cryptocurrencies are to not depend on centralized institutions that can screw you over.
  - Nursie 4y ago
    Without a centralized actor of some sort, most 'investors' are not going to be able to get into or out of a crypto position. Vanishingly few people care about using the tokens themselves for anything but gambling. These institutions can also screw you over by massively inflating the crypto bubble and then crashing spectacularly, tanking your value and poisoning the public perception of cryptocurrency. The 'point' of cryptocurrency may well be to avoid dependence on centralized institutions, but the effect of cryptocurrency has been to enable all this nonsense. At this point in time you can't say "well it's not crypto's fault!" because it absolutely is. You don't just look at intent when assessing outcomes.

Yhippa 4y ago

Is Coinbase safe?

reidjs 4y ago
It is not safe, if you have crypto in coinbase they can steal it the exact same way FTX stole their users crypto. You do not own crypto stored on an exchange
simple-thoughts 4y ago
No centralized exchange is safe, including coinbase. Some are doing proof of reserves and audits but these can easily be gamed.
rvz 4y ago
No it is not. No exchange or centralized crypto service is. Not your keys, not your coins and also not your NFTs.
polynomial 4y ago
"not my keys, not my money."
soupsranjan 4y ago
Coinbase is a publicly listed company, with all its assets & liabilities shared in quarterly investor updates. They store all customers assets 1:1 (ie does not re-hypothecate any of customer assets)
- dvt 4y ago
  Enron was also public, so was Lehman Brothers. The idea that public companies can't game their numbers or commit fraud is provably false. Why anyone would have large sums of crypto (5 or 6 figures+) on an exchange is beyond me.
  - onlyrealcuzzo 4y ago
    Did Lehman commit fraud? My understanding is no.

thinkmcfly 4y ago

What could be done to make the fallout worse? Who's got adversarial strategies about this?

dehrmann 4y ago
A sudden drop in the price of certain coins or a lot of depositors causing a bank run.

solotronics 4y ago

Bitcoiners have been saying this whole time not to keep your crypto with a 3rd party and this is exactly why. Satoshis original message about Bitcoin mentions explicitly you don't need any trusted third party. A whole lot of people think they can make money outsmarting the original concepts of Bitcoin and they get scammed in new ways each cycle. https://nakamotoinstitute.org/trusted-third-parties/ https://nakamotoinstitute.org/trusted-third-parties/

anonymousab 4y ago
At the same time, storage of value bitcoiners - the majority that titanically dwarfs medium-of-exchange/currency bitcoiners - have been trying to get the average layman to put money into the system as much as possible. More bag holders at any cost. And it turned out that that cost was something that would give the illusion of security, and hide away the technical minutiae that would prevent the system from sucking in those non-technical users. The bitcoin and other crypto communities don't get to have it both ways. You can't pull in average folks with these mechanisms, to increase the value of your holdings, while simultaneously admonishing them for using and trusting the systems set up to bring them into the fold.
- MrMan 4y ago
  thank you
- mattwilsonn888 4y ago
  That doesn't make a whole lot of sense. For starters you make assumptions about the motivations of all 'Bitcoiners,' even extending your cynical projection to the ones most vocal about using Bitcoin safely. But let's take the cynical viewpoint. If I, as a hypothetical Bitcoin holder, want the dollar value of my Bitcoin to go and stay up, then the last outcome I desire is for massive volumes of Bitcoin to end up centralized into a few pockets where they will be gambled on and sold when those bets fail. The most cynical Bitcoin holder has it in their interest for all retail holders to custody their own supply. Considering the educated base of Bitcoiners have been screaming and citing examples of what happened with FTX since the protocol's inception, "Not your keys, not your coins," it's rather dubious to try and blame them. The reason people get into the space and trust their coins to some third party is that those people are chasing the end of a market cycle and never even come across or seek out the wisdom of the people that were they in the beginning. 'Bitcoiners' at large, judging by the on chain metrics for holders through negative price action, would much rather the volatile market cycles played out as a smoothed average with each new user coming in educated rather than speculators rushing in at the end by any means necessary.

overkill28 4y ago

> BlockFi has said it had “significant exposure” to FTX and its sister company Alameda Research LLC, including taking a $400 million credit line from FTX U.S. that also gave FTX an option to buy the company. > > BlockFi was one of several struggling crypto firms that signed deals to be rescued by FTX in the past months. The agreement is now in jeopardy as FTX itself sorts through its financial trouble and is subject to federal and state investigations. > > It also holds assets at FTX.com and made loans to crypto trading firm Alameda partly secured by FTX’s FTT tokens. https://www.wsj.com/articles/blockfi-files-for-bankruptcy-as-latest-crypto-casualty-11669649545 https://www.wsj.com/articles/blockfi-files-for-bankruptcy-as... So FTX lent money to BlockFi, and BlockFi lent money to Alameda, and Alameda owed money back to FTX? And BlockFi's money was stored on FTX and denominated in a "currency" that relied on FTX's performance for value? This all lends credence to the theory that we instinctively knew was true: SBF was just doling out money to crypto firms in the spring to prop up the system a little longer, but ultimately it all relied on users injecting new money into the system.

blockfiuser0102 4y ago

this is bad thing for all depositors who are losing money. but good for overall progress of crypto. centralized custodians should be regulated, and users should be educated about the benefits of choosing self custody and decentralized exchanges over unregulated and opaque services. contagion will spread more after this, so expect more centralized services to fall. disclaimer: i am former BlockFi depositor.

itake 4y ago
> users should be educated about the benefits of choosing self custody and decentralized exchanges over unregulated and opaque services. Are there any "self custody" or "decentralized exchanges" that offer 8% interest on deposits? I think you are comparing apples and oranges here. disclaimer: I am a current 3-figure BlockFi depositor
- blockfiuser0102 4y ago
  yes there are dozens of decentralized protocols that claim to offer high yield. but few can really sustain that in reality. safer to not chase such high yield.
  - itake 4y ago
    My understanding of the "high yield" options don't pay out in stable coins. At best, they are vulnerable to impermanent loss and worse the smart contracts get outsmarted with all the coins gone. Staking crypto has lockin periods, whereas blockfi had no lockin period. Can you share an example of a decentralized protocol that offers high yield in a stable coin with less risk than blockfi offered?
    - TimJRobinson 4y ago
      The balancer USD boosted pool currently gives 2.4 - 4.4% returns at the moment (https://app.balancer.fi/#/ethereum/pool/0xa13a9247ea42d743238089903570127dda72fe4400000000000000000000035d https://app.balancer.fi/#/ethereum/pool/0xa13a9247ea42d74323...). Theres another new one on polygon that gives 12% but it will likely drop soon as people discover it: https://app.balancer.fi/#/polygon/pool/0x48e6b98ef6329f8f0a30ebb8c7c960330d64808500000000000000000000075b https://app.balancer.fi/#/polygon/pool/0x48e6b98ef6329f8f0a3... That's about the best you can get in this bear market.

RobLach 4y ago

The pyramid is falling. Get out if you can. Whatever thrives in the rubble will definitely be neat.

gnrlst 4y ago
Im really looking forward to this.
- rahen 4y ago
  It's already happening. The CEX scams are falling one after another. Long live self custody.
edem 4y ago
Note that none of the truly decentralized protocols failed so far.
- riknos314 4y ago
  What does it mean for a protocol to fail? There's multiple layers to the bigger picture: the protocol itself, and the systems that use the protocol to provide value to users. Customers don't actually care about the protocol, they care about receiving value. A protocol is only as valuable as the systems that use it to add value to consumers. I remain unconvinced that any currently existing decentralized crypto system has a net-positive long-term value proposition, regardless of the underlying protocol.
  - edem 4y ago
    That's probably because you've never used any of those.

reiichiroh 4y ago

Still featured prominently on digg.com’s frontpage listing Money.com’s “The Five Best Crypto Exchanges of 2022”

jerf 4y ago

"We do have significant exposure to FTX and associated corporate entities that encompasses obligations owed to us by Alameda" I feel like the term "exposure" was intended as a euphemism, but it is now so thoroughly overused that I am developing a more negative reaction to the term than the words it was intended to hide from. "We had exposure to X" is starting to sound worse to me than "We invested in X and X lost a lot of our money"! The latter sounds like a reasonable thing that happens even to reasonable people but I'm starting to associate the former with more insane things happening to careless people. But maybe that's just because of the sort of things I tend to read.

Thorentis 4y ago
Yes agree, and I think this is because the more serious the situation, the more euphemisms will be used by the people in the situation to describe it.

shuntress 4y ago

It is not "fallout" "spreading". It just regular collapse as the supply of bigger fools runs out.

christiangenco 4y ago

My wife and I had about 10% of our life savings in BlockFi. This is a pretty big blow for us, especially while gearing up to start a family. It's easily in the top 5 worst things to happen to me in my life. Is there any hope of individual creditors getting any of their money back? I'm unfamiliar with how bankruptcy works.

f6v 4y ago
Off-topic, I had some savings in high-risk stuff(not crypto). Now they’re frozen, almost certainly lost. I’m fine since I knew the risks. Did you not anticipate you might loose your investment there?
jimmydddd 4y ago
In traditional bankruptcy proceedings, as you suspected, the little guys are at the extreme back of the line. I would follow the news closely and see if there is any mention of a firm representing individual investors.
twiddling 4y ago
Can't get blood from a stone
woodruffw 4y ago
I'm sorry for your hardship. My understanding (which is not a professional or legal opinion) is that individual creditors probably come near last in these kinds of bankruptcy proceedings. It's possible that after a prolonged settlement process you may receive some of your money back, but that's not an outcome that I would place substantial faith in. I say this without an ounce of judgement, explicit or implied: can you speak to some of your motivations for putting your life savings into these kinds of vehicles?
- twiddling 4y ago
  I would build on this and have a frank discussion with your partner about risk tolerance and long term goals around your portfolio. A single exchange failure should not expose you to this much risk.

kgwgk 4y ago

Today's Matt Levine's Money Stuff https://www.bloomberg.com/opinion/articles/2022-11-28/ftx-s-blockfi-rescue-didn-t-work https://www.bloomberg.com/opinion/articles/2022-11-28/ftx-s-... BlockFiles One lesson of traditional finance that crypto is learning these days is: “If you’ve got a bazooka, and people know you’ve got it, you may not have to take it out.” For instance: 1. There is a small opaque crypto lending platform that is rumored to be in trouble. 2. Its depositors want their money back. 3. It doesn’t have their money, either because the money is locked up in long-term loans or because it lost the money or some combination or otherwise. 4. There is a “run on the bank.” 5. To solve the problem, the lending platform agrees to take a desperation bailout from some bigger, more stable, better-known crypto exchange. The big exchange agrees to guarantee the lending platform’s customer deposits, or at least gives it an ample line of credit to pay out depositors. In exchange, the exchange gets to take over the lending platform, and its existing owners get more or less nothing. 6. The run on the bank stops. The depositors don’t want their money back, because now instead of being depositors at the small lending platform, they are depositors of the large stable crypto exchange. Their money is safe, backed by the deep pockets of the large exchange, and they can go back to earning crypto interest or whatever. If you can get a big enough line of credit, you never need to draw on it, because your depositors were worried about your liquidity, and the line of credit resolves those worries. In some rough sense this describes the bailouts this summer of BlockFi Inc. and Voyager Digital Ltd. by Sam Bankman-Fried’s crypto exchange FTX and its affiliated trading firm Alameda Research. 1 BlockFi and Voyager looked risky after some of their borrowers collapsed, so customers rushed to withdraw their money, and BlockFi and Voyager didn’t have enough to give them. And then FTX/Alameda showed up and said, well, we’ll take over your customers. In the case of BlockFi, FTX gave it a line of credit to cash out customers, and got an option to buy the company for some nominal amount of money. In the case of Voyager, it filed for bankruptcy, and FTX offered to come in, move Voyager’s customers to FTX, and cash out anyone who wanted out. In either case the basic point was that FTX had enough money to cash out everyone, so no one needed to cash out. These small rickety crypto firms were rescued by a big safe crypto firm, so the customers could let their money ride. Oops! That was all wrong; FTX had been misplacing tons of its customers money, and did not in fact have enough to bail out everyone else; FTX filed for bankruptcy earlier this month. And today: BlockFi Inc. filed for bankruptcy, the latest crypto firm to collapse in the wake of crypto exchange FTX’s rapid downfall. BlockFi said in a statement that it will use the Chapter 11 process to “focus on recovering all obligations owed to BlockFi by its counterparties, including FTX and associated corporate entities,” adding that recoveries are likely to be delayed by FTX’s own bankruptcy. Chapter 11 bankruptcy allows a company to continue operating while working out a plan to repay creditors. … Citing “a lack of clarity” over the status of bankrupt FTX and Alameda Research, the Jersey City, New Jersey-based company earlier halted withdrawals and said it was exploring “all options” with outside advisers. FTX US is listed in the company’s petition as one of its top unsecured creditors, with a $275 million loan. The company’s largest unsecured creditor, Ankura Trust Company, is owed about $729 million, according to the petition. Ankura acts as a trustee for BlockFi’s interest-bearing crypto accounts, according to its website. BlockFi in July received a capital injection from a now-collapsed FTX US, and also had collateralized loans to Sam Bankman-Fried’s trading firm Alameda Research. It is early yet, and hard to know exactly what happened, but I think it’s something like “as long as people assume you have a bazooka you don’t need to use it, or have it.” When FTX was a $32 billion company that ran a well-regarded crypto exchange, had raised billions of dollars of equity from big investors and was handing out nine-digit credit lines like candy, everyone was like “ah well if FTX is here then everything is fine,” and it was. When FTX was bankrupt and couldn’t fund its credit lines, its beneficiaries quickly collapsed along with it. Here is the bankruptcy docket, and the bankruptcy petition with the list of top creditors. At the top is Ankura, which is the trustee for BlockFi’s crypto interest accounts; if you put your crypto at BlockFi to earn interest, what you have is an unsecured claim on whatever BlockFi has left. In fourth place, owed $30 million, is the US Securities and Exchange Commission, for what’s left of a $100 million securities settlement from happier times this February. In February, BlockFi thought that it was such a good idea to offer interest-bearing crypto accounts that it agreed to a $100 million settlement with the SEC to find a path to legalizing those accounts. In February, the biggest problem with BlockFi’s interest-bearing crypto accounts was that they were not, technically, legal in the US. Now there are much bigger problems! And yet that problem was not small? Meanwhile BlockFi owes FTX $275 million, presumably having drawn that much on its line of credit (and being unable to draw the rest). The details are a little unclear, but one weird little detail is that in FTX’s bankruptcy pleadings it has said that FTX US loaned BlockFi $250 million worth of its own FTT token. We talked about the FTT token a few weeks ago, in tones of horror. Basically the FTT token is a cryptocurrency that is kind of like stock in FTX, a claim on the future cash flows of the exchange. When FTX was a good crypto exchange with a promising future, that claim was very valuable; FTT traded above $50 in March 2022, and was mostly above $25 this summer as BlockFi and Voyager were running into trouble. When FTX was bankrupt, that claim was not worth much; FTT was trading at about $1.29 at noon today. It turned out that FTX’s balance sheet consisted largely of FTT and other, similar tokens that it had made up and that represented bets on the future of FTX’s businesses. Basically FTX took in a lot of real money and … lost it somehow … and convinced itself that the money was still there because it still had a lot of tokens that it had made up? And those tokens did have a market value; they traded in cryptocurrency markets, and so you could calculate how much FTX’s stash of those tokens were worth at their market prices. Of course if FTX had actually tried to sell all those tokens the price would have cratered, so that market value was not real, and now it has collapsed. FTX is not going to sell its stash of FTT and SRM and MAPS tokens for billions of dollars to make all of its customers whole; those tokens were worth billions of dollars when people had confidence in FTX, and now that confidence is shattered and so are the tokens. But back over the summer, FTT was totally a thing! And so it is possible that when FTX extended a loan to BlockFi to shore up its customers’ confidence, it loaned BlockFi tokens. “Here, have some magic beans we made up, people really believe in them,” FTX could have said to BlockFi, and over the summer that would have been enough. “Ah, BlockFi has some FTX magic beans, everything is fine,” customers could have said, and the bank run would have halted. Now the beans no longer work, and BlockFi is bankrupt.

woah 4y ago

Another "crypto" company that was not actually crypto. These guys just held people's money custodially and promised some dumb overblown interest rate. Sure their theme was "crypto" and they have the bitcoin logo on their website, but the underlying mechanism of trusting someone who has a slick app with your money is the opposite of crypto. It seems like silicon valley VCs completely missed the boat on crypto by dumping money on any huckster with a Stanford degree. Instead of asking "is this the end of crypto", maybe we should ask "is this the end of silicon valley".

zubairq 4y ago
I agree, none of these companies are crypto companies, just centralised scams. In fact, this is not the end of crypto, but is exactly the opposite. This is the "real beginning" of crypto, as now the benefit of decentralisation and transparency are being understood by a larger number of people. So all in all, this is great news for the crypto industry!
- bpiche 4y ago
  A real "this is good for bitcoin" in the wild!
  - rnk 4y ago
    Come on, zubairq must be kidding. This is not good for crypto or bitcoin. What problem were we fixing again with crypto?
    - MrMan 4y ago
      smart greedy people who dont yet have enough money have to solve this problem. crypto is an opportunity to convince less-smart greedy people that "centralization" is socialist and bad, and get them to hand over their money.
- Melting_Harps 4y ago
  > I agree, none of these companies are crypto companies, just centralised scams. In fact, this is not the end of crypto, but is exactly the opposite. This is the "real beginning" of crypto, as now the benefit of decentralisation and transparency are being understood by a larger number of people. So all in all, this is great news for the crypto industry! While I share your enthusiasm, even after countless rugpulls/exitscams/fraud proving centraization is the bane of why this tech was created; I don't share your conclusion as it doesn't reflect reality at all. The 'crypto' market is rife with this and has been sine the Ico mania (and alt boom before that really) so things like NFTs and DeFi are at it's core rely possible of this ignorance which is what most profit from and do so to the detriment to actual viable projects: Bitoin, Monero. In short, all I'm seeing is a price correction, but real projects keep building muh needed infrastructure and 95% of the 'crypto Industry' are the hype tokens exchanges like FTX, Binance fleece the masses with with promises of short lived DeFi yield farming like scams. > It seems like silicon valley VCs completely missed the boat on crypto by dumping money on any huckster with a Stanford degree. Instead of asking "is this the end of crypto", maybe we should ask "is this the end of silicon valley". Agreed, we have been persona non grata in SV for some time; in 2014 I went to the bitcoin job fair in Sunnyvale when I was launching my startup and despite having Standford heavy weights and Vc (like Balaji, Chamath, Dorsey and later Musk) soon realized just how poorly we were received outside of our circles; we represented the uncouth gate-crashers who were supposed to be kept at arm's distance, and only when fortunes were made only then would they even listen to us and even then they hose their own ilk who turn out to be the biggest scammers of all and then blamed us for their failures. There is still time for a correction, but there is a reason as a Californian with a CSU STEM degree and wit family/roots in SV area I went to Boulder instead and never regretted it. With that said SBF went to MIT, and his parents are Stanford professors, it was his GF who headed Alameda that is a Stanford grad.

twiddling 4y ago

something something house of cards

sebastian_z 4y ago

I was a BlockFi customer. I always had the sense that they wanted to do the right thing. They hired people with risk experience in traditional banking, had real customer support, engaged with regulators to get their interest rate product certified, etc. It is really a bit sad that they got entangled into the FTX situation. (I should also say that I withdrew my funds earlier. Otherwise, I may feel differently.)

itake 4y ago
It always felt like a facade to me. When 3AC collapsed and they were fined, they didn't really disclose how they 'solved' their liquidity problem. Taking a loan out just kicks the can down the road. They also were handed an amazing deal that no one else was offering without taking a second to wonder why?
- sebastian_z 4y ago
  I assumed they received the deal because they were legit. :) But yes, agreed, hard to tell from the outside. We will learn more in the bankruptcy proceedings.

unboxingelf 4y ago

I feel sorry for the retail investors caught up in yet another crypto scam. Let me try to articulate my view of what’s actually going on with these seemingly endless scams, in hopes of saving future retail investors some pain: Prominent venture capital firms like A16Z, Sequoia, etc have discovered a new get rich quick scheme: they raise a fund and invest it in a some shitcoin like FTX, SOL, etc. the shitcoin founders use the cash to market and shill the coin, hiring public figures like famous NFL players. Retail investors FOMO into these tokens, boosting prices and attracting more retail investors. Once the market cap of the shitcoin exceeds the VC/investor cost basis, they cash out and let the rest ride. Eventually the shitcoin implodes, but by this time the firms are already onto their next fund and another token. A16Z is on their 4th fund now and it’s $4.5B[0]. There’s an entire political strategy at play as well, where shitcoins are employing folks in DC and lining pockets to further the scam. All of this is possible because there is no regulation on crypto tokens. In reality these are unregulated securities and these large VC firms are exploiting a loop hole for profit. This goes for literally every token starting at ETH and below. [0]: https://a16zcrypto.com/ https://a16zcrypto.com/

ilrwbwrkhv 4y ago
This is it. I have not heard this most important argument so clearly and powerfully made before. The VCs need to be thoroughly investigated. It is clear.
jiggawatts 4y ago
Just look at their portfolio on their front page for a list of "future scam revelations" and implosions. E.g.: Chia coin is down -98% since its inception, -76% just this year and heading downwards. What does it do other than soak up excessive hard drive inventory? I dunno! I doubt anyone has a use for it.
pavlov 4y ago
In this scheme, VCs are cleverly exploiting the fact that US securities law is designed to protect investors foremost. They are investors in these web3 shitcoins, so it’s complicated to prosecute them for anything when the law sees them as the victims. In reality these VCs are co-conspirators in creating these unregulated securities, and hopefully the SEC will eventually make an example out of someone like a16z. Their Coinbase pipeline has been an absolute sham because they’ve had board-level influence on Coinbase which they’ve used to make the crypto exchange list all the shitcoins that a16z just happened to buy six months earlier. This shouldn’t be legal.

parkaboy 4y ago

On the lending-side. I just want to give a big customer shoutout to Unchained Capital (https://unchained.com https://unchained.com) for making it through this mess. I took out some collateralized loans this past year for my startup and looked at both them and BlockFi. I've had the long unfortunate history of being burned several times (Mt Gox, Pirate@40, Friedcat/ASICMiner...). BlockFi of course had a significantly lower interest rate, but Unchained designed their product and messaging around trust (primarily using multisig wallets and promise that they don't rehypothecate)--which, after my experiences, sold me. It was a little painful to go with the higher interest rate, but damn am I now glad that I did.

LatteLazy 4y ago

I have never seen such a strong argument for an end to limited liability before. Dozens of investors funded and enabled FTXs fraud. Their level of incompetence, both to their own investors and to the public in general is astounding. Now they fraud they enabled and cheered on is destroying other peoples savings and businesses. They asked for some basic info on FTXs internal controls and were told to piss off. They asked for some oversight power and we're refused. Then they choose to invest anyway and help this fraud grow. To me, this is like reloading the gun of an armed robber during the robbery. "He seemed like a nice guy" isn't going to cut it here morally even if they're legally in the clear.

trophycase 4y ago

Nexo is probably next but hopefully that should be the last of the implosions for now.

faangiq 4y ago

Coinbase next …

farseer 4y ago

Should we take out all crypto from Coinbase then?