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Most charitable, and I think likely true, is that most of the funds never existed in the first place. FTX took in 2-3 billion from investors and retail, told c
by nullc 4y ago
Most charitable, and I think likely true, is that most of the funds never existed in the first place. FTX took in 2-3 billion from investors and retail, told customers had big winnings on large leverage bets. 1 billion was squandered, 2 billion was withdrawn by customers. And poof they couldn't process withdraws anymore even though their accounts say they're still 8 billion in the hole.
In that theory the real story is that they were just running a casino offering extremely leveraged side-bets on the prices of all manner of nonsense (they've even been sued for manipulating the underlying prices to benefit themselves by triggering liquidations). But to make this all appear legitimate they claimed these bets were fully collateralized, but the secret being that they'd accept illiquid magic beans as the collateral (and not just their own, but other random trash too).
Now they're stuck because it's hard to explain what happened without explaining that the collateral was just a pretext and the real business they were in was a bucketshop. So they're stuck feigning surprise that the obviously worthless stuff they took as collateral turned out to be worthless.
- richbell 4y ago> But to make this all appear legitimate they claimed these bets were fully collateralized, but the secret being that they'd accept illiquid magic beans as the collateral (and not just their own, but other random trash too). This is a key lie that SBF has been allowed to peddle in these interviews. He claims that, had he not panicked and announced bankruptcy, FTX would have been fine; however, the lawyers and suits that took over have decided to burn it to the ground instead. He handily omits that the liquidity he's claiming would have saved the day is the now worthless magic beans. It reminds me of how people dishonesty reference "market cap" for NFTs and cryptocurrencies with incredibly high valuations extrapolated from a handful of sales.
- nullc 4y agoYeah, it's not clear to me why people keep allowing him to attribute significant value to those assets in these interviews particularly since the public disclosure that Alameda's balance sheet was mostly that stuff is what initially triggered the collapse. It's like a bank-of-lore collapsing after people heard that their gold vaults were full of tungsten bars ... and then none of the interviews go into talking about the tungsten bars.
- andirk 4y agoValuations often have non-liquid portions of their estimates. Market caps of regular stonks are fairly incorrect, too, since if a large holder sold all of their shares, that price per share would drop. But yeah making ones own super magic bean FTT in an already magical bean world should have been a VERY obvious red flag to anyone who knew that. I'm more shocked that he was able to get any investors with his abysmal accounting practices.
- vba616 4y agoI love this: “Here’s a list of stuff, will you give us a few billion dollars for this list of stuff? Look! The top thing on the list is this nice clean Robinhood stake. Okay that’s enough looking.” You take a wad of crumpled $1 bills and $3 bills and dry cleaning receipts and chewing-gum wrappers, you wrap some crisp $20s around the outside, you hold the wad up in front of people and see what they’ll give you for it.
- dmix 4y agoThat makes a lot of sense, thanks. SBF twice talked about how they had “real legitimate income” covering their actions but it sounds like their books were such a mess that even though they were taking very obvious serious losses on trades by Alameda he still (best case) somehow thought their assets covered it or (worst case) dual booked deposits purposefully to inflate their balance sheets and propped up their now illiquid asset to keep the casino running until loses get covered by future growth.