The FTX Disaster is Deeper Than you Think
Summary
TLDRThe script narrates the meteoric rise and sudden fall of Sam Bankman-Fried, the CEO of FTX, once valued at $32 billion. Highlighting his academic background and political connections, it delves into the alleged misuse of customer funds, risky trading practices, and the eventual bankruptcy of FTX and Alameda Research. The narrative explores the implications of the collapse on the crypto market, political lobbying, and potential corruption, drawing parallels to the 2008 financial crisis.
Takeaways
- 😲 Sam Bankman-Fried, CEO of FTX, lost his multi-billion dollar fortune in a shocking collapse that took the crypto world by surprise.
- 🏆 Bankman-Fried was a golden boy of the crypto industry, featured on the covers of Fortune and Forbes, with a net worth of 26 billion dollars.
- 🌐 Behind the success story was an operation run by a group of young, romantically involved crypto enthusiasts based in the Bahamas, which was not as reputable as it seemed.
- 💥 The fall of FTX led to the collapse of over 100 affiliated companies and the loss of countless people's savings, with ties to American politics, the war in Ukraine, and reminiscent of the Enron scandal.
- 🎓 Sam was born into an academic and politically connected family, graduated from MIT, and started Alameda Research, which played a key role in the eventual downfall.
- 💰 Alameda Research, made up of Sam's college friends and former colleagues, was a crypto hedge fund that promised high returns but was involved in risky trading practices.
- 🤝 Sam's personal relationships, including his romantic partner Caroline Ellison, played a significant role in the business operations, with Ellison becoming the CEO of Alameda Research.
- 🚨 The use of customer funds for Alameda's trading activities was a major violation and a sign of the lack of oversight within FTX and Alameda.
- 💡 FTX's rise to fame involved high-level partnerships and endorsements from celebrities, but it also included political donations that raised questions about influence and corruption.
- 📉 As the crypto market declined, Sam's risky decisions and the use of FTX's own token (FTT) as collateral led to a liquidity crisis and the eventual bankruptcy filing.
- 🕊️ The story of FTX's fall serves as a cautionary tale about the risks of investing in unregulated markets and the importance of due diligence, even when dealing with seemingly reputable figures in the industry.
Q & A
What event led to the downfall of Sam Bankman-Fried and his crypto empire?
-The downfall of Sam Bankman-Fried began with the collapse of FTX, which triggered the collapse of more than 100 affiliated companies and wiped out countless savings. This was followed by revelations about the misuse of customer funds and a series of negative reports and tweets that shook investor confidence.
What was the role of Alameda Research in the collapse of FTX?
-Alameda Research, a crypto hedge fund made up mostly of Sam's MIT college friends and former work colleagues, was a key player in the collapse. It was involved in risky trades and received $10 billion in FTX customer funds, which were used for trading without customer consent, leading to a violation of financial norms.
How did Sam Bankman-Fried's personal life and relationships influence the operations of his companies?
-Sam Bankman-Fried's personal life was closely intertwined with his business operations. He lived with an inner circle of 10 people, all of whom were housemates and had been involved in romantic relations with each other. This group, including the inexperienced CEO Caroline Ellison, was involved in the day-to-day operations and decision-making processes of the companies.
What was the significance of the FTT token in the FTX collapse?
-The FTT token, created by FTX, played a central role in the collapse. Alameda Research's assets were heavily composed of FTT, and when the crypto market slid, these assets became illiquid. The token's value plummeted, leading to a liquidity crisis at FTX and contributing to its eventual bankruptcy.
How did political connections play a role in the rise and fall of FTX?
-Political connections were significant in the rise of FTX, with Sam making large donations to political figures and the company gaining influence in American politics. However, these connections also raised concerns about potential corruption and lobbying, which later became a focus of scrutiny during the company's downfall.
What was the role of Changpeng Zhao (CZ) and Binance in the collapse of FTX?
-Changpeng Zhao, CEO of Binance, played a pivotal role in the collapse of FTX. After a leaked report raised questions about Alameda Research's financial stability, CZ announced that Binance would liquidate its holdings of FTT tokens, triggering a sell-off that led to a massive withdrawal of funds from FTX and ultimately its bankruptcy.
What was the impact of the FTX collapse on the broader cryptocurrency market?
-The collapse of FTX had a significant impact on the broader cryptocurrency market, causing a loss of over 150 billion dollars in market value for the world's 15 largest cryptocurrencies within three days. It led to a widespread loss of confidence and increased calls for regulation.
What was the extent of the financial mismanagement discovered within FTX and Alameda Research?
-The financial mismanagement within FTX and Alameda Research was extensive, including the use of customer deposits as loans for trading, a lack of oversight, conflicts of interest, and the use of a self-created token (FTT) as collateral for financing projects. This led to a significant gap between assets and liabilities.
How did the involvement of high-profile investors and celebrities contribute to FTX's credibility?
-High-profile investors like BlackRock and SoftBank, as well as celebrities who endorsed FTX, contributed to its credibility by associating it with established financial institutions and well-known figures. This helped FTX raise significant capital and attract a large user base.
What regulatory actions have been taken or are being considered in response to the FTX collapse?
-In response to the FTX collapse, regulatory actions are being considered, including increased oversight and regulation of cryptocurrency exchanges. The U.S. Justice Department has also begun investigating the case, with a focus on the misuse of customer funds and potential violations of financial regulations.
What are the potential legal consequences for Sam Bankman-Fried and other key figures involved in the FTX collapse?
-Sam Bankman-Fried and other key figures involved in the FTX collapse may face legal consequences including charges related to financial mismanagement, misuse of customer funds, and potentially corruption if the allegations of political lobbying and influence are proven. Sam is currently under police surveillance in the Bahamas and may be brought to the U.S. for questioning.
Outlines
📉 The Fall of Sam Bankman-Fried and FTX Empire
This paragraph introduces the shocking downfall of Sam Bankman-Fried, the 30-year-old CEO of FTX, who lost his multi-billion dollar fortune over a weekend. Once a golden boy featured in Fortune and Forbes, Sam was part of an elite circle, rubbing shoulders with the likes of Steph Curry and Leonardo DiCaprio. His company, Alameda Research, was revealed to be a dubious operation run by a group of crypto enthusiasts in the Bahamas. The collapse of FTX had far-reaching consequences, affecting over 100 affiliated companies and countless investors. The narrative hints at ties to American politics, the war in Ukraine, and draws parallels with the Enron scandal and the Theranos case.
🤝 The Shady Foundations of Alameda Research and FTX
The paragraph delves into the operations of Alameda Research, a crypto hedge fund that promised unrealistic returns and was later found to be using customer deposits from FTX for trading without consent, a serious violation in traditional finance. The staff at Alameda, many of whom were Sam's friends and housemates, had a casual approach to trading, with Caroline Ellison, the CEO, admitting to using elementary school math and lacking proper risk management. Despite internal issues, Sam's outward image as a humble billionaire was propagated by social media influencers, and FTX was promoted as an exchange for advanced financial products, attracting significant investments from major firms like BlackRock.
🏆 FTX's Rapid Growth and High-Profile Partnerships
This section highlights the rapid growth of FTX, which became a household name in the crypto space with high-profile endorsements from celebrities like Tom Brady and Stephen Curry. The company's promotional strategies and political involvements, including partnerships with the World Economic Forum and financial support for Ukraine, are discussed. Sam's personal wealth and political donations, especially to Joe Biden and other politicians, are noted, suggesting that FTX was buying political influence. The paragraph also mentions the lack of oversight within FTX, with Sam being the sole decision-maker and the company's operations being full of conflicts of interest.
💸 The Downfall: Alameda's Financial Crisis and FTX's Collapse
The paragraph describes the financial crisis at Alameda, which held a significant portion of its assets in FTX's native token, FTT. As the crypto market declined, Alameda's assets became illiquid, and questions about FTX's solvency emerged. The situation worsened when a rival, CZ from Binance, decided to sell off a large amount of FTT tokens, triggering a chain reaction that led to a rapid decline in FTX's reserves and a scramble among users to withdraw their assets. Sam's attempts to reassure the public and the subsequent revelation of Alameda using FTX customer funds for its liabilities are detailed, painting a picture of a company in deep financial trouble.
📉 The FTX-Binance Saga: Acquisition and Withdrawal
This section narrates the dramatic events following Binance's announcement to liquidate its FTT holdings, which led to a significant drop in the token's value and a crisis of confidence for FTX. Sam's initial confidence and later desperation as he sought help from CZ, who initially agreed to a buyout of FTX, are highlighted. However, Binance's decision to back out of the deal after discovering the extent of FTX's financial缺口 is also covered. The paragraph concludes with the news of FTX and Alameda filing for bankruptcy, causing a massive shockwave in the crypto market and resulting in the loss of over 150 billion dollars in market value for the world's largest cryptocurrencies.
🚨 Aftermath and Implications of FTX's Bankruptcy
The final paragraph discusses the aftermath of FTX's bankruptcy, including the disappearance of a billion dollars' worth of customer cryptocurrency and the hacking incident that led to the theft of remaining funds in FTX accounts. The impact on investors, the involvement of the U.S. Department of Justice, and Sam's current situation under police surveillance are detailed. The paragraph also reflects on the broader implications for the crypto industry, the potential for increased regulation, and the parallels between the FTX collapse and the 2008 financial crisis. It concludes with a cautionary note for investors and a call for better oversight in the financial sector.
Mindmap
Keywords
💡Cryptocurrency Exchange
💡Effective Altruism
💡Alameda Research
💡Polyamory
💡FTT Token
💡Political Lobbying
💡Bankruptcy
💡Central Bank Digital Currencies (CBDCs)
💡Conflict of Interest
💡Hacking
💡Regulation
Highlights
Sam Bankman-Fried, CEO of FTX, lost his multi-billion dollar fortune in a single weekend.
FTX was the second largest crypto exchange in the world, with Bankman-Fried featured on Fortune and Forbes covers.
Bankman-Fried's net worth peaked at 26 billion dollars, with high-profile investors like BlackRock and SoftBank.
The fall of FTX triggered the collapse of over 100 affiliated companies and affected countless savings.
Bankman-Fried's operation was run by a group of ten romantically involved crypto enthusiasts from the Bahamas.
Alameda Research, a key player in the FTX collapse, was a crypto hedge fund with questionable practices.
Alameda Research used customer deposits as loans for trading, violating traditional finance norms.
Bankman-Fried promoted himself as a humble billionaire, despite owning a 30 million dollar mansion.
Caroline Ellison, with little experience, became CEO of Alameda Research, a multi-billion dollar operation.
FTX offered advanced financial products, attracting investments from major hedge funds and banks.
Bankman-Fried was involved in political donations, with ties to both Democratic and Republican politicians.
FTX's collapse was triggered by a tweet from rival exchange Binance, leading to a liquidity crisis.
Bankman-Fried's empire was built on a shaky foundation, including the use of FTX's own token, FTT.
FTX's bankruptcy filing revealed a potential 8 billion dollar shortfall in assets and liabilities.
The U.S. Justice Department is investigating the misuse of customer funds, with potential legal consequences.
Bankman-Fried's political donations and connections may be tested as authorities consider extradition.
The crypto market is left in uncertainty, with many firms potentially tied to FTX's collapse.
Investors are advised to only invest what they can afford to lose, as the crypto space faces increased scrutiny.
Transcripts
[Music]
hi welcome to another episode of Cold
Fusion
what do you think is the probability of
a multi-billionaire losing his entire
fortune in a single weekend most people
would likely say that it's close to
Impossible and yet this is exactly what
happened to 30 year old Sam bankman
freed the CEO of FTX the second largest
crypto Exchange in the world
he was the Golden Boy on the cover of
Fortune and Forbes Magazine he had a net
worth of 26 billion dollars watched the
Super Bowl with NBA star Steph Curry had
dinner with SIA Jeff Bezos and Leonardo
DiCaprio
big names like BlackRock and SoftBank
invested in his vision
but behind the facade was something
completely different Sam's Empire was
actually a bunch of 10 romantically
involved crypto kids running a shady
operation out of the Bahamas
the fall of FTX triggered the collapse
of more than 100 Affiliated companies
and wiped out countless savings this
story has strange but very real tires to
American politics the war in Ukraine and
Enron it has the intensity of theranos
but with a collapse as rapid as Lehman
Brothers this is the wild story of the
fall of FTX
[Music]
you were watching cold fusion TV
Sam bankmanfried with his moppy hair and
unsuspecting look is at the center of
this story he was born in 1992 in
California to an academic and
politically connected family his mother
Barbara is a lawyer and the co-founder
of multiple Democratic fundraising
organizations
Sam's Father Joseph was a law professor
and would later help his son raise funds
for his company
in 2014 Sam would graduate from MIT and
would go on to work at the New York
trading firm Jane Street Capital there
he realized that he could make untold
amounts of money Trading cryptocurrency
he discovered a loophole where he could
buy Bitcoin cheaper in America and sell
it for a higher price in Japan sometimes
he would shift up to 25 million a day
in 2017 he would use the money from
these trades to start his own company
Alameda research
Alameda research was made up mostly of
Sam's MIT College friends and former
work colleagues this firm would later be
a key player in the collapse
Sam supposedly believed in effective
altruism which he described as quote
trying to figure out what practical
things you can do with your life to have
as much positive impact as you can on
the world
he would make an impact on the world
alright but it was by no means positive
perhaps to appear more trustworthy as
Sam became Rich he would promote himself
as the resourceful billionaire choosing
to drive an average Toyota instead of a
typical Supercar but in reality he would
own a 30 million mansion in the Bahamas
regardless many social media influences
would later buy into Sam's humble brand
image and many promoted his companies
okay the guy you see next to me is the
most generous billionaire in the world
and I found him hi my name is Sam
while trading at Jane Street Sam would
make a few friends one of these was
Caroline Ellison she and Sam would begin
dating
back in 2017 Caroline wasn't really sure
what to do for a career Sam suggested
working at his new company Alameda
research she didn't mean to get into
trading but Caroline thought that she
might as well give it a go and with that
someone with little to no experience
would quickly be on her way to becoming
the CEO of what would become a
multi-billion dollar operation
[Music]
according to Fortune Alameda research
quote was run by a gang of kids in the
Bahamas end quote
many of the staff were Sam's
ex-coworkers from the trading firm Jane
Street and others were from MIT Sam had
an inner circle of 10 people who were
all housemates they partied together and
had been involved in romantic relations
with each other
this group of course included the
inexperienced CEO Caroline who would
publicly praise amphetamine drugs on her
on Her Tumblr Caroline would state that
the only acceptable polyamorous
relationship should be in the form of a
hierarchy people should know where they
fall within the ranking and there should
be vicious power struggles between the
higher ranks
I have no comment
despite issues behind the scenes in 2019
Sam would start his next major project
FTX FTX was a cryptocurrency derivatives
Exchange
for those not familiar an exchange is
basically a place to store and trade
different cryptocurrencies and tokens
for a fee of course the firm would also
offer discounts to clients who stored
their money in a token called ftt the
ftt token was made by FTX and it was
also the token that blew up this entire
Mass but we'll get to that shortly
the group of young Misfits kept high
level management in the dark about what
they were actually doing one former FTX
employee told Forbes that the group was
quote kind of a little click just a
bunch of degenerate kids at the end of
the day end quote
so what did Alameda research do well
essentially they were a crypto hedge
fund of sorts They carried out trades
matched buyers and sellers and would
give investors a supposed return
an alleged 2019 promotional document
raises some eyebrows to get people in
the door Alameda promised 15 annualized
fixed rate returns with no downside
if you watch my episode on Luna you
would know that that's an impossibly
good offer
as later reported by The Wall Street
Journal The Firm would use customer
deposits as loans for trading Alameda
research would later receive 10 billion
dollars in FTX customer funds FTX of
course was also owned by Sam
gambling and investing with customer
funds without their knowledge is a clear
violation in traditional Finance like 10
billion dollars in customer funds were
transferred to Alameda now both the Wall
Street Journal and Reuters are reporting
that billions of dollars was being used
on Alameda so billions of dollars in FTX
customer money yes is being traded on
the Alameda uh like through their
trading house and so that's especially
concerning I mean you can't you can't
take customer funds without the consent
and especially what's especially bad
about it Brian is that it's a clear
violation of ftx's own uh guidelines FTX
and the Almeda offices are located in
the Bahamas just steps apart from each
other in a co-working compound what do
we know about the use of customer funds
from here to over here because that is
spectacularly illegal oh yeah that
doesn't happen on Wall Street that is a
clear violation oh we're not in Wall
Street we're in the Bahamas we're in the
Bahamas and to make things worse some of
the things that Caroline said in
interviews weren't too encouraging
yeah absolutely could pull it off
without my math degree I use very little
math
uh use a lot of like uh elementary
school math
tend not to have things like stop losses
I think those aren't necessarily great
risk management tool trying to think of
a good example of a
trade where I've
lost a ton of money
um well I don't know I probably don't
want to go into specifics too much with
that
Sam stated that he started FTX because
he saw that most other crypto platforms
only managed to cater to inexperienced
retail investors FTX on the other hand
would offer more Advanced Financial
products like features and options
trading for crypto or tokenized stocks
that track the value of real companies
like Tesla
people either really like the idea or
really trusted Sam because he managed to
raise two billion dollars from various
hedge funds and investment Banks
including BlackRock how he managed to
pull this off I'm not entirely sure but
supposedly smart people thought of him
as a genius
in fact according to a blog post from
Venture Capital Giant Sequoia Capital
Sam was playing the video game League of
Legends while on a call to discuss a 210
million dollar investment
upon seeing this someone from The Firm
typed quote I love this founder in a
chat box during the meeting after the
call Sequoia gave Sam the 210 million
dollars little did they know they would
never see this money again
according to coindesk current and former
FTX and Alameda employees claim that the
operations were full of conflicts of
interest nepotism and a lack of
oversight
here's a quote Gary nashard and Sam
control the code the exchange's matching
engine and funds if they move them
around or input their own numbers I'm
not sure who would notice end quote
nashard's girlfriend Claire who used to
live with Sam was hired and immediately
promoted to head of HR this meant that
she could and often did fire anyone who
didn't agree with Sam
other employees claimed that Sam was the
ringleader quote Sam wanted to take
risky decisions than what others would
take Sam ran everything we trusted him
and believed him
but regardless for now crypto was Rising
like no tomorrow and business was going
great for Sam so I'd encourage everybody
to go out there and look at you know
let's call it the top 30 or so
cryptocurrencies by market cap what's up
I'm getting into crypto with FTX you in
in July 2021 it was reported that FTX
was averaging 10 billion dollars a day
in trading volume across its 1 million
users by this stage FTX had a UC
Berkeley Stadium named after them an
advertising partnership with the Golden
State Warriors and the Mercedes F1 team
they even had an NBA stadium in Miami
named after them FTX was involved in
every corner of the crypto space
as FTX grew it became a household name
promotional material included stars like
Tom Brady Stephen Curry Naomi Osaka and
Larry David and according to NBC these
Stars received equity in Sam's company
in return in fact it's reported that Tom
Brady put his 650 million dollar Fortune
into FTX
it's worth noting that this whole time
FTX had no board of directors just Sam
another employee and a lawyer FTX even
became involved geopolitically being a
partner of the world economic forum
they also built the infrastructure to
supply funds to Ukraine basically
converting cryptocurrency donations into
fiat currency for deposit at the
National Bank of Ukraine
at this stage Sam became knee-deep in
politics soon he would be worth 26
billion dollars
he donated five million dollars to Joe
Biden in 2020 alone and 50 million
dollars to politicians ahead of the 2022
midterm elections
but there's a hidden detail to the story
a lesser known player within FTX was
Ryan salami he donated 23 million
dollars to Republican politicians to
also gain political leverage for FTX
left or right isn't the point here the
main issue is that this company was
buying political influence and nobody
was paying attention
on the 16th of November 2022 the United
States New York fed and 12 Banks
including Citigroup and Wells Fargo
announced that their testing digital US
dollar crypto tokens so after years of
chatter Central Bank digital currencies
are looking to be a part of the next
financial system for the United States
and FTX wanted to be at the center of it
as Sam's empire grew someone was
watching closer than most his name was
Chang Pang Zhao AKA CZ and he was the
CEO of Binet ftx's biggest competitor a
single tweet from this man would start a
chain reaction that would collapse Sam's
Empire
but we'll get to that
for Sam everything would start to change
in the second half of 2022.
as inflation was beginning to rise the
U.S federal reserve lifted interest
rates higher rates mean more expensive
loans and a more cautious economy
for this reason risk assets took a dive
and the premier among them was
cryptocurrencies
as crypto firms began to blow up and go
under Sam became the man to bail them
out he could then buy the crypto of
their books at record discounts
and this wasn't risky because after all
Alameda research had plenty of capital
to spare
also everyone thought
behind the scenes Sam and his friends at
Almeida were making huge losses from Bad
trades and these bailouts
meanwhile guys as crypto lenders
continue to collapse along with prices
one key figure we've talked about has
emerged to help stabilize the ecosystem
that is sambang been freed founder and
CEO of crypto exchange FTX bankman
Freed's company provided a loan made up
of crypto and cash it was worth about
500 million dollars Voyager only Drew on
about 75 million worth of that total
legal analysts that were telling me it's
unlikely Alameda will recoup that equity
and credit line that money may be wiped
out in voyagers restructuring seeking to
prop up Alameda Sam secretly transferred
at least four billion dollars worth of
FTX consumer funds publicly he was
stating that all of these funds were
being moved around within the FTX
company
quote heads up rotating a few FTX
wallets today mostly non-circulating we
do this periodically might have a few
more coming won't have any effect
people tracking these wallets were
suspicious and they had a right to be
Sam was lying
this trade wasn't routine it was the
largest transfer of tokens on an
exchange ever and the recipient wallet
wasn't one with an FTX but another
wallet that was at Alameda
according to Reuters Sam did not tell
other FTX Executives about the move to
prop up Alameda he was afraid that it
could leak
meanwhile Caroline accidentally said on
a call that FTX used customer money to
help Alameda meet its liabilities the 27
year old CEO just admitted to
potentially criminal activity and could
now be up for a lengthy jail sentence
so a key point to note is that these
funds given to Alameda weren't in
dollars but four billion dollars worth
of ftx's own tokens ftt
and herein lies one of the biggest
issues with Sam's crypto Empire
ftt was essentially a made-up token by
Sam and his friends
here's the problem say you had a great
idea and were looking for an investment
Sam could say here's five million
dollars but it's not dollars it's an ftt
frankly he was using money that didn't
exist to buy things
Corey clipston CEO of the investment
platform Swan Bitcoin puts it quote it's
fascinating to see that the majority of
net equity in the Alameda business is
actually ftx's own centrally controlled
and printed out of thin air token
on November 2nd Sam's worst fears are
realized when behind the scenes
information about Alameda finally leaked
a report by the news Outlet coindesk
detailed a very unhealthy balance sheet
that allegedly showed that much of
alameda's 14.6 billion dollars in assets
were held in ftt the coin made up by Sam
and his friends
in essence Sam created a coin
artificially attributed Valley to it and
then used it as collateral to finance
his projects it was very very shady for
Sam this was never a problem as long as
the coin went up in value but things
were different now the crypto Market was
sliding and as this happened much of
alameda's books became essentially
illiquid
questions about the real Financial
stability of FTX began swirling it
became the perfect opportunity for Sam's
main rival CZ to step in
[Music]
salmon sees Ed's relationship started
six months after the launch of FTX CZ
bought 20 of the exchange for about 100
million Sam would later buy back the
stock for two billion dollars
this sum was paid to binance in part by
ftx's own token ftt
meanwhile CZ was bitter because behind
closed doors Sam had been lobbing for
the creation of a brokerage-like
licensing system a decentralized finance
and who would lose out the most from
this Arrangement almost all other
exchanges especially binance ftx's main
rival
and this is where things get a bit crazy
because interestingly it's reported that
the head of the SEC Gary Gensler and
Caroline's dad Glenn Ellison both worked
at MIT as professors at MIT Caroline's
dad was the former boss of the head of
the SEC
an alleged leaked email shows that the
SEC was going to give FTX quote no
action relief basically this means we
know that you're breaking the rules but
we'll look the other way
if these reports are true we could be
looking at genuine corruption within the
US government
as FTX grew CZ viewed them as a genuine
competitor he now had two billion
dollars worth of ftt tokens if he wanted
he could bring down the house of cards
so he did and the leaked coindesk report
was the perfect excuse to do that
what sets in motion the disaster was a
simple tweet it's November 6th and CZ
comes out publicly stating that binance
will dump the two billion worth of ftt
that they got from that early FTX stake
now ftt wasn't heavily traded so dumping
all of this on the Open Market at the
same time would have Mammoth
consequences so FTX CEO Sam Bateman free
took to Twitter this morning to clear
something up he said that a competitor
is trying to attack the company with
rumors he then says in the same tweet
ftx's fine assets are fine over the
weekend speculation Rose about the
solvency of FTX this came after a
coindesk report revealed elevator
research's balance sheet is full of
ftx's native token ftt so binance CEO CZ
got in on the actions he said that he
would be liquidating the exchanges ftt
tokens on its books and there was a
little bit of back and forth with
Alameda CEO Adam I'm going to kick this
off to you first I was gone for a week
and what a story to come back to maybe
you can talk us through what is going on
the Tweet shook the crypto world and
money began bleeding out of FTX and fast
inner correspondence with staff a
presumably panicked Sam said that the
firm saw a quote giant withdrawal search
as many users rush to withdraw 6 billion
in crypto tokens from FTX in just 72
hours
Sam would remain confident stating quote
we're chugging along obviously binance
is trying to go after us so be it end
quote
the ftt tokens priest collapsed 80
percent over the next two days this
resulted in ftx's reserves falling
FTX didn't even have the funds to pay
out all of these withdrawals they had
nine billion dollars in liability and
only 900 million in liquid assets that's
only 10 covered
to stop a further sell-off Caroline of
Alameda offered binance a deal Alameda
would purchase all the ftt that binance
were dumping on the open market but CZ
binance's CEO answered by stating that
they quote won't support people who
Lobby against other industry players
behind their backs
next more news would come out that would
shock everybody again
Sam called CZ begging for help an
agreement was made for binance to buy
FTX so to go from saying that assets are
completely fine to a complete 180 and
selling his company in a single day
things needed to be very bleak
while the deal was labeled as a
strategic acquisition CZ went into PR
mode stating that quote FTX was in
trouble we bought them to save them he
may have said that but he knew perfectly
well that dumping all of this ftt would
destroy Sam's Empire
buying up all of his assets at a steep
discount would be a great way to
consolidate power
but as a side binance were by no means
clean themselves the U.S justice
department is investigating Finance
allegations include money laundering and
criminal sanction violations
reportedly binance had helped Iranian
firms trade 8 billion since 2018 despite
U.S sanctions
for a while this looked like one of the
most Cutthroat business moves in recent
times binance was able to destroy and
acquire its main competitor
however only two days later binance made
another announcement and this would rock
the crypto World once again
they were no longer pursuing the deal
and they weren't going to help FTX
so what was the reason for the major
U-turn once binance investigated ftx's
books they found a disaster
the company had a far bigger gap between
assets and liabilities than they
expected reports suggest an 8 billion
shortfall
with this news even some employees at
FTX were shocked Executives had been
left in the dark about the true State of
Affairs the kids in the Bahamas were
playing with risk and they were losing
big without telling anyone
on top of this the U.S justice
department began to investigate this was
over the 10 billion dollars of customer
FTX funds that were given as loans to
Alameda
so with no liquidity and no plan B FTX
stopped withdrawals Whispers of
bankruptcy filled the digital spaces of
on the 11th of November Sam resigns and
tweets that FTX and Alameda are filing
for bankruptcy
this news sent crypto markets crashing
no corner of the market was left
unscathed over 150 billion dollars in
three days that's how much the world's
15 largest cryptocurrencies lost in
market value it's because of the crypto
exchange platform FTX orderly is
difficult when you have an entity that
has 130 entities across the globe really
looking to file for bankruptcy and
receive whatever assets they can to make
some investors partly whole again
however the value of a lot of their
Holdings obviously have fallen
dramatically you have FTX trading the
FTX U.S entity Alameda research which is
Sam begman Freed's trading shop and
again like I said the 130 additional
companies he apologizes and took full
responsibility but people were
understandably still extremely angry and
with that FTX which was once valued at
32 billion earlier this year with
investors including SoftBank and
BlackRock was no more
another mystery soon came to light as it
was discovered that one billion dollars
worth of customers cryptocurrency had
vanished from FTX Traders is also
reporting that one to two billion
dollars of that customer money that was
transferred to that trading House
Alameda is just missing they just don't
know where it is so that's a huge
concern and to make matters worse
whatever money remained in the FTX
account was hacked and stolen alarmed
consumers began chattering on social
media that cryptocurrency was
disappearing from their accounts and
their balance was now reading zero over
half a billion dollars in cryptocurrency
was siphoned
online blockchain detectives are now
watching closely so far the hacker has
moved into ethereum making them one of
the largest holders in the world
countless companies are affected
okoya Capital One of the biggest FTX
backers announced that their stake was
essentially worthless and wrote it off
their books so I guess next time when
they take an investment call with a guy
playing League of Legends they may think
twice Goliath's capital a hedge fund
whose founder is credited with spotting
the collapse of Luna still had quote
half of our Capital stuck on FTX at the
time of implosion blockfire had to stop
withdrawals and are now filing for
bankruptcy
a teacher's pension fund in Canada
invested almost 100 million dollars into
FTX so now innocent people who had
nothing to do with crypto could see a
dent in their retirement
FTX bankruptcy files show 134 affiliate
companies across the world estimates say
that liabilities could be up to 50
billion dollars for a sense of scale
enron's liabilities were 23 billion
fittingly ftx's new CEO is the former
Enron bankruptcy lawyer
the White House would comment on the
situation calling for more regulation
as for Sam according to reports he lost
all of his wealth and has a negative net
worth
this is because he has more debt than
equity in all of his companies and
Investments adding the involvement of
the Department of Justice in the case
who knows how much the damages would be
Sam is currently under police
surveillance in the Bahamas
on November 16th Sam tweeted that he was
going to meet Regulators to try and
repay customers
comments under the Tweet could be
summarized as basically what are you
doing you should be in jail meanwhile
Bloomberg reports that U.S and Bahamian
authorities are in talks to bring Sam
back to the US for questioning this will
be a test of his political donation
money for sure
so naturally this unconfirmed rumors at
this point I'm going to still mention
them but take the following with a grain
of salt the main theory is that the hack
was an inside job funds were stolen
through a secret back door that Sam
could siphon without detection when
Reuters asked about the missing funds
Sam simply responded with three question
marks
as for crypto as a whole
there's now a whole lot of risk and
uncertainty it's going to take a while
to see which companies were dangerously
tied up with FTX a lot of firms seemed
like they were tied up somehow with FTA
right now we're just going to have to
wait and see what happens with the
market and what arrests are being made
will there now be regulation what
happened to the missing funds we just
don't know at this point it's a wild
story that's still unfolding FTX you
know generated an ftt token blue you
know if you trade your own token on your
own exchange with wash trading with
leverage you can park the price at any
number you want so you want to make a
billion dollars you Jack the price by
three bucks by wash trading with
yourself
then you generate a billion dollars of
collateral then you look for a bank
that'll loan you money against the
collateral of course nobody in their
right mind should be loaning money
against an air token that you
manipulated yourself but of course Sam
happened to be the CEO of a bank that
made loans so he applied for a loan from
his own bank and he granted it to
himself and then he took real assets
like Bitcoin from his honest customers
and then he rehypothecated them traded
them lost them and so this is just an
egregious ethical lapse and it can't go
on so what can we learn here
well if you're an investor only put in
what you're willing to lose
this story also shows that in a bull
market with cheap money anything goes
even the smartest experts become drunk
with the idea of making millions they're
willing to throw hundreds of millions of
dollars to a 30 year old and his
polyamorous friends some of whom had
next to no experience
really with this whole thing it just
seems like no one knows what they're
doing
although there might be a deeper aspect
at play here in the depths of U.S
politics although we can draw nothing
conclusive at the very least the
political lobbying and possible
corruption is concerning
so what do you guys think about all of
this feel free to discuss below
the whole thing reminds me of 2008 firms
making up Financial products taking on
huge risk and passing it to others it's
crazy because cryptocurrency was
supposed to stop this but I guess where
there's money to be made you always get
Bad actors
I just finished the documentary on the
2008 crisis what happened and how it
still affects all of us today so really
I can't help but see the parallels I'll
leave a link to that and my other
documentaries on fraud and scams like
theranos Enron Worldcom onecoin and Luna
below if you haven't seen them you're in
for a treat
so lastly for those of you who follow my
music I've put out a new track on the
second Channel burnwater music you're
listening to that track right now
I'll leave a link for that too so anyway
that's it from me I'm tired and I need
to go to bed I'll see you again soon for
the next episode cheers
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