The FTX Disaster is Deeper Than you Think

Summary

The 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

00:00

📉 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.

05:02

🤝 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.

10:05

🏆 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.

15:06

💸 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.

20:06

📉 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.

25:07

🚨 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.

Keywords

💡Cryptocurrency Exchange

A cryptocurrency exchange is a digital marketplace where traders can buy and sell cryptocurrencies. In the video, FTX is described as the second-largest crypto exchange in the world, highlighting its significance in the crypto market and the impact of its collapse on the industry.

💡Effective Altruism

Effective altruism is a philosophical concept where individuals use evidence and reasoning to determine the most effective ways to benefit others. Sam Bankman-Fried supposedly believed in this concept, aiming to maximize positive impact on the world, which contrasts with the video's narrative of his actions leading to significant negative consequences.

💡Alameda Research

Alameda Research is portrayed in the video as a key player in the collapse of FTX, being a crypto hedge fund that carried out trades and was involved in conflicts of interest and misuse of funds. It was also the company where Caroline Ellison, with little experience, became CEO.

💡Polyamory

Polyamory is the practice of engaging in multiple romantic relationships with the consent of all involved. The video mentions an inner circle of 10 people at Alameda Research who were not only housemates but also involved in romantic relations with each other, illustrating the unconventional personal dynamics within the company.

💡FTT Token

The FTT token is a cryptocurrency token created by FTX, which played a central role in the collapse of the exchange. The video explains how billions of dollars in customer funds were transferred to Alameda Research, and how the token's value was artificially inflated, leading to a massive financial disaster.

💡Political Lobbying

Political lobbying refers to the act of attempting to influence decisions made by government officials. The video suggests that Sam Bankman-Fried engaged in political lobbying, donating significant amounts to politicians and potentially gaining favorable treatment for FTX, which raises questions about corruption and influence in politics.

💡Bankruptcy

Bankruptcy is a legal process that a person or company undergoes when they are unable to repay outstanding debts. The video describes how FTX and Alameda Research filed for bankruptcy, which was a direct result of the financial mismanagement and the subsequent collapse of the company.

💡Central Bank Digital Currencies (CBDCs)

CBDCs are digital forms of a country's currency, issued and regulated by the central bank. The video mentions that FTX wanted to be at the center of the emerging financial system involving CBDCs, indicating the company's ambition to play a significant role in the future of finance.

💡Conflict of Interest

A conflict of interest arises when there is a risk that an individual's actions or decisions could be unduly influenced by personal interests. The video describes several instances of conflicts of interest within FTX and Alameda Research, such as the misuse of customer funds for personal trading.

💡Hacking

Hacking refers to the unauthorized access to computer systems or networks. The video discusses the suspicious disappearance of one billion dollars' worth of customer cryptocurrency from FTX, suggesting that it may have been an inside job, which raises questions about the security of digital assets.

💡Regulation

Regulation refers to the rules and oversight provided by regulatory bodies to ensure fair practices and protect consumers. The video concludes with a call for more regulation in the cryptocurrency space, as the lack of oversight may have contributed to the collapse of FTX and the loss of investor funds.

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

Twitter

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

Twitter

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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