David Bankman-Fried’s FTX Exchange and Binance: The Case against the Cosmic Censorship of Enron Corp
At the end of the advertisement, David learns that FTX is a way to get into digital currency. David says he doesn’t think so. I am always correct about this stuff.
On Friday, FTX said it had turned over control of the company to John J. Ray III, the restructuring specialist who handled the liquidation of Enron Corp – one of the largest bankruptcies in history.
The report from Coinsely helped set off the collapse of FTX because it showed that Alameda Research relied on the sister token, FTT. This led Binance CEO Changpeng “CZ” Zhao to announce that his exchange would sell off its FTT tokens, causing the coin’s value to plummet and other customers to jump ship. As FTX struggled to make up for an $8 billion shortfall caused by a surge in withdrawal requests, Binance was interested in buying the firm but then walked back on its plans just one day later.
But Bankman-Fried’s empire, it turned out, was far from transparent. Ian Allison, a journalist at coinDesk wrote an article last week detailing that the balance sheet of Bankman-Fried’s Alameda, the sister company of FTX, is mainly made up of FTT, a token that FTX created. This raised questions about the stability of FTX’s sister company and drew attention to the strikingly close ties between FTX and Alameda.
Based on net worth calculations by Bloomberg, Bankman-Fried was worth about $16 billion at the start of the week. But as his crypto exchange, FTX, collapsed, the value of his assets was reduced to zero in what Bloomberg called “one of history’s greatest-ever destructions of wealth.”
Bankman-Fried owns about 70% of FTX’s US business, which the index now estimates to be essentially worthless. According to news reports, that stake was held through Alameda, and may have been used as a security for loans, and it was taken out of his calculation.
Bankman- Fried has given away a lot of money in order to make as much money as possible. His philanthropic endeavors are in doubt.
Samuel, who wanted to be known only by his first name, says he lives in Southeast Asia and works between jobs, which makes money hard to come by. The cryptocurrency in his FTX account was his nest egg.
Samuel is the only investor who has a large amount of XRP in his portfolio which is thought to have been depressed by a lawsuit between the issuer and the US Securities and Exchange Commission. Recently, there have been signs the two-year legal battle may be coming to a close—and Samuel had been sitting tight in the hope that a favorable ruling might send the price of XRP skyward. But now, with his tokens locked up in FTX, he won’t be able to reap the rewards for his patience. The latest drama has me hanging by the balls, but I could see the finish line. It is so much hardship.
There are lots of FTX customers with this type of story. One FTX trader, who asked to remain anonymous, was in the US when they first heard of trouble at the exchange, which meant it was not possible to immediately withdraw their funds (FTX International, not to be confused with FTX US, is unavailable in the country.) When the FTX trader eventually used a VPN service to bypass the geo-restrictions, they found their withdrawal password needed to be reset, a process that for security reasons prevents money from being taken out of an account for 24 hours. By that time, it was too late.
However, Neal will not be taking over. saying that he is “unable to serve in that position for reasons having nothing to do with FTX, Inc. or its former CEO.”
Blockfi’s Big Bounce: What have we learnt from the FTX Group? Sam Bankman- Fried, Mark Levinson, and John Ray III
The negative ripple effect across the industry started last night with Blockfi, another crypto services firm, freezing customer withdrawals as a result of the FTX problems. After the announcement, the price of the digital currency dropped and is currently under the threshold of $17,000.
Bankman- Fried said in a statement on Friday that he was “piecing together” what had happened at FTX. “I was shocked to see things unravel the way they did earlier this week,” he wrote. “I will, soon, write up a more complete post on the play by play.”
Newly appointed CEO John J. Ray III is quoted saying, “The FTX Group has valuable assets that can only be effectively administered in an organized, joint process. I wanted to make sure that we conducted the effort with diligence, thoroughness and transparency.
Update November 11th, 10:55AM ET: Added bankruptcy filing, tweets from Sam Bankman-Fried, and noted that Sir Lewis Hamilton’s F1 car will not bear FTX branding at this weekend’s upcoming race.
CoinDesk: How Did Binance End the Cryptocurrency Liquidation? An Insider’s View of FTX.com
A large portion of that total has since disappeared, they said. One source put the missing amount at about $1.7 billion. The other said the gap was between $1 billion and $2 billion.
Soon after, another larger-than-life crypto personality entered the chat. The CEO of the world’s biggest coin exchange publicly announced that it would liquidate its FTX holdings. Binance then signed a letter of intent to acquire FTX, a plan that Binance abandoned shortly after.
That Sunday, Bankman-Fried held a meeting with several executives in the Bahamas capital Nassau to calculate how much outside funding he needed to cover FTX’s shortfall, the two people with knowledge of FTX’s finances said.
According to the documents, between $1 billion and $2 billion of the funds were not accounted for. The spreadsheets did not indicate where this money was moved, and the sources said they don’t know what became of it.
FTX teams learned that Bankman-Fried implemented a backdoor in the book-keeping system that was built with bespoke software after a subsequent examination.
A source with direct knowledge of the inquiry told reporters on Wednesday that the securities and Exchange Commission was looking into FTX.com’s handling of customer funds and its t-hedge activities. The Department of Justice and Commodity Futures Trading Commission are looking into it.
The crisis has sent reverberations through the crypto world, with the price of major coins plummeting. FTX is drawing comparisons to previous business collapses.
Editor’s Note: Emily Parker is executive director of global content at CoinDesk, a media, event, indices and data company, and a former policy advisor at the US State Department and writer/editor at The Wall Street Journal. She is the author of “Now I Know Who? My Comrades Are: Voices From the Internet Underground.” Her opinions are her own in this commentary. CNN has more opinion.
Why should bankman-Fried be the CEO of Cryptocurrencies? An opinion of a man who hasn’t done that
The answer is no one, because crypto shouldn’t need a savior. The whole point of crypto is that it is supposed to be decentralized and transparent. Bankman-Fried’s rise and fall shows how far the industry has strayed from that ideal. Today’s crypto world is one of opaque entities run by larger-than-life personalities. There is no better example than FTX and its leader.
It wasn’t supposed to be this way. Bitcoin, the world’s first major cryptocurrency, came into the world on the heels of the 2008 financial crisis, which led to a deep disappointment in bankers and politicians. The new system doesn’t require you to trust anyone at all, because of the distrust in financial institutions. No bad actor should be able to alter the transactions on the ledger, since everyone can see them.
The man said that he takes complete responsibility for his mistakes. In a long Twitter thread this week, he wrote: “I was CEO, which means that I was responsible for making sure that things went well. I, ultimately, should have been on top of everything. I clearly failed in that. I am sorry.
Source: https://www.cnn.com/2022/11/12/opinions/crypto-white-knight-problem-sam-bankman-fried-ftx-parker/index.html
The CLT of Personality: Why Does Musk Need a Coin? How Does Bankman-Fried Wants to Make Sense of Social Media?
The cult of personality problem is not limited to the internet. We see it in social media as well, another supposedly leaderless and decentralized technology. Musk owns the richest man in the world, and so he has the final say on who is on the platform.
Many people think the risk of powerful centralized exchanges like FTX is worth it if you hold your own coins instead of using an exchange. Another option is to actually use blockchain technology to provide greater visibility, something that Bankman-Fried is now promising to do. In his thread on Thursday, he said his priority was “radical transparency,” meaning that people know what’s happening with it. In the case of FTX, of course, it’s probably too late.