Sam Bankman-Fried is not going to give away his philanthropic fortunes until 2020 or 2021; he tells a lot of what he does on FTX

The past year saw the collapse of several crypto companies and the emergence of a white knight. Sam Bankman-Fried, the CEO of FTX, helped to bail out some distressed companies. In an industry with a reputation that has been marred by scammers, hackers and sheer greed, Bankman-Fried seemed like a relatively nice guy. He said he wanted to give almost all of his money away.

Ian Allison was hearing rumors before the firms started blowing up this year. Allison said that someone urged him to look at the amount of market-making Alameda was doing on FTX. He didn’t write a story on the audited financials from FTX and FTX US for 2020 and 2021. He had a chat with a person who said that the balance sheet of Alameda was weak and he got some information from sources that led to his big story.

Bankman-Fried has been known to make as much money as possible in order to give away. But the fate of his philanthropic endeavors is now in doubt.

On Thursday, the entire staff of the FTX Future Fund, which says it has committed $160 million in grants, publicly quit. The team said they have questions about the integrity of the business operations that were funding the FTX Foundation and the Future Fund.

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.

A venture capital fund wrote down investments worth over $200 million. BlockFi stopped client withdrawals on Friday after FTX was declared bankrupt. The Singapore-based exchange Crypto.com saw withdrawals increase this weekend for internal reasons but some of the action could be attributed to raw nerves from FTX.

In a tweet on Friday, Bankman-Fried said 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 write up a complete post about the play soon.

FTX grew to be the third- largest exchange by volume. The stunning collapse of this nascent empire has sent tsunami-like waves through the cryptocurrency industry, which has seen a fair share of volatility and turmoil this year, including a sharp decline in price for bitcoin and other digital assets. For some, the events are reminiscent of the domino-like failures of Wall Street firms during the 2008 financial crisis, particularly now that supposedly healthy firms like FTX are failing.

FTX.com: The Wild West of the Cryptocurrency Market: An Investigation Using a Backdoor in the Book-keeping System

Two people with knowledge of FTX’s finances said that Bankman- Fried met with several executives in Nassau to determine how much outside funding he needed to cover FTX’s shortfall.

The funds were not accounted for among Alameda’s assets according to the documents. The spreadsheets did not indicate where this money was moved, and the sources said they don’t know what became of it.

In a subsequent examination, FTX legal and finance teams also learned that Bankman-Fried implemented what the two people described as a “backdoor” in FTX’s book-keeping system, which was built using bespoke software.

The US Securities and Exchange Commission is looking into Fx.com’s handling of customer funds, according to a source with knowledge of the inquiry. The Department of Justice and the Commodity Futures Trading Commission are also investigating, the source said.

But the bad news is the crypto market remains largely unregulated, making it the Wild Wild West of the financial world. When something breaks, investors are vulnerable.

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 Bankman-Fried Cryptocurrency: Where My Comrades are from the Underground, or How Bankman Ftx Spent Money on Bitcoin

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 penned the book “Now I Know.” Who My Comrades are voices from the internet underground. The opinions in this commentary are of her own. CNN has more opinion.

There is no one who shouldn’t need a savior. The whole point is that it should be transparent and non-corrupt. Bankman-Fried’s rise and fall shows how far the industry has strayed from that ideal. One of the mysteries of the current world is it is run by bigger than life people. There is perhaps no better example than FTX and its leader.

It was supposed to be different. The 2008 financial crisis, which led to a deep disappointment in bankers and politicians, triggered the introduction of the first major criptoml currency, bitcoins. The idea of this new system being free from the need to trust anyone at all was based on the distrust in financial institutions. Bitcoin transactions are recorded on a decentralized ledger known as a blockchain, which everyone can see and no bad actor should be able to fraudulently alter.

Source: https://www.cnn.com/2022/11/12/opinions/crypto-white-knight-problem-sam-bankman-fried-ftx-parker/index.html

What was Bankman-Fried about? A Twitter Message to regulators: The “SBF is a winner” for the stockbroken hedge fund

Bankman-Fried said he has full 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’m sorry.”

The cult of personality problem is not limited to crypto. We see it in social media as well, another supposedly leaderless and decentralized technology. Twitter is now subject to the whims of owner Elon Musk, the richest man in the world.

Many people in the industry have been aware of the risk of centralized exchanges like FTX, with some people choosing to own their own coins instead of storing them. Another option is to actually use blockchain technology to provide greater visibility, something that Bankman-Fried is now promising to do. In his long Twitter thread on Thursday, he said his priority would be “radical transparency,” or “giving as close to on-chain transparency as it can: so that people know exactly what is happening on it.” It’s probably too late for FTX.

The Department of Justice and Securities and Exchange Commission are investigating Bankman- Fried and his company. The investigations may be related to the fact that the firm may have used their customers’ money to fund bets at Bankman-Fried’s hedge fund.

“I care because it’s retail investors who suffer the most, and because too many people still wrongly associate bitcoin with the scammy ‘crypto’ space,” said Cory Klippsten, CEO of Swan Bitcoin, who for months raised concerns about FTX’s business model. Klippsten is publicly enthusiastic about bitcoin but has long had deep skepticism about other parts of the crypto universe.

The investment firm said their meeting with Bankman-Fried was likely to be about the world’s first trillionaire. Several of the partners of Sequoia were enthusiastic about Bankman-Fried after a meeting. After a number of meetings, Sequoia decided to invest in the company.

I don’t know what to think. SBF is a winner,” wrote Adam Fisher, a business journalist who wrote a profile of Bankman-Fried for the firm, referring to Bankman-Fried by his popular online moniker. The article was removed from the website.

What Bankman-Fried Did Before Ponzi Collided: Towards a More Simplified Understanding of Wall Street and Wall Street Crimes

In a terse statement, the Ontario Teachers’ Pension Fund said, “Naturally, not all of the investments in this early-stage asset class perform to expectations.”

AfterBankman- Fried bought up the assets of bankrupt cryptocurrency firm Voyager Digital, it brought a sense of relief to its account holders who had their assets frozen since their own failure. That rescue is now in question.

His influence was starting to be felt in politics and popular culture. FTX bought prominent sports sponsorships with Formula Racing and bought the naming rights to an arena in Miami. Bill Clinton was invited to speak at FTX conferences despite the fact that his actual donations were in the tens of millions. Tom Brady invested in FTX.

Bair said that investors can distract regulators from seeing what is really going on. It felt like he was the kind of person that had done things to hurt people.

Bair notes that 30-year-old Bankman-Fried, like Madoff, proved adept at using his pedigree and connections to seduce sophisticated investors and regulators into missing “red flags” hiding in plain sight.

Long before his Ponzi scheme collapsed, Madoff was known as a wizard on Wall Street. He was the former chairman of the Nasdaq Stock Market, served on Securities and Exchange Commission advisory panels and managed money for the rich and the famous.

CoinDesk: How FTX was bankrupted in 2016 and how Silbert stepped in to rescue the parent company of the Digital Currency Group

Dennis Kelleher said in the statement that FTX had a tactic of revolving door hires from the Commodities Futures Trading Commission to use their knowledge, influence and access at the agency to move their agenda.

“You get this herd mentality where if all your peers and marquee names in venture capital are investing, you’ve got to, too. That adds credibility to Washington policymakers. Bair is a member of the Paxos board, but she said she was speaking for herself.

Madoff offered investors marvelous returns that were remarkably consistent and an improbable track record that later proved to be made possible by an elaborate scheme that involved repaying existing clients with new client deposits.

The former FDIC chair is not worried about the FTX implosion threatening the financial system in the way that Lehman Brothers did in 2008. A small part of the wider economy and financial market is cryptocurrencies.

One of the basic truisms of journalism is that you don’t control what will happen after you publish. There’s no way of knowing beforehand what the audience’s reaction will be or what powerful person or people might be part of that audience. Tracy Wang told me that they weren’t aware it would lead to all this.

When CoinDesk published a blockbuster scoop on Alameda Research’s balance sheet, it also shot its own parent company in the foot. The events that started with that story led to FTX filing for bankruptcy. The amount of missing money was so big that the story breached the containment wall around crypto shenanigans and became a genuine mainstream news story, the kind my landlady asks me about. The parent company of CoinDesk is in a tough spot because of the fact that some of the money locked in FTX belongs to their sister company.

Barry Silbert is the founder of Digital Currency Group, also known as DCG. DCG acquired the publication in 2016 for somewhere between $500,000 and $600,000 in a move that TechCrunch reported was a stunt for “boosting the visibility” of the associated Consensus conference. DCG acquired the rest of CoinsDesk based on its initial investment in BitPay and Silbert’s initial investment in BitPay.

DCG is relatively buttoned-up in terms of its investments and portfolio, insofar as it is possible to be conservative in cryptocurrency. There’s no meme capitalism here — investing through DCG’s subsidiary Grayscale Investments is a way to get involved with crypto without owning crypto directly. Grayscale’s Bitcoin Trust even has a ticker and trades over the counter, like a stock. William Cai is the co-founder and managing partner of Wilshire Phoenix. “You feel you have real adults in the room.”

There was a time when shares of the Grayscale Bitcoin Trust, or GBTC, traded for more than the worth of the underlying Bitcoin. So 3AC saw an opportunity: they could deliver, let’s say, $1 million worth of Bitcoin to Grayscale and get back shares of GBTC that were worth $1.3 million on the open market. There’s a catch, though — which is that 3AC wouldn’t get those shares for a year. (That time has decreased to six months since 2020.) 3AC made a bet that the Grayscale premium would be there within six months of their initial investment.

For a crypto true believer, this is nonsense — just buy Bitcoin and put it in your cold wallet and call it a day. For a family office, a hedge fund, or endowment, that may not make sense according to Cai. Those types of investors may wish for something that is plug-and-play so that they can take advantage of all the technology they already have.

CoinDesk, 3AC, and Base Cash: Why FTX, 3 AC, and Luna / Luna are not Bankrupted

When CoinDesk landed the scoop that led to FTX’s bankruptcy, that made things even worse. FTX has locked up $175 million in Genesis. It also made loans to Alameda and took the now-worthless FTT token as collateral, an anonymous source told Reuters. Genesis is asking for one billion dollars to help it shore up its business. The Journal says Genesis asking for a loan; Bloomberg says investments.

The Grayscale premium vanished in January 2021. This was a big problem for 3AC, which owned more than 5 percent of the shares of GBTC. Is that even bigger trouble? Luna / Terra, which blew up in May, was its major bet. 3 AC wouldn’t recover because they’d been long Bitcoin.

By contrast, CoinDesk is riding high right now — its page views nearly doubled from October to November. Its FTX coverage drove over five million pages views, or more than a third of its total. Allison’s scoop about the FTX balance sheet outperformed any other business articles published by a factor of 20. Editors demand scoops and pound their desks.

The Consensus conference might struggle in the winter but could be a major profit center if the sector recovers. People who attend the conference will be given the Desk coin, which is associated with that. It is able to be used for things other than free drinks. CoinDesk has a crypto information business, which is used by The Wall Street Journal among others. The publication is similar toBloomberg in that it has news a part of the information. The resemblance is not entirely coincidental as Kevin Reynolds was a colleague of mine at the time.

The company’s editorial director says the community norm is CoinDesk’s philosophy. There is a lot of hacking of crypta. “Our view is that it’s not just consistent with our community but also the era of data insecurity and breaches and the need to allow people to protect their privacy in that context,” he says. Pseudonymous accounts have long-term reputations.

It seems reasonable. That said, Do Kwon was pseudonymously involved with Basis Cash, a failed stablecoin, before doing Terra / Luna, which involved another failed stablecoin. CoinDesk reported his involvement after the Luna crash; the authors, Sam Kessler and Danny Nelson, were almost apologetic, assuring their audience that they didn’t take violating anonymity lightly. Casey told me he didn’t know if identifying Kwon earlier would have changed anything. The community of crypts has an annoying habit of ignoring news they don’t like by calling it “FUD” which is “fear, uncertainty, and doubt.” But I do wonder: would knowing Kwon’s track record have changed anything for 3AC?

Besides, people who cover currency often own, for instance, dollars. Is that a conflict of interest? In his opinion, they are no different.

It is normal for journalists’ compensation plans to include stock options, stock appreciation rights and other bonuses from their parent company. It’s just that most of us do not work for conglomerates where the other arms are financial companies that we also cover.

The SARs are a retention strategy, Casey says — not just because Bloomberg has been poaching, though Bloomberg has also been poaching, but because places such as Coinbase and Kraken were luring talent last year for in-house publications. “These journalists were getting offered not just high-level salaries but large distributions of what were then high-flying tokens,” Casey says. “So it was hard to retain people in what was already a small pool of people with the talent we need.”

SARs were offered by CoinDesk in the year 2022. SARs can be profitable when the stock price goes up. They only give the bonus to people who have been granted SARs in a single year, and they can’t do it until 2023.

If Genesis’ troubles affect the value of DCG, it will affect employees who accepted grants. Last year, DCG was valued at $10 billion in a secondary round by investors that include SoftBank, Alphabet’s private equity arm, and Ribbit Capital, a group whose goal is to change the world of finance. If Genesis is forced to get capital to cover its debts, that may result in a down round and a hit to the SARs. So, depending on when they choose to sell, it’s possible CoinDesk’s journalists may have hurt their own compensation packages when publishing their big scoop.