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Binance to acquire FTX

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Re: Binance to acquire FTX

#151

Post by aaronharnly »

spuz wrote: post #90
shapefrog wrote: post #26

Earlier quoted context omitted.

12:38 PM · Nov 7, 2022 2) FTX has enough to cover all client holdings. [0] 4:03 PM · Nov 8, 2022 2) Our teams are working on clearing out the withdrawal backlog as is. This will clear out liquidity crunches; all assets will be covered 1:1. This is one of the main reasons we’ve asked Binance to come in. [1] has enough to cover all client holdings ---> not enough to cover all client holding in 24 hours. Either they los…

Remember that blockchain transactions are slow and FTX has over 1m users. Even in the most positive of scenarios, I would not be surprised if it took days to clear the backlog of withdrawal requests.

It seems to my layperson’s eye that that would be a reason to get a loan for a week or a month, not to sell the company.

Re: Binance to acquire FTX

#152

Post by miohtama »

mistercheph wrote: post #96
ramish94 wrote: post #31

Earlier quoted context omitted.

He mentions that they have everyone’s money, and then the very next tweet says “we’ll clear out liquidity crunches”. Literally a contradiction.

Giving them the benefit of doubt, this is not a contradiction. The statement means that they have enough illiquid assets to cover the withdrawal that they are working on converting into liquidity.

FTX/Alameda holds tons of illiquid FTT tokens that they cannot sell and which Binance was dumping. Thus, they might have not technically lied. But they were still wrong from the accounting perspective - they surely understood that FTT token cannot be used to cover gaps in large scale.

It was the question that matters "how fast you can process user withdrawals and with what risk"

Sam owns 8% of Robin Hood that is worth around ~$1B - he could sell that and cover some of the gap. But what we do not know yet is the size of the gap in time and space. FTX had $6B withdrawals pending on Tuesday.

Re: Binance to acquire FTX

#153

Post by FormerBandmate »

twelve40 wrote: post #108
FormerBandmate wrote: post #72

Earlier quoted context omitted.

Their stock value is down, but they still are financially solvent. Lehman didn't explode when it fell from $60 to $6, it exploded when it went bankrupt. They're a lot closer to it now then a year ago, however

they are losing like what, $700 mil a year? with the current cost of capital, probably not solvent for very long.

Yeah, they’re fucked. They’re just not dead (yet)

Re: Binance to acquire FTX

#154

Post by kuratkull »

ww520 wrote: post #143
kuratkull wrote: post #119

Binance was threatening to dump a huge amount of FTT tokens on the market. FTX has a big+vulnerable position in FTT. FTX asked Binance to sell them the tokens for a fixed price, so as not to crash the FTT token price. Binance declined - this was yesterday/today. Of course the price of FTT crashed today. And now Binance buys FTX to help them out... smells like Binance played 4D chess all along. https://decrypt.co/1136…

Isn't FTT like FTX's own issuing tokens? It's like printing one's own money. But when the backing firm fails, the printed money is worthless, just like what LUNA issued by Terra had become.

Yeah. I can't be bothered to verify, but i remember that Binance has a huge double-digit percentage of all FTT tokens in circulation. Dumping all of them would crash the tokens value. And since this is FTX's own token, they would hurt a lot, maybe even terminally.

Re: Binance to acquire FTX

#155

Post by miohtama »

ramish94 wrote: post #25
ucha wrote: post #16

SBF said "We don't invest client assets (even in treasuries)". [0] He then says the purpose of the transaction with Binance is to "clear out the liquidity crunches". [1] How could there be a liquidity crunch if assets are not invested? You can't do a bank run on an entity that doesn't function as a bank and doesn't invest clients assets... Something is shifty. [0] https://twitter.com/sbf_ftx/status/158959828579870720…

Welcome to the world of unregulated finance. There’s a reason the FDIC exists and all banks must be insured.

Note that FTX.us is regulated under some US licenses and is unaffected. What was blown up was FTX.com operation that is licensed and regulated in Bahamas.

[insert coconut meme.gif here]

Re: Binance to acquire FTX

#156

Post by miohtama »

ww520 wrote: post #143
kuratkull wrote: post #119

Binance was threatening to dump a huge amount of FTT tokens on the market. FTX has a big+vulnerable position in FTT. FTX asked Binance to sell them the tokens for a fixed price, so as not to crash the FTT token price. Binance declined - this was yesterday/today. Of course the price of FTT crashed today. And now Binance buys FTX to help them out... smells like Binance played 4D chess all along. https://decrypt.co/1136…

Isn't FTT like FTX's own issuing tokens? It's like printing one's own money. But when the backing firm fails, the printed money is worthless, just like what LUNA issued by Terra had become.

It only matters if FTX was using FTT as a collateral for accounting purposes for a valuation that is not realistic considering the liquidity of a position size.

Re: Binance to acquire FTX

#158

Post by JumpCrisscross »

ucha wrote: post #139
JumpCrisscross wrote: post #102

Earlier quoted context omitted.

> Alameda invested in FTT which is minted by FTX FTX issued FTT to Alameda. We have no idea what Alameda gave them as collateral, but it's clear it wasn't cash. Lending is a form of investing. (I don't get what unlocked versus collateral FTX on Alameda's balance sheet means.)

How can you say it's clear it wasn't cash? What's the source? Also, FTX minted FTT out of nothing - effective cost zero - so no matter what they received in exchange, even if they had received nothing that is not an investment unless they received Alameda equity. I agree that lending is a form of investment but nothing says that they received a loan in exchange. You could still be right, but it's all speculation :)

> How can you say it's clear it wasn't cash?

FTT spiraled and FTX went insolvent.

Re: Binance to acquire FTX

#159

Post by [deleted] »

orsenthil wrote: post #133
Bluecobra wrote: post #122

Remember this is a NON-BINDING letter of intent. I wouldn't be surprised at all if this doesn't actually happen and just a bunch of ballyhoo. Unlike Twitter, FTX won't be able to drag CZ down to Delaware’s Chancery Court to force him to acquire it.

What is CZ?

[deleted]

Re: Binance to acquire FTX

#160

Post by kristjansson »

Why is it apparently so difficult to run a solvent crypto exchange? On the face, it shouldn't be too hard, just take deposits, stick them in a wallet, and swap client balances in a database.

Is the temptation to maintain a reserve ratio < 1 just too great? Do operators try to earn small, low-risk return on client funds only to find there are no low-risk, positive-return assets in crypto? Are the extending margin to clients or explicitly stepping in as counterparty, and get exposed to losses as prices move?

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