I think this should be a warning to anyone still invested in other crypto companies or exchanges. Everything seems like it's going well, until the music stops and the exchange is insolvent.
FTX is not unique. A lot of crypto exchanges are doing just as much shady stuff. When you put your money with these companies, you're betting that "no really, this one is above board!" That's an extremely risky game to play when the crypto space operates with no transparency and no consumer protections.
This is such an excellent write-up - showcases a veteran Wikipedia editor's ability to synthesize something comprehensive from a huge array of rapidly changing sources.
"5) The full story here is one I'm still fleshing out every detail of, but as a very high level, I fucked up twice.
The first time, a poor internal labeling of bank-related accounts meant that I was substantially off on my sense of users' margin. I thought it was way lower."
The original dotcom implosion was caused by all these "new Internet" companies selling advertising to each other and recognizing that as revenue, even though it was just a swap of ad space that no else wanted. When people figured that out, we had the crash of 2000.
SBF maybe isn't the best quant, but he clearly knows his history.
I think this should be a warning to anyone still invested in other crypto companies or exchanges. Everything seems like it's going well, until the music stops and the exchange is insolvent. FTX is not unique. A lot of crypto exchanges are doing just as much shady stuff. When you put your money with these companies, you're betting that "no really, this one is above board!" That's an extremely risky game to play when t…
While I could say banks are equally guilty of doing shady stuff, the truth is banking is hundreds of years old and as such, has regulations and insurance behind it. Not regulating is how we get messes like the Housing Bubble in the 2000s in the US culminating in the crash in 2011. Crypto being a completely new space has no regulation and no checks and balances which leads to messes like this with companies playing around with their assets and unable to repay their customers when they collapse. I suppose the draw of crypto is inherently that it is a wild, freeform space free from government interference for some people I guess
Michael Lewis, author of The Big Short, was in the process of writing a book about the success of FTX and SBF. He personally went to the Super Bowl with them and visited them in the Bahamas multiple times. Someone on Twitter said, "he just got his perfect ending." It's gonna be a fantastic book.
I'll pre-order it the day it's available. The big fry.
The original dotcom implosion was caused by all these "new Internet" companies selling advertising to each other and recognizing that as revenue, even though it was just a swap of ad space that no else wanted. When people figured that out, we had the crash of 2000. SBF maybe isn't the best quant, but he clearly knows his history.
And it went beyond the internet companies in no small part because those companies were loading up on hardware and software from all the big tech companies. (Oracle, EMC, Sun, Cisco were explicitly called out as the four horsemen of the internet but the effects were felt much more broadly.)
I think this should be a warning to anyone still invested in other crypto companies or exchanges. Everything seems like it's going well, until the music stops and the exchange is insolvent. FTX is not unique. A lot of crypto exchanges are doing just as much shady stuff. When you put your money with these companies, you're betting that "no really, this one is above board!" That's an extremely risky game to play when t…
While I could say banks are equally guilty of doing shady stuff, the truth is banking is hundreds of years old and as such, has regulations and insurance behind it. Not regulating is how we get messes like the Housing Bubble in the 2000s in the US culminating in the crash in 2011. Crypto being a completely new space has no regulation and no checks and balances which leads to messes like this with companies playing ar…
Unfortunaely the draw for many isn't that they want a libertarian dream society with no rules, but rather they think they can get rich quick. The "banks are bad" is part of the appeal also. I have a cousin who works in the food service industry (think something like managing a Chipotle) and has put all his liquid assets into crypto and still thinks they will "pay off so he can retire".
As for banks - as soon as these crypto scams fail, everyone will find out just why the SEC and FDIC are there. They were not created just because some politician had an idea for more bureaucracy.