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FTX balance sheet, revealed

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Re: FTX balance sheet, revealed

#131

Post by ShamelessC »

bjornsing wrote: post #92
pakitan wrote: post #75

Earlier quoted context omitted.

He's also being purposefully obtuse about his 2 largest regrets - the "poorly labeled" account and underestimating the size of the withdrawals. He's still behaving as if having billions of liabilities in real money backed by funny money "assets" is somehow acceptable and everything would have been fine if it wasn't for the "last week".

But maybe it could have been? I’m a complete crypto skeptic who would never touch anything like FTT, but it’s not an obvious Ponzi scheme. I think one of the troubles with crypto is that it’s very easy to operate what is effective a Ponzi scheme, without fully realizing it yourself.

Eh, it is _obviously_ a ponzi scheme after doing a bit of research. In this podcast he all but says it out loud.

https://jaxandmartinshow.com/sam-bankman-fried-transcript/

Re: FTX balance sheet, revealed

#132

Post by habosa »

jjallen wrote: post #40

The thing that I always wondered about with FTX (and Binance frankly) is how did they get so big so quickly. What did they have that caused so many people to use _their_ exchange. This is still unexplained and was a major red flag. Usually to grow that big takes many years. Just look at Coinbase.

Back in 2017 when there was an new coin spiking every day Binance was by far the easiest place to sign up and trade. Everywhere else had either much stricter KYC or a much worse reputation.

It’s likely Binance was so much easier because they were ignoring KYC laws, but I’m not a lawyer.

Re: FTX balance sheet, revealed

#133

Post by PeterisP »

bjornsing wrote: post #92
pakitan wrote: post #75

Earlier quoted context omitted.

He's also being purposefully obtuse about his 2 largest regrets - the "poorly labeled" account and underestimating the size of the withdrawals. He's still behaving as if having billions of liabilities in real money backed by funny money "assets" is somehow acceptable and everything would have been fine if it wasn't for the "last week".

But maybe it could have been? I’m a complete crypto skeptic who would never touch anything like FTT, but it’s not an obvious Ponzi scheme. I think one of the troubles with crypto is that it’s very easy to operate what is effective a Ponzi scheme, without fully realizing it yourself.

This is not a novel problem - the same situation occurs in "pre-crypto finance" with other non-stable assets like stock and currency risk; that's why we do have all kinds of frameworks on how to properly account for required reserves with the assumption that $1 B (current!) worth of such assets is not enough to cover $1B of cash liabilities.

Re: FTX balance sheet, revealed

#134

Post by ackbar03 »

lordnacho wrote: post #58
mudrockbestgirl wrote: post #34

Okay, but... how? How did they manage to lose so much money by running a popular exchange that should bring in tons of fees? Even if they were gambling with part of the deposits, how can they lose 90% of all assets? You'd have to be actively trying to lose money to be this bad... Also, where does Alameda fit into the picture?

Seems like Alameda was critical to the how of it. What's not clear to me is what they gambled on that lost money. Business model ought to be simple, the exchange earns loads of fees, and Alameda makes markets on it, earning spreads. Just putting a lid on the risk there should be enough to keep people occupied, no need to print your own money for extra leverage.

I think it was mentioned that one of the reasons was they tried to bailout voyager but voyager went under anyways. They extended a 500mio loan from alameda, which would explain a good chunk of it.

Also, having listened to the FTX podcast a few times just to get some idea of what their magic was, there was one episode where Caroline came on, and the gist of it seemed to be that the host Tristan and a lot of the heavy blockchain cool-aid drinkers managed to convince Caroline to toss out good old risk management principles and Yolo it on defi and nft projects. They referred it in Their podcast as "the summer of defi". I guess that might have been a reason as well

Re: FTX balance sheet, revealed

#135

Post by popcorncowboy »

pavlov wrote: post #31
rippercushions wrote: post #9

What the fresh hell? This isn't even an actual accounting balance sheet. He was trying to convince investors to put billions of dollars of actual money into FTX, and the best he could do is the sketchiest one-page Excel ever, complete with comments like "Hidden, poorly internally labled fiat@ account" (sic) worth 8 billion and warnings about typos ! No wonder CZ got cold feet.

Somehow this same level of sloppiness, disorganization and disrespect was a mark of a great disruptive innovator just two months ago. In the Sequoia profile they greatly admire how Bankman-Fried plays League of Legends while pitching to investors, and takes naps in his office when he’s supposed to be in meetings. How surprised can they realistically act that their genius lost 8 billion dollars in a “hidden, poorly in…

Because this is what FOMO looks like. Real FOMO. The kind where even people who are finance sharks end up looking at the wild hair and the unfiltered disrespect oozing out of bros like SBF, and figure there must be magic in those beans even if they don't quite get it and it doesn't quite add up. MAGIC. THE MOON. DIAMONDS. Can't fake those billions, or the blatant fuck-you signalling. Means the emperor is surely clothed. And a genius. The deep abasement and sloppy sucking sound coming from smart, distinguished people helps complete the picture.

Re: FTX balance sheet, revealed

#136

Post by recuter »

recuter wrote: post #110
irusensei wrote: post #105

The whole thing that is bugging me is that they made big political donations to both D and R. They use the money they conjured out of thin air and backed politicians with it. They probably backed the politicians who were most friendly to them. Those politicians might have won and that dirty money might have done a difference. Does that sound moral to you? I think it’s absolutely terrifying. Every candidate that recei…

Sounds like plain old moral hazard to me: https://en.wikipedia.org/wiki/Moral_hazard Why people think that such things are limited to any one political party or that progressive liberals are somehow immune from it is beyond me. Used to be a time, about a decade ago, where these very same folks would lose their collective minds when Mitt Romney said stuff like "corporations are people my friend" and "money is speech".…

I don't know which discord the reply to me is supposed to be linking to but here it is in text form.

  A true scandal is opening for the Biden administration. April 25, 2019: Biden announces his presidential campaign. 13 days later, Sam Bankman-Fried, son of Barbara Fried ( Stanford Professor and co-founder of political fundraising organization "Mind-the-Gap), launches #FTX crypto exchange. The exchange is magically an overnight success. SBF becomes biggest donor to Biden. Election day, FTX implodes completely. If you think this scandal is done, it goes even deeper. Gabe Bankman-Fried, brother to Sam (also a former Jane Street trader), is founder of "Guarding Against Pandemics" He was a Legislative Correspondent for the US House of Representatives and an advisor to large political donors in the Democrat party. The family Aunt Linda Fried is a WEF member on the Global Agenda Council on Aging.

  The father, Joseph Bankman is a Stanford professor who has lobbied on behalf of Hedge Fund managers before Congress before (film records exist). FTX' Head of Ventures & Commercial at FTX Ventures Amy Wu, started with the Clinton Foundation years ago.

  Nishad Singh FTX Director of Engineering has spent over 8 million for Dem candidates. And finally Obama's Commodity Futures Trading Commissioner, Mark Wetien was literally the head of FTX Policy & Regulation. Reports were the organization wanted to spend over a billion dollars on the Democratic party for 2024. A massive, massive money laundering operation has just been broken open.
The tone is a bit conspiratorial and had this been posted before the FTX collapse my eyes would have glazed over. I happen to think guarding against pandemics is a good thing. Financing none-profits with crypto scams and donating to politicians who subsequently are reluctant to regulate you, less so.

Regardless of who is in charge and their political affiliations, it simply should not work this way.

Re: FTX balance sheet, revealed

#137

Post by lordnacho »

vgatherps wrote: post #89
lordnacho wrote: post #58

Earlier quoted context omitted.

Seems like Alameda was critical to the how of it. What's not clear to me is what they gambled on that lost money. Business model ought to be simple, the exchange earns loads of fees, and Alameda makes markets on it, earning spreads. Just putting a lid on the risk there should be enough to keep people occupied, no need to print your own money for extra leverage.

In addition to earning a spread you lose from toxic trades, i.e. someone trading when your quote is stale. Alameda has a strong incentive to knowingly do bad trades on ftx, i.e. stale quotes + spreads too small, since it increases legitimate volume numbers and generates ftx fees (gains in ftx fees offset trade loss). It's unknown if this happened or to what extent, but it can be very costly to do this in large size.

Yes but you can control this, turning it on and off as you like, and indeed market makers do this. It wouldn't explain a catastrophic loss though, it's more like a slow bleed that you balance against whatever income you're making.

Re: FTX balance sheet, revealed

#139

Post by 331c8c71 »

djbebs wrote: post #112
mudrockbestgirl wrote: post #34

Okay, but... how? How did they manage to lose so much money by running a popular exchange that should bring in tons of fees? Even if they were gambling with part of the deposits, how can they lose 90% of all assets? You'd have to be actively trying to lose money to be this bad... Also, where does Alameda fit into the picture?

They stole clients assets and used them to: 1- Gamble with them 2- pay themselves 3- lobby the government 4- bailout other failing crypto companies. Everything here could have been done with any non-crypto exchange.

How would a regulated exchange gamble with clients money? It's even technically impossible for all they do is managing a place where participants trade.

Re: FTX balance sheet, revealed

#140

Post by loftil »

lottin wrote: post #129
bjornsing wrote: post #104

Earlier quoted context omitted.

I think your understanding is a bit off. Sure, central banks can “print” money by buying stuff. But they still have a balance sheet. If the stuff they buy falls in value and they sell it for less then they incur a loss. If they lose more money than the equity on their balance sheet then they will have negative equity. Theoretically a central bank can keep operating with negative equity, but it doesn’t look good. The…

I think my understanding of central banking is quite correct. They don't incur a loss because the money they paid those assets with came out of nowhere. If you buy a car with $1000 that you printed with your money printer, and then sell the car for $800, you're still making a profit.

No, your understanding isn't quite correct. Many western central banks hold long dated bonds on their balance sheet which they are marking down due to increasing interest rates. Different central banks are dealing with this differently. In the US they are writing IOU s that essentially mean future surpluses will be used to pay back negative equity. The UK Treasury recently wired the BoE a large sum for much the same reason. Essentially, the bonds which were profitable during decreasing interest rates and resulted in central banks paying treasuries are now moving the opposite way.
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