FTX held less than $1B in liquid assets against $9B in liabilities
ft.com
ft.com
Notes:
Bankman-Fried personally seems to own, indirectly, about $472M (paid over $600M, so that was a loss) worth of Robinhood Financial.[1]
Other documents provided to investors say that FTX US, Bankman-Fried’s onshore exchange, held $115mn of cash. Of that sum, $48mn was listed as corresponding to customer US dollar balances of $60mn.
So there might be enough cash to pay off customer cash balances. Those belong to the customer, not FTX, and were supposed to be in a separate account.
Here's the bankruptcy filing.[2] Case #22-11066.
Money appears to be flowing out of FTX to "privileged accounts" and anonymous wallets.[3]
This is now well past simple speculating with customer funds and into major criminal enterprise territory.
Creditor litigation is being started up.[4] Of course.
[1] https://archive.ph/o/hfvzw/https://www.sec.gov/Archives/edga...
[2] https://pacer-documents.s3.amazonaws.com/33/188448/042120640...
[3] https://btc-pulse.com/2022/11/12/ftx-withdrawals-resume-but-...
[4] https://scott-scott.com/sec-investigation/ftx-trading-ltd/
3. Improperly intimate or interconnected.
Edit: grammar, for clarity.
NEA, IVP, Iconiq Capital, Third Point Ventures, Tiger Global, Altimeter Capital Management, Lux Capital, Mayfield, Insight Partners, Sequoia Capital, SoftBank, Lightspeed Venture Partners, Ribbit Capital, Temasek Holdings, BlackRock and Thoma Bravo.
These aren't schleps in this list. Blackrock, Sequoia, Tiger, Lightspeed, the fucking NEA. Jesus. Did no one do _any_ due diligence?? Did they just trust the auditor Armanino and Prager Metis (who??)[1]??
At least Enron had Arthur Andersen and some cover of respectability in the audit space at the time.
Irrational exuberance is really something.
1- https://www.coindesk.com/business/2022/11/11/meet-the-metave...
It would not be the first time that otherwise smart people have made a bad call.
Seems like most of the actual fraud started after the 3AC/TerraLuna blowup as SBF trying to trade out of the hole he was in.
I can imagine alameda being burnt by 3ac - just wrap things up there if needed?
What makes you say that? I think it was fraud from day one-- starting with the claimed billions of dollars in arb gains.
If they were real-- wheres that money now?
A friend who tried to raise funds from VCs for his start up tech company in SV, tried for multiple years. He was happy to disclose his financials because he had actual customers and revenue. But nobody cared for multiple years. Then one day, well known VC in those circles finally wrote them a check. The moment that happened, all the VCs were throwing money at him. They didn't care about the financials or doing their due diligence, they just did it because some other reputable guy did it. FOMO.
Well, it's not like they have a great track record with risk management.
They did, saw mommy, daddy, family connections and went all in.
Edit: forgot about girlfriend "Gary Gensler's boss at MIT Glenn Ellison is the father of the Co-CEO Caroline Ellison"
"I'm a big advocate for Sam because he has two parents that are compliance lawyers. If there's ever a place I can be where I'm not going to get in trouble, it's gonna be FTX" https://twitter.com/Guruleaks1/status/1591086077489844224
"I was in this game for the money. The low hanging fruit, i.e. idiots whose parents paid for prep school, Yale, and then the Harvard MBA, was there for the taking. These people who were (often) truly not worthy of the education they received (or supposedly received) rose to the top of companies such as AIG, Bear Stearns and Lehman Brothers and all levels of our government. All of this behavior supporting the Aristocracy, only ended up making it easier for me to find people stupid enough to take the other side of my trades. God bless America."
The lesson is that just because you work for a16z, or Goldman Sachs, or McKinsey, doesn’t mean anything. In fact you’re probably more dumb than average because you’ve been trained to see things a certain way. Not only are they not our best and brightest, they are in fact the “low hanging fruit”.
Glad my BS detector works I guess.
There actually was an Enron Field in Houston in 2000:
> Minute Maid Park, previously named The Ballpark at Union Station, Enron Field, and Astros Field, is a retractable roof stadium in Downtown Houston, Texas, United States. It opened in 2000 as the home ballpark of Major League Baseball's Houston Astros.[1]
(It was named "Enron Field" from 2000 to 2002.)
Most people think it is as easy as ordering a hardware wallet, following the process the wallet software suggests and - hurray! - your keys, your coins!
But it is not that easy. You also have to cut the wallet manufacturer and the software developer out of the loop.
I have yet to see a description on how to safely create a wallet that really does away with counterparty risk.
The way I understand Bitcoins signatures, there could be a way. But it would involve to somehow put your secret key into multiple air gapped, RFC-6979 compliant hardware wallets. And then create addresses and sign transactions with those hardware wallets without ever connecting them to a computer. And compare the addresses and signatures between these wallets to make sure they match. Because otherwise, the wallets could taint the output in a way that signals data back to the manufacturer.
I don't even know if there are fully operational air gapped hardware wallets on the market.
In addition you get ways to handle lost keys, ownership changes, and the ability to require multiple people to sign off on any action.
It's a smart contract that you can add any type of owner to (regular wallet, hardware wallet, anything that can sign for transactions), then you specify how many of the owners need to sign for transactions.
2. Audited[0]
3. Have you read the core contracts source? It's really not that complex.
4. If you don't trust the honesty from this project/team, then you probably don't trust any crypto at all, which is fine. To each their own.
It's used by Aave, 1Inch, Sushi, Balancer, and many more.
[0] https://github.com/safe-global/safe-contracts/blob/186a21a74...
https://github.com/safe-global/safe-contracts/blob/main/cont...
This aims to address these issues. Verifiable hardware and open source OS and wallet.
The only solution is to use multiple air gapped wallets from different manufacturers which use a deterministic algorithm for signatures.
If you have even just a 2-of-3 keyset with one Ledger, one Trezor, and a Coldcard, none of those companies can screw you by itself.
If you go up to 3-of-5, it's even more robust.
You can set it up yourself using FOSS like Electrum.
Or you can hire somebody like Casa[0] to get it all set up and set up the infrastructure to verify Casa App is doing exactly what it says it's doing.
ETA: There are lots of airgapped wallets. Coldcard, Keystone, and Passport all work airgapped.
Each signer has to vote yes before the smart contract executes the staged transaction.
If you use software by a 3rd party, we are back to squear one.
Do these types of smart contracts exist on Bitcoin?
Search BTC multisig and you can learn all about it.
But nobody is creating them with pencil and paper.
I am worried that in 5 years we will learn that some hardware wallets used side channels to transfer bits of your private key out to make it easier to guess for someone who worked at the manufacturer.
Just because you haven't taken the time to learn how this stuff works doesn't mean there aren't thousands of incredibly intelligent people who have been working on it for a decade and have actually solved the low-level concerns you have.
Example: If you use a single hardware wallet to sign your transactions, you have no way to know if the wallet transmits data out via the hashkey:
The keys have 3rd-party software, but all they do is sign. Don't have a quorum from the same manufacturer. If it takes 3 signatures of 5, don't use 3 from the same company.
If you use Electrum, you are hoping that Electrum is not buggy or malicious.
From the string of your comments throughout this conversation, you seem to be making some weird, "I can't do it, so nobody can do it," false equivalency.
I don't know you from anybody, but I'm reasonably confident you're not more intelligent than all the highly incentivized people who have been, on the one hand, solving these problems against adversaries on the other hand who are every bit as incentivized to unsolve them.
None of the points I've made have been in any way groundbreaking or insightful. They're basic "I spent my free time for a year going down the bitcoin rabbit hole" stuff. You're throwing out incredibly basic objections as though they somehow mean the whole system is an unreliable fraud, but all it's really showing is that you haven't done even a cursory overview of the topic.
I'm really not trying to be rude here. People can understand code, even lots of it. People do understand it. They even understand the high-level cryptography these systems are built on. You might not, but that doesn't mean nobody does, much less that nobody can.
The aspect of security I talked about is reducing counterparty risk. What one can do to reduce counterparty risk is to have multiple systems, make them as independent as possible, and compare the output they create.
Example:
1: An air gapped Dell laptop with Electrum on Linux
2: Another air gapped laptop. From Lenovo with Specter on Windows.
Create your seed phrase offline with dice and put them into both.
Every address you create, every transaction you sign - do it on both systems and compare the output.
Now, both systems would have to be faulty/malicious in the same way to harm you.
There are pros and cons vs having a password-protected file that you can at least backup to whatever devices you decide.
The issue is that the hardware wallet could be malicious. A malicious hardware wallet has multiple ways to put your funds at risk.
And uh, both are FDIC members.
[1] https://www.nerdwallet.com/reviews/banking/charles-schwab-ba...
Better get computer literate, and better yet, cryptographically savvy. Oh, but wait, all those microprocessors have closed blob firmware, closed source designs, and you have no idea what type of higher level industry collusion (be it with regulators you disagree with, or just within themselves to ensure they maintain a niche) they have going on.
Guess you'll have to bootstrap your own hardware/firmware/software stack, and maintain it yourself.
...No, there is no /s. I'm dead serious. That's what you're proposing shakes out like.
Look, it ain't an unfamiliar sight to me. I've also seen it exploited in the other direction (industry doing everything they can to maintain their relevance to the detriment of everyone else) too many times.
What I guess I'm trying to say is: no one (in power, or to an extent abstractly) actually wants to empower people to be able to financially self-service.
This will give you a 256-bit integer as the private key. You can process this further with whatever additional method you want (Shamir Secret Sharing, ...).
Obviously not for everybody, but the underlying cryptography is pretty simple.
BTW, this logic also applies to everything else - all websites in the world are hackable if the website owner doesn't write their own compilers, OSes, ...
> Most people think it is as easy as ordering a hardware wallet, following the process the wallet software suggests and - hurray! - your keys, your coins!
What exactly is the threat model here?
To my knowledge, there's been no general compromise of truly air-gapped hardware that could only exfiltrate data by a back channel in an otherwise valid cryptographic transaction. This scenario seems to therefore imagine a targeted attack.
However, if you're storing enough value to be the subject of a targeted attack, then it would also be unwise to have the assets so concentrated in cryptocurrencies. Diversification reduces overall risk.
With cryptocurrencies as just one asset among many, the "storage" answer becomes obvious: use a law firm or financial institution that holds enough liability insurance to cover any losses arising from bad storage practices. Use the legal system, rather than evade it.
Lets look at the simplest way a hardware manufacturer could get your private key: They make the hardware wallet create the private key in a way the manufacturer can guess.
But there are more elaborate ones. For another one, take a look at this discussion:
Another part has to be multiple air gapped hardware wallets from different manufacturers that all are RFC-6979 compliant.
And here it already ends AFAIC. I don't know of any air gapped wallets. The ones that call themselfes "air gapped" just connect to the computer via different means like display->camera.
So you take your hardware wallet, you connect it to a fully airgapped computer (one without any WiFi capability and without any ethernet whatsoever) (btw let's please not get carried away with exfiltration through "fan rotating speed" or the like and hence that not being a really "airgapped computer" and the very concept of "airgapped" being non-existent).
You then sign a tx on your hardware wallet, which generates a text file. You copy that text file to a USB stick. You check that USB stick from another airgapped computer running the tx decoder software. You can see what's signed.
If it's what you wanted, you broadcast the transaction.
This is reasonably secure.
I'm talking about security for people protecting millions in assets, not $1 K, not $1 billion.
There are still several issues. For example the Ledger hardware wallets, often regarded as the be-all / end-all of hardware wallets require constant updating, needing the wallet to be connected to a computer connected to the Internet to download updates.
You can update the firmware before entering your key (for example on a new wallet), but you cannot install the "Nano apps" before entering your keys. Which is an issue in itself.
Data exfiltration through non-deterministic signatures is another very serious issue.
I haven't looked into using the same seed from different hardware wallet vendors and verifying that you get the transaction signature: if that can be done, I'm all ears.
The Ledger CTO and Ledger overall will constantly dodge questions on these issues.
The answer is basically: "Trust us, we won't exfiltrate your seed through non-deterministic transactions" and "Trust us, we won't exfiltrate your seed during apps or firmware updates".
Firmware updates which aren't even signed with a signature people can verify: Ledger can decide to serve, if they want to, a backdoored firmware leaking seeds through non-deterministic to one person in one thousand if they want to.
And they pretend there's nothing to worry about.
What Ledger should do is let people download firmwares and Nano apps offline, put them on USB keys, and then update their hardware wallets from an airgapped computer.
This would at least allow people to crosscheck their firmware and Nano app hashes.
It still wouldn't solve all the issues.
It's very hard to have something you can really trust and the hardware wallets vendors are really trying very hard to make sure you cannot verify what they're doing.
Apart from that, using an air gapped computer is a good idea! I would say you need at least two of them. With different wallets. And then compare everything they do to make sure they do not play any tricks on you.
as always, the biggest risk to your cryptocurrency at an exchange is ... the exchange actively or passively stealing all your money. this has been the case for the entire history of cryptocurrency exchanges.
Stated another way: if you can’t find a counterparty, does the risk you’re talking about matter?
How to avoid counterparty risk is a topic for every asset. For self-custodial crypto, it is about how to handle private keys.
Asset picking which you bring up is a different topic.
But hey, we can go there if you like.
You make a bold claim: That in crypto, demand risk is higher than counterparty risk. Can you back that up somehow? Historically, nobody who held crypto for more than a few years faced lower demand. But many faced loss of their crypto due to counterparty risk.
And which asset class do you see as less risky?
The bold claim is that it has any value at all.
But code for making paper wallets is easy enough to validate or write on your own. Just bring your own air gapped computer, bought from a random supplier at least 20 miles away from your home.
Due to the social nature of money, this is impossible.
What value? All crypto is people trading checksum numbers.
Money/Credit is a social construct; not objectively separate from the system in which it's 'useful'.
If you really want to - you can store Gold in safe. How hard is that? It's relatively easy. A bit annoying, but plausible.
Of course, you have to be sure that others will value Gold in the future. There's no formal 'counterparty' in the specific sense you're alluding to (if the gold is under your bed) but the inherent value of the stored good depends on a 'counterparty'.
You can buy Real Estate, a bit of a pain and dependent on a bunch of laws, but that's an option.
Or any other thing.
All of it ultimately depends on 'counter party' and 'contextual' issues.
I think that this is a serious problem among the 'Self Sovereign' thinking - in pragmatic reality - there is no such thing. At least not in the sense of things like 'currency' or even 'stores of value' to be deployed commercially.
(You can 'store' things like fuel for your own future consumption, but that's a different story)
I also don't understand why some folks are so attracted to a custom hardware device. It's straight-forward to grab Bitcoin software from Github, put it on an air-gapped laptop via USB stick, run it and generate a new pubkey, write down recovery info and bury in backyard, send btc to that pubkey, and done.
Otherwise the pubkey might have been created in a way that makes it easy to guess for someone in your supply chain.
450 mil was in SBFs Robinhood investment, and FTX clearly didn't have any other avenues towards liquidity. 10% without an out was a predictably bad idea
SBF being a US citizen was an angle I hadn’t considered. The US does have jurisdiction over its own citizens, even if they’re operating in other countries. So the question becomes to what extent has SBF defrauded US investors.
a startup (ie. a private company which represents the majority of the founders assets) is already a massively concentrated, ie. not diversified, financial position -
no need to compound it by making a myriad bets (through Alameda or otherwise) in in other tokens/companies in the same market, which are ultimately incredibly correlated assets.
If there was no fraud, that will ultimately be the explanation for their downfall.
Everyone could withdraw all their money at the same time. What happens then? The answer is bank run. There will literally not be enough cash to do it. The entire system is running on the fact that everyone has not done that yet.
Personally, I want to have it happen, just to force the system to come to terms with the fact that it isn't all just about numbers, and so that people can actually materially witness the sheer magnitude of monetary centralization created by our system.
Fuck the inconvenience. If Mammon is going to fucking rule, let everyone see it's rictus. Let everyone take in what it looks like.
The question is are you also willing to give up the easily ignored benefits of monetary centralization, which are significant and foundational to the trust that underpins technological and social progress.
Banks are required by law to have regulatory capital[1] and reserves[2] in order to stay liquid and solvent.
Longer explanation: "The reserves only provide liquidity to cover withdrawals within the normal pattern. Banks and the central bank expect that in normal circumstances only a proportion of deposits will be withdrawn at the same time, and that the reserves will be sufficient to meet the demand for cash. However, banks routinely find themselves in a shortfall situation or may experience an unexpected bank run, when depositors wish to withdraw more funds than the reserves held by the bank. In that event, the bank experiencing the liquidity shortfall may routinely borrow short-term funds in the interbank lending market from banks with a surplus. In exceptional situations, the central bank may provide funds to cover the short-term shortfall as lender of last resort. When the bank liquidity problem exceeds the central bank’s lender of last resort resources, as happened during the global financial crisis of 2007-2008, the government may try to restore confidence in the banking system, for example, by providing government guarantees[2]."
If commercial bank is in trouble other commercial banks will try to help but if they can not help, central bank will try to help and if that is not possible government will step in.
All in all, banking industry is tightly regulated and somewhat safe especially after 2007 fiasco.
In the case of FTX, Binance said they would step in but they gave up. If FTX is profitable they can gradually loan money from private sector(banks, investment funds etc.) then start to repay their liabilities and eventually return loans.
Aren't tokens supposed to be "liquid" or is this a different way of saying the tokens are worthless?
1. Make million new coins called $mikecoin
2. Sell 1 $mikecoin to a friend for 1 USD
3. Claim that the "Total Market Cap" for $mikecoin is 1 million USD
4. Borrow Bitcoin or dollars against your $mikecoin reserve.
> Instead of selling and crashing the price
and
> these are held onto and used as a collateral to borrow against.
Are not compatible. If selling the assert crashes its price, it is a terrible collateral.
I would like to see how lenders justified in writing accepting large quantities of FTT as collateral.
Basically extended comment of michaelbuckbee. You have your $mikecoins "worth" 1 million and someone else makes $annacoins worth 1 million and some other party makes $bobcoins worth 1 million - and you each "lend" them to each other to make a complicated net. Then Mike, Anna and Bob just wait for some people to invest real money - and cash out. People who bought those $mikecoins, $annacoins and $bobcoins think that they can "always sell them back at the market", but the market didnt really exist. From those 1 million coins minted, maybe 250 thousand were sold, rest are held by creators to sell them to bagholders.
Well, I guess the warning would be that someone created something from nothing and said it was worth a few Billion dollars, but other than that, it's a surprise event to everyone - just ask Sequoia Capital and Forbes.
Fedex was famously down to their last 5,000$ dollars and were facing bankruptcy, and the founder quite literally went to Vegas to play blackjack and won 27,000$ to save the company.
Companies and entrepreneurs are supposed to take on risk, that's why bankruptcy laws and LLCs exists in the first place. To give entrepreneurs some peace of mind that if the risk doesn't pay off they only lose what they put in.
The world and the US was growing much faster in the 1970s and 1980s when these sort of things happened daily. Not all donuts come out with a hole.
If for every Ponzis we get a Standard Oil then it's worth it.
If for every Enron we get a Microsoft then it's worth it.
If for every FTX we get a Moderna then it's for sure worth it.
And maybe all those positive examples were just inches away from being touted as negative examples, quite like Fedex was.
The worst is seeing white collar crime get let off easy while the man who steals from a bank goes to jail for long time.
https://blog.kraken.com/post/15002/kraken-proof-of-reserves-...
That said, I don't think it's fair to say "nothing" in a situation where holding the keys means having control of the coins.
FTX's problem wasn't that they had liabilities. It was that they didn't have cryptographic custody of the assets they claimed to have. They don't have the ability to make a case in court that the funds they held belong to customers and, thus, should not be considered assets that could be given to their creditors, because they don't have the assets at all.
Kraken not only can prove that they have all the customer funds in the audited currencies, but also which account they belong to.
If individual accountholders can prove Kraken holds not just "all customer coins" but "my specific account's coins," Kraken can also make that case in court.
Whether it holds up is obviously not guaranteed, but that's not "nothing" compared to FTX's situation.
> None of the Digital Assets in your Kraken Account are the property of Payward. Payward does not represent or treat assets in your Kraken Account as belonging to Payward. However, a court may disagree with Payward’s treatment of your assets and subject them to claims of Payward’s creditors.
This will be tested in court. Kraken's liabilities matter.
What I also said is that proof of reserves is not nothing.
Kraken has proven they do have your coins. FTX did not.
This does not mean Kraken is invulnerable. It's just not vulnerable to the vulnerability that killed FTX.
FTX could have borrowed using these assets as collateral, and the result would have been very similar, but FTX could have posted a proof of reserves.
You're right that the court would have had more freedom to act, though.
In any case, the news about the supposed hack may make the argument moot.
the point of crypto is the ability to self custody without intermediary and verify funds are sound on-chain
non-custodial defi solves many of these issues
I look forward to the day defi fixes this, but right now, and especially with the difficulty of fiat on-ramps to defi, I think the balance comes down in favor of trading on a reliable CEX and never holding funds on an exchange that you aren't actively trading.
> Bankman-Fried told the Financial Times the $8bn related to funds “accidentally” extended to his trading firm, Alameda, but declined to comment further.
Oh look, $8bn just appeared on the balance sheet. Where did they come from? Doesn't matter, surely they are legit. I mean, I have so many billions, $8bn is pocket change. Lets use the $8bn for trading immediately.
> SBF: So, you know, X tokens [are] being given out each day, all these like sophisticated firms are like, huh, that's interesting. Like if the total amount of money in the box is a hundred million dollars, then it's going to yield $16 million this year in X tokens being given out for it. That's a 16% return. That's pretty good. We'll put a little bit more in, right? And maybe that happens until there are $200 million dollars in the box. So, you know, sophisticated traders and/or people on Crypto Twitter, or other sort of similar parties, go and put $200 million in the box collectively and they start getting these X tokens for it.
> And now all of a sudden everyone's like, wow, people just decide to put $200 million in the box. This is a pretty cool box, right? Like this is a valuable box as demonstrated by all the money that people have apparently decided should be in the box. And who are we to say that they're wrong about that? Like, you know, this is, I mean boxes can be great. Look, I love boxes as much as the next guy. And so what happens now? All of a sudden people are kind of recalibrating like, well, $20 million, that's it? Like that market cap for this box? And it's been like 48 hours and it already is $200 million, including from like sophisticated players in it. They're like, come on, that's too low. And they look at these ratios, TVL, total value locked in the box, you know, as a ratio to market cap of the box’s token.
> ...
> Matt Levine: I think of myself as like a fairly cynical person. And that was so much more cynical than how I would've described farming. You're just like, well, I'm in the Ponzi business and it's pretty good.
https://www.bloomberg.com/news/articles/2022-04-25/sam-bankm...
However he runs an exchange, not one of these magic boxes, and he was never saying or claiming that that was what ftx was doing
https://twitter.com/The_Prologuist/status/158967849854920704...
Well, it depends on how you look at it.
Define satire?
For all his talk of altruism, what has he actually done so far? Compared with, say, Mackenzie Scott, who is actually putting her money where her mouth is?
From what little I could find, perhaps he has written $160M worth of grants, and it is questionable if those will even be paid out, or who they went to, or over what time period. So that is 0.6% of his wealth at peak.
For reference, people who make less than $30-50k/yr(who generally have a negligible net worth and are sustained by their income) donate on average 5%[0] of their income to charity each year. An average Joe or Jane appears to be literally 10x more altruistic than SBF from what I can find.
[0]https://www.definefinancial.com/blog/charitable-giving-stati...
I've thought before that EA is charity for sociopaths. Nothing recently has shaken that view. There are plenty of EA quotes that support the 're-framing' point you make, stuff ling Singer saying "take advantage of strategies other people are biased against using".
Fortunately, with FTX collapsed there is a little less risk that someone will actually fund them to move forward with the idea of genociding all the wild animals on earth (on the basis of it being the most efficient way to reduce total suffering because wild animals are suffering). So, I guess that's a little silver lining on the FTX implosion.
So FTX had an 11% leverage ratio, pretty good.
"You control the Digital Assets held in your Account," says Section 8.2 of the terms. "Title to your Digital Assets shall at all times remain with you and shall not transfer to FTX Trading."
The terms continue: "None of the Digital Assets in your Account are the property of, or shall or may be loaned to, FTX Trading; FTX Trading does not represent or treat Digital Assets in User’s Accounts as belonging to FTX Trading."
A better comparison would be a stock brokerage that took your money to buy specific stocks on your behalf but then did something totally different, including “investing” in illiquid assets.
If they had just bought the stock you requested, then they could just liquidate your stock at market price when you said you want to sell.
This was not the situation that FTX was/is in.
Instead, the way FTX allocated money/assets was suspicious (at best) if not flat out irresponsible and deceptive.
Also, FTX was not and is not a bank, and the idea that this is levering in the same way regulated banks lever is laughable.
Sure it might be slightly more convoluted, but at the end of the day isn't this still customer deposits funding margin/loans?
banks hold real life assets, that can be resold, like mortgages or loans to credit-worthy people.
they also have access to central banks, and other big banks who might recapitalise them if they have bad luck.
FTX had a bundle of funbacks, which it had also printed, and are of no intrinsic worth.
of course the liquidity and reserve requirements are different.