What Happened at FTX?
lcamtuf.substack.com
lcamtuf.substack.com
FTX employees submitted payment requests through an online chat platform where a disparate group of supervisors approved disbursements by responding with personalized emojis. Other practices included the use of an unsecured group email account as the root user to access confidential private keys and critically sensitive data for the FTX Group companies around the world, the use of software to conceal the misuse of customer funds; the secret exemption of Alameda from certain aspects of FTX.com’s auto-liquidation protocol. Also, the audit firm for the Dotcom Silo was Prager Metis, a firm whose website indicates that they are the “first-ever CPA firm to officially open its Metaverse headquarters in the metaverse platform Decentraland".
Last week: "FTX lent customer deposits to Alameda research. Both FTX and Alameda are owned by SBF".
This week: "Alameda research issued personal loans to SBF".
We've gone from "SBF probably stole everyone's money" into "SBF definitely stole everyone's money". There's not much else to say, honest. I guess you can dig into the details more-and-more and try to figure out how various groups will deal with the fallout, but that's really not the important bit here.
People sought riskier and riskier investments and did less and less vetting. The real estate situation where you had to waive all inspections and put up massive earnest cash up front was just an analogy for what was going on everywhere. Just to keep up with inflation you basically had to put yourself out there and pray, and people who otherwise would end up as little more than punks at Jane Street sniffed the blood in the ocean.
While SBF is the primary culprit here, the fed's short-sighted policies created incalculable damage to our economic landscape and advantages for scammers. I fear we will disproportionately be seeing more unwinding of these kind of schemes.
What a terrible way to end up. No wonder they turned to crime, with that as the only alternative.
How far does the price of BTC have to drop before we dispense with this charade?
Coinbase and Kraken would beg to differ. They have been operating since 2011 and 2012 respectively.
>As the number of crypto exchanges that have imploded spectacularly keeps rising
Given that the number can only go up (exchanges can't un-implode), this statement seems like a truism. You could say the same about VC backed companies, for instance.
> Coinbase and Kraken would beg to differ. They have been operating since 2011 and 2012 respectively.
Kraken isn't public, and we don't know their inner balance sheet. However, Coinbase seems to have lost more than a billion dollars in the four quarters [0]. Definitely not how I define "running profitably."
Madoff appeared to be operating well and meeting all withdrawl demands from the 1970s until 2008.
FTX appeared to be operating successfully until a week before it collapsed.
We'll see when some event forces transparency. Usually it's a collapse, but it could be a lawsuit with discovery for another reason.