Tag Archives: FTX

The Contagion: Fallout and Lessons from FTX and SBF, by Sam Hill

The third part of Sam Hill’s series on Sam Bankman-Fried and his cryptocurrency exchange, FTX. Will there be any consequences for Democratic darling SBF? From Sam Hill at bombthrower.com:

 

This is the third and final part in our recap of the collapse of FTX. In the first two issues we covered what happened in the weeks leading up to the failure of the exchange and how Alameda Research and FTX became so entangled and fraudulent in the first place.

Today we’ll cover the contagion and fallout throughout the Crypto industry and some lessons learned by Crypto investors and industry insiders.

Leveraged Unwind

The Contagion that we are seeing from the failure of FTX is mainly an unwind of built up debt between Crypto companies. This is acting with a lag as a majority of companies with financial problems were already on the ropes from earlier in the year as a result of the collapse of Luna/Terraform labs and Three Arrows Capital.

The list of Crypto lenders that have so far filed for bankruptcy as a result of these earlier problems include Voyager, Celsius and BlockFi. Gemini’s yield program has halted withdrawals. Nexo has announced that they will exit US markets but have not yet announced financial problems.

If you haven’t already, you should strongly consider whether any of the yield generating accounts at Crypto companies are worth the risk.

 These failures are all a result of counterparties defaulting on loans. Essentially, Crypto hedge funds and other entities took on loans from these lenders during the bull market and have failed to repay this year. To compound this issue towards the end of 2021 and in early 2022 the Crypto lending space was so competitive that loan terms were extremely favorable.

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The Rise and Fall of FTX (Part 2 of 3), by Scott Hill

Here’s further analysis of the FTX travesty, from Scott Hill at bombthrower.com:

Last week we covered the collapse of FTX as it happened but there’s a lot more to the story. How did FTX grow from a tiny Hong Kong bucket shop into a top three Crypto exchange over the course of just a few years? What was Alameda research and were they ever legitimate? Most importantly, how exactly does an exchange lose track of up to $10 billion worth of customer deposits?

Most of this material is still an educated guess, but the guessers are out there putting together clues from private discussions which have been leaked, the bankruptcy proceedings and first hand dealings shared on Crypto Twitter.

It’s worth noting that there is a whole deep state angle to this story.

I won’t go into it in this article because so little is known (see endnote – ed.)

What we do know is mostly confined to the fact that FTX CEO Sam Bankman-Fried (SBF) was the second largest donor to Democrat political campaigns since 2019. His Co-CEO for part of the FTX Empire, Ryan Salame, was a top 10 donor to the Republican party in the same period.

Sam Bankman-Fried met with SEC Chairman Gary Gensler seeking a “no action” letter on an enforcement matter in April, shortly before SBF began pushing the DCCPA, a bill which the Crypto industry mainly saw as a subtle crackdown on DeFi wrapped in a reasonable sounding regulatory framework.

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Why Isn’t Sam Bankman-Fried In Handcuffs Yet? By Quoth the Raven

Elizabeth Holmes crimes are a traffic ticket compared to what Sam Bankman-Fried has allegedly done, but she’s going to the slammer for 11 years and he roams free. From Quoth the Raven at quoththeraven,substack.com:

For a party that seems to absolutely loathe billionaires, Democrats and their friends in the media sure are taking it soft on Bankman-Fried.

To be honest, it’s kind of hard to try and entertain the innuendo and rumors that Democrats and the media are working to do damage control on behalf of Sam Bankman-Fried, the founder of now-bankrupt crypto exchange FTX, because the idea is just so reprehensible.

But they sure do keep giving us ammunition to make that suggestion, don’t they?

Bankman-Fried and House Financial Services Committee Chair Maxine Waters

Bankman-Fried – the second biggest donor to Democrats behind George Soros – has all but admitted that he squandered billions of dollars of other people’s money carelessly, writing “I fucked up” on Twitter in a mea culpa about two weeks ago, days after a run on his exchange exposed it to be a shell of what many perceived it to be.

Institutional investors in FTX have written their stakes in the firm to $0.

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The Strange Morality of the Bay-Area Billionaire Left, by Victor Davis Hanson

And these people think they should be ruling us. From Victor Davis Hanson at amgreatness.com:

Sam Bankman-Fried is the ultimate dangerous and ridiculous expression of the most toxic and creepy culture in America.
If he did not exist, he would have to be invented.

a. Hehe. I had to be. It’s what reputations are made of, to some extent. I feel bad for those guys who get f—ed by it, by this dumb game we woke westerners play where we say all the right shibboleths and so everyone likes us.” —Sam Bankman-Fried

The FTX Bitcoin empire of 30-year-old CEO Sam Bankman-Fried is in shambles. Or more specifically, his “dumb game” cryptocurrency exchange has destroyed thousands of lives. Electronically, he may have robbed perhaps a million investors, and along with them hundreds of large institutional investors.

Mysteriously, only after the conclusion of the midterm elections, did we suddenly learn that this left-wing “philanthropist” and benefactor of Democratic politics, this megadonor to the quid pro quo puff-piece media, this con artist protected from federal securities regulators, had drained off, lost, hidden, or spent billions of dollars of other people’s money.

As a result, the Bahamas-basking, tax-avoiding, polyamorous sybarite, and heartthrob of progressive moralists, now claims he has no wherewithal to honor his financial commitments to his own investors. Preliminary postmortem auditors sigh that they have never encountered a greater financial mess than what Bankman-Fried has left in his wake.

How does the most sophisticated financial system in the history of civilization allow a virtue-signaling nerd to nearly wreck it? Where were the Federal Trade Commission, the Department of Justice, the IRS, and all the other alphabet soup agencies that supposedly exist so that someone like Bankman-Fried does not? Where is Merrick Garland and his special prosecutors, the FBI with its televised SWAT swoops and leg irons?

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The Solemn Stillness Before Winter, by James Howard Kunstler

All sorts of shit looks ready to hit the fan this winter. From James Howard Kunstler at kunstler.com:

“Ultimately, the Democratic Party is a criminal organization; and to support it is to be a criminal. And since it is the ruling party, unless you oppose it, you support it.” —Curtis Yarvin, The Gray Mirror

Here in New England now, the landscape is putting itself to bed, preparing for winter’s long sleep. The grass in the cow pastures never looks greener than in contrast to the barren trees, but that lingering color, too, will soon fade. We did not get smacked here by the deep snows of far-off Buffalo, not a flake, so a sweetly solemn stillness settles over these tender hills as we give vague thanks at Thursday’s gala of gluttony, certain to induce terrors of indigestion in the restless night to come.

I am thankful to still be here after all these years — more than that, grateful! And with the prospect of seeing what comes next: the beginning of a great correction for a country gone off the rails in greed, bad faith, and treachery. Everything rooted in lies and fakery is primed to blow down in the political storms ahead.

It’s fitting that the last straw on this beast’s back was the phoniest scam of all, and saturated with every known sort of millennial Woke posturing: the FTX swindle. Its avatar, Sam Bankman-Fried (SBF), proved to be a special species of villain, the idiot-savant slob, clever enough to somehow winkle a physics degree out of the Massachusetts Institute of Technology, but not very good with the basic math of money — for instance, the equation that margin must equal collateral — and really really bad at covering his oafish tracks.

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FTX on Steroids: Is “Tether” the Biden World’s Crypto BCCI? By 2nd Smartest Guy in the World

The next crypto domino to fall may well be Tether. From 2nd Smartest Guy in the World at 2ndsmartestguyintheworld.com:

A simple crypto rule to live by: any token or exchange that has a CEO, identifiable individual or development team associated with it is not real crypto; it’s the antithesis of crypto.

This substack has been warning for quite some time that all of these centralized exchanges are nothing more than grifting operations, IRS reporting nodes and CIA black ops money laundering facilitators.

I have been warning since around 2019 that Tether is the single most egregious crypto scam out there. It is far worse than FTX, with Sam Bankman-Fried (SBF) and his team of scammers having had direct ties with Tether. The sordid cadre of snake oil salesmen behind Tether makes SBF look like an ethical player.

Tether is made possible by the CIA, and in particular the Democratic party of the illegitimate Federal government that has been laundering money to Ukraine using both FTX and Tether.

This substack has covered the criminal CIA and taxation:

2nd Smartest Guy in the World
Original Social Engineering Sin
“…the socio-psychological foundations of socialism is identical to that of the foundations of a state, if there were no institution enforcing socialistic ideas of property, there would be no room for a state, as a state is nothing else than an institution built on taxation and unsolicited, noncontractual interference with the use that private people c…
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Both the CIA and taxation happen to have literally funded the likes of FTX and Tether while protecting these criminal exchanges and centralized “backed” tokens from the very investigations that the unconstitutional three letter agencies are allegedly tasked with enforcing.

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WTF Happened with FTX (Part 1 of 3), by Scott Hill

For those who want to delve more deeply into the sordid tale of FTX. From Scott Hill at bombthrower.com:

(Part 1 of 3 special to Bombthrower by digital asset space analyst Scott Hill)

On November 2nd Coindesk published a leaked balance sheet from FTX affiliated market maker Alameda Research.

Ten days later the third largest Crypto exchange in the world was bankrupt and its founder was under international investigation for fraud.

In this article I’ll go through how Crypto giant FTX fell apart. There is a lot of backstory to this situation which I’ll cover in a following article, discussing the beginnings of Alameda research and the story of how a sketchy hedge fund turned into a major exchange.

As you’ve no doubt heard repeatedly this week, self custody of your Crypto is the safest approach until we know who is insolvent and the extent of the contagion. If you’re not confident with self custody, Coinbase and Kraken seem to be the safest Crypto exchanges, but that is still a counterparty risk that I’m not willing to take personally in these market conditions.

The Balance Sheet Leak

The exclusive scoop from Coindesk looked bad for Alameda Research. The firm, which performed market making on FTX as well as taking directional bets and venture capital investments, seemed insolvent on a realized value basis.

Their balance showed $14.6 billion in assets held against $8 billion in liabilities. On paper solvent on a mark-to-market basis, but digging in there was no way that mark was reasonable.

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Citizen reporting beats legacy media on a crucial, complex story (yet again), by Alex Berenson

No news to SLL readers: the alternative media beats the mainstream media every time. From Alex Berenson at alexberenson.substack.com:

While the New York Times et al offer puffery on Sam Bankman-Fried and the FTX collapse, expert outsiders sift through the wreckage and get to the truth; this is Twitter and Substack at their best

Elon Musk was proud of his $44 billion baby this morning.

Musk is right.

Fourteen years ago, when Bernie Madoff’s massive hedge fund collapsed, the New York Times and other elite media aggressively dug into what had happened – and why and how regulators had failed to stop it. I know – I was part of the Times team.

By this point, business reporters were experienced covering financial collapse. Along with al Qaeda and Iraq, Wall Street’s various meltdowns were the story of the 2000s, starting with the technology stock crash in 2000, running through Enron and the other giant accounting frauds, and culminating in the bank crisis and Madoff.

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A Smoldering Fuse, by James Howard Kunstler

The FTX affair is a hideous monstrosity, which means Sam Bankman-Fried has to be deeply in bed with multiple governments. From James Howard Kunstler at kunstler.com:

We have pretty much burned our bridges at this point. Unless you’re prepared to mindfuck yourself, and gaslight yourself, and confess, and convert, there’s no going back to “normal” society (which we couldn’t go back to anyway, on account of how it doesn’t exist anymore) — CJ Hopkins

Thirty-seven billion more dollars for Ukraine? (That’s thirty-seven thousand millions of dollars, by the way.) Bringing the total this year to a click-or-two over ninety billion (ninety-thousand millions), on top of whatever Sam Bankman-Fried’s FTX company funneled through that sad-sack international money laundromat — soon to be the darkest backwater of a European failed state since Field Marshal Melchior von Hatzfeldt of Westphalia left Bohemia a corpse-strewn wasteland after the Battle of Jankau (1645).

It really doesn’t matter how much more money we pound down that rat-hole, you understand, because by the time various parties — the weapons-makers, Volodymyr Zelensky, sundry members of the US House of Representatives, the Biden family, the World Economic Forum — are finished creaming off their fair shares, poor Ukraine won’t have enough cash-on-hand to replace six fuse-boxes in Zaporizhzhia.

Against this backdrop, the USA enters a holiday season near-death spiral as unspooling scandals battle a collapsing economy for supremacy of the alt news sites. Case-in-point: the aforementioned FTX monkey business, a metastasizing tumor of the body politic. This complex fraud will smolder for a few weeks before it explodes into an extinction-grade event for the Democratic Party. The usual suspects among the mainstream media are trying strenuously to ignore it, but the shreds of this exploding money-borg are already sticking to guilty parties far and wide across the political landscape like so much rotting flesh.

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“This Is Unprecedented”: Enron Liquidator Overseeing FTX Bankruptcy Speechless: “I Have Never Seen Anything Like This”, by Tyler Durden

FTX looks like it may take the prize for the most convoluted mess of a company to ever grace a bankruptcy court. From Tyler Durden at zerohedge.com:

A few days ago we asked how much longer do we have to wait for the “first-day affidavit” in the FTX bankruptcy, traditionally the most detailed and comprehensive summary of how any given company collapsed into Chapter 11 (and in FTX’s case, Chapter 7 soon, as this will soon become a full-blown liquidation)…

… and this morning we finally got our answer when it hit the docket (22-11068, U.S. Bankruptcy Court for the District of Delaware), almost a full week after FTX filed on Nov 11… and boy is it a doozy.

Because how else would one describe it when FTX’s new CEO and liquidator, John Ray III,  who also oversaw the unwinding and liquidation of Enron, admits that “Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here.”

And just in case his shock at FTX’s fraud of epic proportions was not quite clear enough, he adds that “from compromised systems integrity and faulty regulatory oversight abroad, to the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals, this situation is unprecedented.”

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