>Watch Ye The WATERS
>Zorrik Voldman CEO,Deepwaters
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WTF FTX
https://deepwaters.xyz/learn/wtftx
https://archive.ph/F1cwb
09 Nov 2022 | 7 min read
WTFTX?!
SBF (the man behind one of the largest crypto exchanges in the world, FTX, and one of the largest crypto-oriented hedge funds, Alameda Research)
had topress the big red button at FTX.
Alistair Simmonds
FTX Burning
TL:DR
Samuel Bankman-Fried(the man behind one of the largest crypto exchanges in the world, FTX, andone of the largest crypto-oriented hedge funds, Alameda Research) had to press the big red button at FTX - by which we mean the big red button that says “Turn Off the User’s Ability to Withdraw Funds”. On November 8th, one of the best known and well regarded exchanges in the industry suspended non-fiat withdrawals after ~$6 billion was withdrawn in ~72 hours. One of FTX’s early investors, Binance, may now be coming to the rescue, although the situation is evolving rapidly. There have been reasonable allegations made that this fiasco is inextricably linked to questionable “investment” decisions made by Alameda Research, leaving room to believe that we are still experiencing fallout from May’s Terra/LUNA collapse. Though FTX and Alameda’s leadership have both stepped down in recent months, the industry has been broadly caught off guard by the scale and scope of mismanagement of user funds.
Binance To Acquire FTX
Just when we all began to relax and feel more comfortable that some ludicrous series of egregious liberties taken with user funds isn’t going to crash the crypto markets, we are all humbled by one of the best respected exchanges suffering a liquidity crisis. How did we find ourselves at a point where Binance is tweeting “we did not master plan this”?
Having been an early investor in FTX, Binance received ~$2.1 billion USD (in BUSD and FTT) when they sold their equity in FTX. On November 6th, CZ announced that Binance would be liquidating their remaining FTT holdings. On 11/5 FTX’s FTT token traded at ~$25 USD and by 11/8 it was trading at ~$5. Binance’s CEO, Changpeng Zhao, has since announced (on the morning of November 9th) an intention to stop selling FTT while the details of their acquisition of FTX are fleshed out.
The background to Binance’s decision to start selling large quantities of FTT (somewhere in the region of $0.5 billion according to Bloomberg, though industry participants no doubt feared this could be closer to the $2.1 billion USD equivalent figure CZ mentioned) involves Alameda research appearing to be in financial distress, bickering about lobbying between major industry players and allegations of money laundering investigations.
It is also necessary to gain some intuition for SBF’s intricate and complicated web of interconnected projects. Alameda Research was the largest shareholder in Voyager digital, a company that filed for bankruptcy over the summer while owing ~100,000 creditors funds to the tune of billions of USD equivalent. Voyager had assured customers that their funds were FDIC insured, though this transpired to not be the case since this insurance was apparently contingent on funds being held by a specific (insured) bank, rather than (presumably) being rehypothecated in some way).
FTT closing price
Source: Nomics
Sam Bankman-Fried (SBF), a well known young crypto billionaire, famous among other things for his affinity for the Effective Altruism movement, was listed among the major political donors in the United States; specifically SBF was the 6th largest donor to US political parties in the 2022 election cycle, ranking just after titans like George Soros and Kenneth Griffin, with his ~$40 million in donations, ~99.6% of which went to liberal causes. SBF’s offers to help bail out firms in turmoil earlier in 2022, combined with these major liberal oriented political donations, did a lot to cement SBF (and by extension FTX’s) standing in the industry as credible and trustworthy players. It is only with an eye to scrutinize SBF’s other initiatives, such as Alameda Research (a trading firm) that the above described moves appear potentially motivated by some ulterior factors.