That gets them out from bankruptcy in the Bahamas, which is much tougher than US law. The Bahamas still has classic tough bankruptcy laws, where there's no debtor-in-possession reorganization. It's straight to liquidation, with a court-appointed receiver in charge.
This should be, and may be, converted to a straight liquidation. Chapter 11 can be useful for restarting companies that actually do something, like General Motors. There, much of the value is in the ongoing business. FTX, going forward, has no ongoing business. Lawyers for creditors will be making that argument.
Note that Bankman-Fried is still employed by FTX, "assisting".
Current banners at FTX.com: "FTX is currently unable to process withdrawals. We strongly advise against depositing. Deposits of TRX, BTT, JST, SUN, and HT are disabled. All onboarding of new clients has been suspended until further notice."
"We have reached an agreement with Tron to establish a special facility to allow holders of TRX, BTT, JST, SUN, and HT to swap assets from FTX 1:1 to external wallets. This functionality will be enabled at 18:30 UTC, November 10, 2022."
>"We have reached an agreement with Tron to establish a special facility to allow holders of TRX, BTT, JST, SUN, and HT to swap assets from FTX 1:1 to external wallets. This functionality will be enabled at 18:30 UTC, November 10, 2022."
These centralized coins are hilarious. How can you negotiate a special facility to swap to those assets when they're presumably gone? Also now that they've filed for Chapter 11 won't all these 'activities' and withdrawals be frozen?
Wait, why does a Bahamas based company get to choose the jurisdiction where its bankruptcy proceedings are held? Surely if they are a Bahamas company they are beholden to Bahamas bankruptcy laws?
> Chapter 11 can be useful for restarting companies that actually do something, like General Motors. There, much of the value is in the ongoing business. FTX, going forward, has no ongoing business.
I was looking for a diplomatic way to write "and nothing of value was lost...", but you nailed it.
A financial firm with nominal billions in outstanding debts and credits seems like the worst thing to shut down with a straight liquidation. Nothing says "these creditors get nothing" like the need to immediately firesale numerous crypto tokens moving the price dramatically.
I've seen some comments saying that this is all delayed fallout from the Luna/Terra collapse last spring, it's just that FTX had the means (its own token that it could pump and move around its own entities) to paper over the hole in its balance sheet until now. Can anyone more familiar with the situation elaborate? How much further will the contagion spread?
1. Alameda essentially needed a bailout in the spring.
2. Alameda, though, also had a large chunk of FTT coming due in the fall that was basically part of the vesting schedule of the original FTT ICO.
3. So, FTX lent Alameda customer funds in the spring.
4. In the fall, when the vested FTT paid out to Alameda, they immediately paid it back to FTX.
5. The thing that looks highly suspicious and fraudulent is that SBF tweeted out that the big FTT move that day was just normal "rotation".
Also, particularly interesting to me, the FTX-US president, Brett Harrison, resigned the day before that transaction at the end of September. He also just liked an interview on LinkedIn where Brian Armstrong (Coinbase CEO) was being interviewed, saying "not all crypto companies are like FTX, where it appears they fraudulently misappropriated customer funds".
The above is speculation, but it's based on on-chain data.
Its hard to tell, but looks like the fall out is far from over. There are a lot of rumours running around so unsure what is true and what is not, but we've gotten confirmations from a lot of crypto companies to be affected one way or another. Genesis (a big OTC trading company) lost about 160M but their parent company wrote them a check. BlockFi seems to be in the hole and has closed withdrawals. Blockfolio (an FTX owned company) paused withdrawals. Anything SOL/SRM related is likely affected. Any market maker worth its salt had money on it as well... think we will see a lot of blood in the coming days/weeks.
By their own figures, Tether is now undercapitalized and just had billions withdrawn. They made those payments. But, as Hemmingway said, bankruptcy tends to happen gradually and then all at once. Tether is in a hole. Nobody knows how close they are to not making payments. But when they implode, it will be sudden and the blast radius will be large.
Does Tether weather this squall? Based on history, probably. Based on economic fundamentals, they will sink at some point.
Scoopy in the Alchemix discord had this to say:
"If you are on any CEX or CeFi app or earn product, get out RIGHT NOW. Rumors are swirling and it is possible that none of them are solvent.
I am not kidding, really, get out now. I care too much for our community to not have said anything to warn you."
Crypto doesn’t do anything there’s no productive asset. Literally every dollar coming out is a subset of the dollars that went in.
It’s less than that even due to electric bills and all that.
Contrast that to a productive asset, like a farm. You start with land and put dollars in and you get food. And you still have the land. There’s more food than there was before.
Or if you’re one of those Elon worshippers, he starts with rocky ore and seawater or whatever and ends up with lithium battery packs.
So with that established, when you see this guy running around spending hundreds of millions of dollars the next question has to be whose dollars were those. Because they don’t have them any more and they ain’t getting them back.
I don't think people realize how big of a collapse UST was. $18 billion market cap that vanished in a week. The fact that Do Kwon is not in jail yet is astonishing to me. FTX by comparison is on the hook for $10 billion, about half of the UST collapse. Everything we're seeing is a result of Do Kwon's scamming.
For someone that only dabbles in crypto - what are the reasons people choose to use high-risk exchanges like FTX, and buy even higher risk "sh*t coins" on them? Especially the exchange-created-and-owned coins - of which I have yet to see one actually do what it promised.
Is Coinbase just not cool anymore, or is there some advantage to using exchanges like FTX until they go belly-up?
I think there's a real chance of the entire market going pretty close to zero. The market was only ever suspended by pure belief. If the belief is shattered it's over. There's no earnings report or central bank bailout to stem the tide. The market is in freefall. And the only thing keeping from hitting zero is the collective will of those who are doggedly clinging to their sunk costs.
I’d encourage you to listen to the odd lots podcast where Sam gets lost in the explanation of what crypto does and his soon to be famous hypothetical “x coin,” and the “box” it uses to derive value from it.
I know little by way of the crypto world, but I have to say that calling platforms like FTX, Binance, and others "exchanges" strikes me as very much misleading.
In traditional finance, the "exchange", as in "the New York Stock Exchange", only facilitates the calculation of market prices for a range of assets and the matching between sellers and buyers. Exchanges don't even manipulate money - that's left to other, highly regulated, professions, such as brokers.
Brokers hold your assets and sometimes lend you money, but are very restricted with what they can do with it unless they qualify as banks, which requires complying with an array of complex capital requirements.
So really, I don't understand: how are those entities not offering "investment services" and so not under SEC supervision?
Dumb question, but what happens to stuff like Miami Heat’s FTX Arena etc in situations like this? Should we expect a name change for the arena at some point soon?
This whole thing is just the .com crash all over again. Super Bowl ad’s the same year of the crash even.
I happened to be at a hotel earlier this year that was hosting a crypto conference and the attendees looked like the kinds of people a multi-level marketing scheme attracts. Very different from a few years ago.
You must not have been following cryptocurrency for that long. This sort of thing happens every 2-3 years. This isn't a wild, unforseen crazy market calamity, this is your run of the mill downturn, this ones mild so far actually. You're only hearing more "bloodbath" talk because the news covers it nowadays, and the news loves to exaggerate bad things and make them sound worse because that's how they keep the lights on.
> I happened to be at a hotel earlier this year that was hosting a crypto conference and the attendees looked like the kinds of people a multi-level marketing scheme attracts.
So people who are barely holding on to the bottom rungs of the (American) middle class, and who are the traditional targets of multi level marketing (and also religious) hucksters?
That doesn't bode well for the argument that the crypto ecosystem isn't a set of scams, regardless of whatever the merits of the underlying technology has.
So for "normal" financial institutions (eg banks, mutual funds, brokerages) you are legally required to shield custodian assets. They rea typically held in trust. Due to various scandals there's a lot of regulation. There's even government protection (to a point) for individual customers (eg FDIC insurance for bank depositors).
All of this is necessary to stop situations like FTX/Alameda. A bank can't take your money and bet it on blackjack but there seems to be no such protection for these crypto exchanges. All of this is necessary to maintain confidence in the financial system (yet another reason to roll one's eyes at libertarians).
I mention this because it's just another case of crypto lacking protections the non-crypto financial system has and ignoring lessons learned over the last 5000 years of finance.
I saw a comment on HN yesterday where someone in the Navy said that when they get a new CO it'll be one of two types: the first will work out how things work and then incrementally improve things. The second will immediately reshape everything in their image without figuring out why things are the way they are.
I see that trend in management too. But it seems to be a problem with the entire crypto space. Otherwise smart people completely ignorance of the financial systeem just reshaping crypto with no regard for history.
As for SBF, this is a fraud on a massive scale, like Madoff scale. I really wonder what will happen here because what should probably happen is he'd spend the rest of his life in prison.
For those who believe crypto and web3 is the future, has any comparable emerging technology been met with as many scandals and busts in so little time?
What of the rumour that Bahamians are allowed to access their funds for legal reasons while everyone else can not? Most of the FTX employees including SBF are based in Bahama? Isn't this just insiders cashing out before creditors/users?
He should have just stuck to running an exchange and trying to innovate that game (note - earlier in the year lots of talk around their automated margin plan for wider industry beyond crypto). Theres a decent business there.
Yes, that’s generally what happens when an unregulated bank goes bankrupt. The list of creditors will be long, and some have priority claims so they get paid first.
Everybody said this can happen. Coinbase was forced to include a warning to this effect in their filings as a public company. But nobody cares when the going is good and FOMO is strong.
Can anyone speculate what Bankman-Fried's exit plan was?
Was this a fraud that got out of control, or premeditated? If it was premeditated, what was the exit plan?
Did he expect to be able to gamble with customer funds indefinitely?
Were the Effective Altruism intimations genuine?
Why, if Alameda was a market maker, and they therefore presumably have some form of insight into the markets, did they then decide to take a huge directional bet on Crypto [source?]? This is contrary to market making principles.
What was the purpose of encouraging employees to invest? Was it to buy their silence/cooperation ('you have to stay employed and invested if you ever want your money back') if they found out about the fraud, or did Bankman-Fried genuinely believe it was to their benefit?
Why were there so many puff pieces in the media, without any journalist questioning the narrative?
[+] [-] Animats|3 years ago|reply
That gets them out from bankruptcy in the Bahamas, which is much tougher than US law. The Bahamas still has classic tough bankruptcy laws, where there's no debtor-in-possession reorganization. It's straight to liquidation, with a court-appointed receiver in charge.
This should be, and may be, converted to a straight liquidation. Chapter 11 can be useful for restarting companies that actually do something, like General Motors. There, much of the value is in the ongoing business. FTX, going forward, has no ongoing business. Lawyers for creditors will be making that argument.
Note that Bankman-Fried is still employed by FTX, "assisting".
Current banners at FTX.com: "FTX is currently unable to process withdrawals. We strongly advise against depositing. Deposits of TRX, BTT, JST, SUN, and HT are disabled. All onboarding of new clients has been suspended until further notice."
"We have reached an agreement with Tron to establish a special facility to allow holders of TRX, BTT, JST, SUN, and HT to swap assets from FTX 1:1 to external wallets. This functionality will be enabled at 18:30 UTC, November 10, 2022."
[+] [-] sp332|3 years ago|reply
[+] [-] AustinDev|3 years ago|reply
These centralized coins are hilarious. How can you negotiate a special facility to swap to those assets when they're presumably gone? Also now that they've filed for Chapter 11 won't all these 'activities' and withdrawals be frozen?
[+] [-] rurp|3 years ago|reply
Wait, withdrawls are completely frozen and the company is done for, but they are still accepting deposits?!
[+] [-] null0pointer|3 years ago|reply
[+] [-] propogandist|3 years ago|reply
https://blockworks.co/news/ftx-ceo-bankman-fried-resigns-ban...
[+] [-] imdsm|3 years ago|reply
[+] [-] walrus01|3 years ago|reply
I was looking for a diplomatic way to write "and nothing of value was lost...", but you nailed it.
[+] [-] HWR_14|3 years ago|reply
[+] [-] faefox|3 years ago|reply
[+] [-] hn_throwaway_99|3 years ago|reply
https://mobile.twitter.com/LucasNuzzi/status/159012259020682...
In summary:
1. Alameda essentially needed a bailout in the spring.
2. Alameda, though, also had a large chunk of FTT coming due in the fall that was basically part of the vesting schedule of the original FTT ICO.
3. So, FTX lent Alameda customer funds in the spring.
4. In the fall, when the vested FTT paid out to Alameda, they immediately paid it back to FTX.
5. The thing that looks highly suspicious and fraudulent is that SBF tweeted out that the big FTT move that day was just normal "rotation".
Also, particularly interesting to me, the FTX-US president, Brett Harrison, resigned the day before that transaction at the end of September. He also just liked an interview on LinkedIn where Brian Armstrong (Coinbase CEO) was being interviewed, saying "not all crypto companies are like FTX, where it appears they fraudulently misappropriated customer funds".
The above is speculation, but it's based on on-chain data.
[+] [-] crypt1d|3 years ago|reply
[+] [-] btilly|3 years ago|reply
By their own figures, Tether is now undercapitalized and just had billions withdrawn. They made those payments. But, as Hemmingway said, bankruptcy tends to happen gradually and then all at once. Tether is in a hole. Nobody knows how close they are to not making payments. But when they implode, it will be sudden and the blast radius will be large.
Does Tether weather this squall? Based on history, probably. Based on economic fundamentals, they will sink at some point.
[+] [-] OptoContrarian|3 years ago|reply
I am not kidding, really, get out now. I care too much for our community to not have said anything to warn you."
Not sure what that all entails.
[+] [-] CPLX|3 years ago|reply
It’s less than that even due to electric bills and all that.
Contrast that to a productive asset, like a farm. You start with land and put dollars in and you get food. And you still have the land. There’s more food than there was before.
Or if you’re one of those Elon worshippers, he starts with rocky ore and seawater or whatever and ends up with lithium battery packs.
So with that established, when you see this guy running around spending hundreds of millions of dollars the next question has to be whose dollars were those. Because they don’t have them any more and they ain’t getting them back.
[+] [-] ryanSrich|3 years ago|reply
[+] [-] Alupis|3 years ago|reply
Is Coinbase just not cool anymore, or is there some advantage to using exchanges like FTX until they go belly-up?
[+] [-] tootie|3 years ago|reply
[+] [-] Flatcircle|3 years ago|reply
Begins at about the 24 min mark
https://open.spotify.com/episode/2SXncXpdjwH6WIxhM2V9zZ?si=D...
[+] [-] sillysaurusx|3 years ago|reply
[+] [-] throwaway0asd|3 years ago|reply
[+] [-] rapht|3 years ago|reply
In traditional finance, the "exchange", as in "the New York Stock Exchange", only facilitates the calculation of market prices for a range of assets and the matching between sellers and buyers. Exchanges don't even manipulate money - that's left to other, highly regulated, professions, such as brokers.
Brokers hold your assets and sometimes lend you money, but are very restricted with what they can do with it unless they qualify as banks, which requires complying with an array of complex capital requirements.
So really, I don't understand: how are those entities not offering "investment services" and so not under SEC supervision?
[+] [-] criddell|3 years ago|reply
Yesterday SBF said FTX US was not impacted by the shitshow:
https://twitter.com/SBF_FTX/status/1590709195892195329
[+] [-] gonehome|3 years ago|reply
You can sign up to get the newsletter for free, but it’s sometimes paywalled on the site (it’s a great newsletter for finance anyway).
The most recent: https://www.bloomberg.com/opinion/articles/2022-11-10/ftx-is...
[+] [-] indigodaddy|3 years ago|reply
[+] [-] once_inc|3 years ago|reply
[+] [-] throwup|3 years ago|reply
https://finance.yahoo.com/news/blockfi-halts-withdrawals-cit...
[+] [-] WFHRenaissance|3 years ago|reply
[+] [-] bmitc|3 years ago|reply
[+] [-] nemo44x|3 years ago|reply
I happened to be at a hotel earlier this year that was hosting a crypto conference and the attendees looked like the kinds of people a multi-level marketing scheme attracts. Very different from a few years ago.
[+] [-] friend_and_foe|3 years ago|reply
[+] [-] danans|3 years ago|reply
So people who are barely holding on to the bottom rungs of the (American) middle class, and who are the traditional targets of multi level marketing (and also religious) hucksters?
That doesn't bode well for the argument that the crypto ecosystem isn't a set of scams, regardless of whatever the merits of the underlying technology has.
[+] [-] jmyeet|3 years ago|reply
All of this is necessary to stop situations like FTX/Alameda. A bank can't take your money and bet it on blackjack but there seems to be no such protection for these crypto exchanges. All of this is necessary to maintain confidence in the financial system (yet another reason to roll one's eyes at libertarians).
I mention this because it's just another case of crypto lacking protections the non-crypto financial system has and ignoring lessons learned over the last 5000 years of finance.
I saw a comment on HN yesterday where someone in the Navy said that when they get a new CO it'll be one of two types: the first will work out how things work and then incrementally improve things. The second will immediately reshape everything in their image without figuring out why things are the way they are.
I see that trend in management too. But it seems to be a problem with the entire crypto space. Otherwise smart people completely ignorance of the financial systeem just reshaping crypto with no regard for history.
As for SBF, this is a fraud on a massive scale, like Madoff scale. I really wonder what will happen here because what should probably happen is he'd spend the rest of his life in prison.
[+] [-] planetsprite|3 years ago|reply
[+] [-] bhouston|3 years ago|reply
https://twitter.com/JasonYanowitz/status/1590800210200256513
https://twitter.com/StackerSatoshi/status/159097223797656780...
https://twitter.com/statelayer/status/1590939767205920769
And then there are these NFT shenanigans:
https://twitter.com/cobie/status/1590974648552148992
[+] [-] ftx_no_name|3 years ago|reply
Do you guys know, what will happen with the funds? Will I as a customer get any of my money back? (do you know if I'm a secured creditor?)
[+] [-] monkeydust|3 years ago|reply
[+] [-] alberth|3 years ago|reply
If so, wow'zer.
[+] [-] pavlov|3 years ago|reply
Everybody said this can happen. Coinbase was forced to include a warning to this effect in their filings as a public company. But nobody cares when the going is good and FOMO is strong.
[+] [-] pjc50|3 years ago|reply
(Did the mtgox payout happen yet?)
[+] [-] yieldcrv|3 years ago|reply
If you don't have access to your keys then you never owned your digital assets
and if you don't know how to run that test then blaming the victim is completely appropriate here
[+] [-] sfusato|3 years ago|reply
[+] [-] rvz|3 years ago|reply
Not your keys, not your coins.
[+] [-] LZ_Khan|3 years ago|reply
[+] [-] shorthistory|3 years ago|reply
Was this a fraud that got out of control, or premeditated? If it was premeditated, what was the exit plan?
Did he expect to be able to gamble with customer funds indefinitely?
Were the Effective Altruism intimations genuine?
Why, if Alameda was a market maker, and they therefore presumably have some form of insight into the markets, did they then decide to take a huge directional bet on Crypto [source?]? This is contrary to market making principles.
What was the purpose of encouraging employees to invest? Was it to buy their silence/cooperation ('you have to stay employed and invested if you ever want your money back') if they found out about the fraud, or did Bankman-Fried genuinely believe it was to their benefit?
Why were there so many puff pieces in the media, without any journalist questioning the narrative?
[+] [-] Edmond|3 years ago|reply
Sam is only 30 so obviously doesn't appreciate just how retro this is... Enron & Crypto...as I live and breathe.
[+] [-] NelsonMinar|3 years ago|reply
[+] [-] new2this|3 years ago|reply
[+] [-] tluyben2|3 years ago|reply
[+] [-] nfw2|3 years ago|reply