I’m not generally following the news as-it-happens (even this), but someone I know told me that Sam seems to have straightforwardly lied on Monday. The twitter thread is down now but the quote was:
FTX has enough to cover all client holdings.
We don’t invest client assets (even in treasuries).
We have been processing all withdrawals, and will continue to be.
I reckon it has probably been a hellish few days on the inside there, but I’ll mention that if someone openly lies to lots of people whose money they control, I wouldn’t straightforwardly give them all of my sympathies for their problems, even if I believe they’ve otherwise done a great deal of good in the world.
Edit on Nov 24th: As I said downthread, I’ll update this comment with new info. It now seems to me that Sam lied, that he did invest client assets, (though it’s possible to me he just monkeyed around and didn’t know what he was doing with them). For a full account I recommend Zvi’s writeup.
I don’t think we know enough yet to know whether this was a lie or not. I’d hold out on passing judgement until we get more details about what exactly happened.
Yeah, seems fair. I’ve set a reminder to check in again in 2 weeks and update my comment with any new info that clearly reduces uncertainty on this (and in the absence of that I’ll probably set another reminder).
This was a lie and he knew it was a lie. There are numerous reports now that FTX has an 8 billion dollar hole in its balance sheet due to loans made to Alameda that were collateralized by illiquid tokens. The Wall Street Journal is reporting Alameda owes FTX $10 billion.
There is no chance whatsoever that the CEO did not know that his company was loaning over half of customer assets to a hedge fund he started and in which he owned a 50% equity stake.
I think he is still lying about it on Twitter today. He wrote this in his explanation thread:
a poor internal labeling of bank-related accounts meant that I was substantially off on my sense of users’ margin
Tokens can be illiquid because they are locked for staking and a few other reason that allow them to be liquid again in the future. Do we know more about those illiquid tokens to tell whether they are worth something or whether it makes sense to think of them as being worth zero?
Most of the illiquid tokens were FTT, FTX’s proprietary token, which has dropped 97% from its all-time high (and about 89% just this week).
The remainder are a mish-mash of others, but they account for less than 10% of the total.
They had some other assets on their balance sheet, though the reports about how much and of what are very mixed and the only actual data source we have is from before the crash. I believe they sold off a few hundred million Bitcoin, Ethereum and Solana trying to prop up the price of FTT at $22.
Look at the price of FTT on the evening of the 7th. Volatility goes to basically zero. You only see that when there’s one buyer in the market and everyone else wants to sell.
There’s some articles mentioning huge outflows from Alameda-associated wallets around that same time, but I’m too lazy to go find them.
But all that is kind of besides the point. The tokens were illiquid because Alameda owned 180% of the circulating supply. If they made bad trades and FTX was forced to liquidate that collateral, who was going to buy it? There were no buyers.
That’s also why they were so desperate to keep the price up; FTT was like 90% of their net assets.
In my opinion, the fact that the original tweet, along with Bankman-Fried’s other tweets in the same thread, has been deleted in an attempt to shift the narrative is noteworthy in and of itself.
I think the tweet is more likely to be deleted in this way in worlds where the claim in it was made in bad faith rather than not, though perhaps unknown details about FTX’s strategy for getting out of this quagmire necessitated such a move even in worlds where the claim had originally been made in good faith. Still, the optics are not good, and I have appropriately updated towards FTX having engaged in dishonest conduct.
I agree with evhub that we don’t yet know if the claim was made in bad faith, but we can still make some guesses in the absence of such definitive knowledge.
Yeah, I generally don’t comment on news, but when a post attempts to speak on my behalf, I feel I am at least a little honor-bound to point out if I wouldn’t say that.
K. It was immediately following the bullet “We should wait and see what happens” which is attempting to speak for everyone (it’s aiming to set an attitude for all readers). But I see your alternative interpretation now.
I’m not generally following the news as-it-happens (even this), but someone I know told me that Sam seems to have straightforwardly lied on Monday. The twitter thread is down now but the quote was:
I reckon it has probably been a hellish few days on the inside there, but I’ll mention that if someone openly lies to lots of people whose money they control, I wouldn’t straightforwardly give them all of my sympathies for their problems, even if I believe they’ve otherwise done a great deal of good in the world.
Edit on Nov 24th: As I said downthread, I’ll update this comment with new info. It now seems to me that Sam lied, that he did invest client assets, (though it’s possible to me he just monkeyed around and didn’t know what he was doing with them). For a full account I recommend Zvi’s writeup.
I don’t think we know enough yet to know whether this was a lie or not. I’d hold out on passing judgement until we get more details about what exactly happened.
Yeah, seems fair. I’ve set a reminder to check in again in 2 weeks and update my comment with any new info that clearly reduces uncertainty on this (and in the absence of that I’ll probably set another reminder).
I can give you an update right now:
This was a lie and he knew it was a lie. There are numerous reports now that FTX has an 8 billion dollar hole in its balance sheet due to loans made to Alameda that were collateralized by illiquid tokens. The Wall Street Journal is reporting Alameda owes FTX $10 billion.
There is no chance whatsoever that the CEO did not know that his company was loaning over half of customer assets to a hedge fund he started and in which he owned a 50% equity stake.
I think he is still lying about it on Twitter today. He wrote this in his explanation thread:
Again, implausible for the reason above.
Tokens can be illiquid because they are locked for staking and a few other reason that allow them to be liquid again in the future. Do we know more about those illiquid tokens to tell whether they are worth something or whether it makes sense to think of them as being worth zero?
Most of the illiquid tokens were FTT, FTX’s proprietary token, which has dropped 97% from its all-time high (and about 89% just this week).
The remainder are a mish-mash of others, but they account for less than 10% of the total.
They had some other assets on their balance sheet, though the reports about how much and of what are very mixed and the only actual data source we have is from before the crash. I believe they sold off a few hundred million Bitcoin, Ethereum and Solana trying to prop up the price of FTT at $22.
Look at the price of FTT on the evening of the 7th. Volatility goes to basically zero. You only see that when there’s one buyer in the market and everyone else wants to sell.
There’s some articles mentioning huge outflows from Alameda-associated wallets around that same time, but I’m too lazy to go find them.
But all that is kind of besides the point. The tokens were illiquid because Alameda owned 180% of the circulating supply. If they made bad trades and FTX was forced to liquidate that collateral, who was going to buy it? There were no buyers.
That’s also why they were so desperate to keep the price up; FTT was like 90% of their net assets.
Updated with new info.
In my opinion, the fact that the original tweet, along with Bankman-Fried’s other tweets in the same thread, has been deleted in an attempt to shift the narrative is noteworthy in and of itself.
I think the tweet is more likely to be deleted in this way in worlds where the claim in it was made in bad faith rather than not, though perhaps unknown details about FTX’s strategy for getting out of this quagmire necessitated such a move even in worlds where the claim had originally been made in good faith. Still, the optics are not good, and I have appropriately updated towards FTX having engaged in dishonest conduct.
I agree with evhub that we don’t yet know if the claim was made in bad faith, but we can still make some guesses in the absence of such definitive knowledge.
It does makes him sound very shady.
It’s unproductive to grieve before all the facts are known. There’s even a chance the EA folks dodged a bullet here.
IDK why the OP even needs to include suggestions on how to feel?
Yeah, I generally don’t comment on news, but when a post attempts to speak on my behalf, I feel I am at least a little honor-bound to point out if I wouldn’t say that.
The original post on the forum was written by multiple people, hence the use of “our”
K. It was immediately following the bullet “We should wait and see what happens” which is attempting to speak for everyone (it’s aiming to set an attitude for all readers). But I see your alternative interpretation now.
Honestly looking back I can’t recall how I meant it. Thanks for the critique.
You are welcome :)
I made some edits.