Do not let a Fool ruin your own fortune: The Rise of Alameda Bankman-Fried and the Rise of the Coincurrency Exchange (FTX)
David learns that FTX is a safe and easy way to get into crypto at the end of the ad. David thinks that he doesn’t think so. I can never be wrong about this stuff.
FTX, backed by some of the biggest investors in the world, quickly becameone of the biggest exchanges in the world. The Wall Street Journal reported on Thursday that Bankman- Fried had lent billions of dollars to Alameda to fund risky bets.
Earlier in the week, rival Binance said that it was going to explore an FTX rescue, but almost immediately backtracked after the company said FTX was essentially beyond saving.
FTX grew to be the third largest exchange by volume in just a few years. The stunning collapse of this nascent empire has sent tsunami-like waves through the cryptocurrency industry, which has seen a fair share of volatility and turmoil this year, including a sharp decline in price for bitcoin and other digital assets. For some, the events are reminiscent of the domino-like failures of Wall Street firms during the 2008 financial crisis, particularly now that supposedly healthy firms like FTX are failing.
Emily is executive director of global content at CoinDesk, a media, event, and data company, and a former policy advisor to the US State Department. She is the author of a book. Who? The voices from the internet underground are called my Comrades. The opinions in this commentary are her own. Read more opinion at CNN.
For the crypto industry, the lesson here is to stop looking for saviors. The rise of Bankman-Fried was not solely based on his own doing, but was powered by many others. He raised millions of dollars from high-profile investors, was covered in media and had few exceptions. The bottom line is that so much hope and responsibility should not rest in one individual. It goes against everything that crypto is supposed to represent.
It wasn’t supposed to be this way. The 2008 financial crisis caused a lot of disappointment in bankers and politicians and the first majorcryptocurrencies came into the world after that. The idea of the new system was that it didn’t require you to trust anyone at all. No bad actor should be able to make a fraudulent transaction on the block chain that everyone can see.
Do FTX and Binance Trade-Offs End on a Mutually-Owned Platform? An apology to Zhao and Bankman-Fried
Changpeng was one of the critics. The feud between the two billionaires spilled out onto Twitter, where Zhao and Bankman-Fried collectively commanded millions of followers. Zhao helped kickstart the withdrawals that doomed FTX when he said Binance would sell its holdings in FTX’s crypto token FTT.
FTX tried to separate the liability in the “[email protected]” account from the liability in the FTX account to separate out customer deposits. Alameda’s portion — which amounted to more than $8 billion in FTX customer assets that had been deposited into Alameda-controlled bank accounts — was initially moved to a different account in the FTX database. However, because this change caused FTX’s internal systems to automatically charge Alameda interest on the more than $8 billion liability, Bankman-Fried directed that the Alameda liability be moved to an account that would not be charged interest.”
Bankman-Fried takes full responsibility for his mistakes. He wrote that he was responsible for making sure that things went well, in a lengthy thread this week. I should’ve been on top of everything. I failed in that. I’m sorry.”
Getting More Information on Cryptocurrencies: Bankman-Fried’s Twitter Message on Oct. 28, 2018 at 13:10 PM ET
The fear of missing out among investors that attracted huge sums of money spread because of the frothiness of the market. But that FOMO is now long gone, replaced by a suspicion of both the promises and accounting practices of large crypto companies in light of the allegations of fraud at FTX.
There is a cult of personality problem. We see it in social media as well, another supposedly leaderless and decentralized technology. Twitter is now subject to the whims of owner Elon Musk, the richest man in the world.
In the case of crypto, many have long pointed out the risk of powerful centralized exchanges like FTX, with some people preferring to hold their own coins instead of storing them in an exchange. Bankman- Fried is currently promising to use theBlockchain to provide more visibility, something that could happen in the future. In his long Twitter thread on Thursday, he said his priority would be “radical transparency,” or “giving as close to on-chain transparency as it can: so that people know exactly what is happening on it.” It is probably too late in the case of FTX.
The Bitcoin-Coinfund Collapse Update: An Analogy to the 2008 Integer Bank Collapse and the Lehman Moment
Prices of digital currencies fell again as the crisis engulfing the market deepened over the weekend. Bitcoin, the world’s biggest cryptocurrency, has plummeted about 65% so far this year. It was trading at more than $20,000 on Monday. Analysts believe that it could fall below $10,000.
The world’s second most valued coin isn’t faring much better. Over the last week, it has plummeted by 20%, and was trading at around $1,230 on Monday.
Some industry insiders have said the company’s downfall had triggered a “Lehman moment,” referring to the 2008 collapse of the investment bank that sent shockwaves around the world.
The episode will embolden regulators around the world, as it has destroyed confidence in the industry. If it helps to restore faith in the industry, some of the biggest names have said they will welcome the scrutiny.
Changpeng said there is a lot of risk. “We have seen in the past week things go crazy in the industry, so we do need some regulations, we do need to do this properly,” he added.
At the conference in Indonesia, he was speaking as CZ. He said last week that comparing the current crypto turmoil to the 2008 global financial crisis is “probably an accurate analogy.”
Source: https://www.cnn.com/2022/11/14/business/ftx-crypto-collapse-updates-hnk-intl/index.html
Transmitting ETH to Gate.io: What happened when FTX went offline in Singapore two weeks after the collapsing of Robinhood
FTX moved its headquarters from Hong Kong to The Bahamas last year, with former CEO Sam Bankman-Fried hailing it as “one of the few places to set up a comprehensive framework for crypto” at the time.
“In light of the collapse of FTX globally and the provisional liquidation of FTX Digital Markets Ltd., a team of financial investigators from the Financial Crimes Investigation Branch are working closely with the Bahamas Securities Commission to investigate if any criminal misconduct occurred,” the Royal Bahamas Police Force said in a statement.
Last week, Bankman- Fried was seen as a kind of white knight for the industry. Bankman-Fried was the person most likely to come in during a crisis in the cripto industry. When online trading platform Robinhood was in financial straits earlier this year — collateral damage from the decline in stock and crypto prices — Bankman-Fried jumped in to buy a stake in the company as a sign of support.
Miller said that FTX was “investigating abnormalities” regarding movements in crypto wallets “related to consolidation of FTX balances across exchanges.”
FTX General Counsel Ryne Miller said Saturday that the company had taken precautionary steps and moved its digital assets offline. The process was done quickly Friday evening to reduce damage from unauthorized transactions.
The Singapore based company accidentally sent $400 million in ether to an account that wasn’t theirs.
Kris Marszalek, the CEO of the exchange, said in an interview on Sunday that the transfer of 320,000 ETH was made three weeks ago to a corporate account at Gate.io, instead of to a cold wallet.
“We have since strengthened our process and systems to better manage these internal transfers,” Marszalek tweeted Sunday. The native token has dropped in value in the last 24 hours.
Sequoia Capital, the World’s First T Tachyon, and Sam Bankman-Fried “Is a Winner”
Marszalek said Monday that his firm has acted as a “responsible, regulated player since inception” and will soon “prove all the naysayers …wrong with our actions.”
“It is very, very normal for a bank to move user assets for investments and try to make returns,” he explained. He said that it was almost guaranteed to go down if the exchange operated that way. adding that the industry collectively had a role to play in protecting consumers.
The fallout from the collapse of Sam Bankman-Fried’s FTX empire is still reverberating across the crypto sector as it confronts angry investors and new lawsuits, and executives turn on each other. Barry Silbert, the creator of Digital Currency Group, has been blamed by the co-founder of the Gemini exchange for the problems of his own customers.
Sequoia Capital, which invested in Apple, Cisco, Google, Airbnb and YouTube, described their meeting with Bankman-Fried as likely “talking to the world’s first trillionaire.” Following a meeting in 2001, several of the partners became enthusiastic about Bankman-Fried. After several more meetings, Sequoia decided to invest in the company.
I don’t know, I just do. Business journalist Adam Fisher wrote a profile of bankman- Fried for the firm and referred to it as “SBF is a winner”. The article was taken down from the website.
Investigating the Rise and Fall of Cryptocurrence: The Case for a King Who Spent the First Day of His Life in Congress
In a terse statement, the Ontario Teachers’ Pension Fund said that not all of the investments in this early-stage asset class perform to expectations.
When Bankman-Fried bought up the assets of bankrupt crypto firm Voyager Digital for $1.4 billion this summer, it brought a sense of relief to Voyager account holders, whose assets has been frozen since its own failure. It is now a question about that rescue.
As king of crypto, his influence was starting to pour into political and popular culture. FTX bought prominent sports sponsorships with Formula Racing and bought the naming rights to an arena in Miami. He pledged to donate $1 billion toward Democrats this election cycle — his actual donations were in the tens of millions — and prominent politicians like Bill Clinton were invited to speak at FTX conferences. Football star Tom Brady invested in FTX.
The Times reports that federal prosecutors in Manhattan, who are seeking his extradition, will charge Mr. Bankman-Fried with wire fraud, wire fraud conspiracy, securities fraud, securities fraud conspiracy and money laundering. A trial could start late next year.
The unexpected arrest took many by surprise. On Tuesday, S.B.F. was supposed to testify before the House Financial Services Committee. The committee’s Democratic chair, Representative Max Waters of California, did not see this coming: “The public has been waiting eagerly to get these answers under oath before congress and the timing of this arrest denies the public this opportunity.” S.B.F. said that he wouldn’t expect to be arrested.
Editor’s Note: Casey Michel is a writer and investigative journalist covering kleptocracy and dark money networks across the globe. He is the author of “American Kleptocracy: How the US Created the World’s Greatest Money Laundering Scheme in History,” and is at work on a book investigating foreign lobbying in Washington, DC. The opinions expressed in this article are his own. Read more opinion at CNN.
Many of the cases that are similar to traditional Ponzi schemes are as old as American capitalism. They almost always pair a lack of regulation and oversight with promises of easy wealth schemes, all predicated on some kind of proprietary technology that seems to generate returns out of thin air.
Railroad bonds, stock purchases, mortgage derivatives, and other tools have emerged without any kind of regulation or oversight. Money raced in, looking to take advantage of the new industries and financial tools. Others have taken advantage of the new investors and taken as much wealth as they could.
Ms. Ellison and Mr. Wang contradicted Mr. Bankman-Fried’s defense. At the DealBook Summit last month, Mr. Bankman-Fried stated that he wasn’t aware of what was happening at Alameda, but documents filed yesterday show otherwise.
What Ms. Ellison and Mr. Wang are facing: The S.E.C. accused Ms. Ellison of manipulating the markets for FTT, FTX’s in-house token and the digital asset it frequently used to invest in other companies, to prop up its price. It also accused Mr. Wang of creating software that allowed the diversion of FTX customer funds to occur without detection.
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The S&P 500 and the Dow Jones Industrial Average hit record-highs on the first trading day of 2022. Later that week, minutes from the Federal Reserve highlighted increasing concern over rising inflation and indicated that officials were considering rate hikes. Since then, trillions of dollars have been erased from markets across the globe as equities and bonds were whipsawed by hawkish Fed policy, geopolitical chaos, Covid shutdowns and more.
Inflation was the top market story last year — prices around the globe soared, driving central banks to collectively hike interest rates more than 300 times.
By the end of the year, Fed officials increased the rate that banks charge each other for overnight borrowing to a range of 4.25%-4.5%, the highest since 2007.
These rate increases were intended to cool the economy and tamp down price rises, but now analysts and economists fear that things have become too chilly and a recession is imminent. How bad will it be?
Russia’s zero-Covid policy, the energy crisis, and the price of bitcoin: When Europeans lost control of their energy supply, the oil price fell sharply
China’s zero-Covid policy has kept large swaths of the country shutdown for significant periods of time over the past three years — choking business and frustrating citizens and global trade alike.
In late February Russia invaded Ukraine and began a prolonged war that would drive global food and fuel prices sky-high. Europe is in an energy crisis.
International Energy Agency chief Fatih Birol and European Commission President Ursula von der Leyen have warned that Europe could face a natural gas shortage of 27 billion cubic meters in 2023. That’s close to 7% of the area’s annual consumption.
Russia, which sent about 60 billion cubic meters of gas to the European Union over the course of 2022, could halt flows entirely. It could also slash oil production in response to a Western price cap.
There was a very bad year for it. As the Fed raised interest rates, investors began to withdraw their money from the bear market, and the value of bitcoin fell by more than 600%.
Source: https://www.cnn.com/2023/01/03/investing/premarket-stocks-trading/index.html
The Musk Legacy of Tesla’s Power: An Update on Tesla, Autonomous Vehicles, Inflation, and the Cost of Living
But don’t cry for Musk just yet. The value of the company’s CEO has more than doubled in the last year, to $137 billion. That places him second on the list of the world’s richest behind LVMH Chairman Bernard Arnault. But at its peak in November 2021, Musk’s net worth was $340 billion.
Competition for electric vehicles surged last year, hurting the demand forTeslas. The company did not meet its targets and scaled back production. Its fourth-quarter deliveries, announced Monday, missed Wall Street’s estimates.
Musk’s $44 billion purchase of Twitter hasn’t helped Tesla’s stock or Musk’s personal wealth, either. Since his public interest in Twitter became public in April, Musk has sold more than $22 billion worth ofTesla shares.
It is possible to be not all doom and gloom. It is not in a recession at this time. Matt outlined why he believes we could achieve a soft-landing in 2023.
Hiring remains surprisingly resilient. The unemployment rate is now 4.1%, down from 15% in the spring of 2020 as the economy added 263,000 jobs in November.
The cost of living is still way too high, but the rate of inflation appears to have peaked. The month of November saw consumer prices shoot up by 7.1%, marking the fifth straight month of improvement and a notable cooling from the previous month. The inflation rate is at its lowest in nearly a year.
After spiking above $5 a gallon for the first time ever in June, gas prices have plunged. The national average for regular gasoline recently dropped to $3.10 a gallon, an 18-month low, though it has crept higher in recent days to about $3.22 a gallon.
Gemini, BlockFi, Alameda Research and the Earn Investors vs. Coinbase: What Happens Behind Closed Doors?
Prosecutors asked the presiding judge for a new bail condition that would block Mr. Bankman-Fried from transferring any funds from FTX or its trading affiliate, Alameda Research. The judge agreed to the request.
The names of two co-signers that did not sign on for Mr Bankman-Fried were sealed in order to protect the privacy of his parents. (This was also approved.)
Prosecutors also described what they said was a growing body of evidence, including documents provided by banks, employees, political campaigns, internet service providers and FTX’s new leaders.
Late last month, Earn investors filed a proposed class action in New York federal court, naming Gemini and its founders Cameron and Tyler Winklevoss. The lawyers behind the suit, Hee-Jean Kim and James Serritella, told DealBook that they regard the Winklevoss letter as an attempt to shift the blame for investor losses in Earn, which Gemini had marketed as risk-free and akin to a “crypto savings bank.”
Mr. Winklevoss accused Mr. Silbert of borrowing from Gemini customers. He accused him of hiding behind lawyers, investment bankers and process, and of having bad faith stalling tactics. Mr. Silbert fired back that Gemini had not responded to its latest resolution offer and denied claims about DCG’s finances.
Gemini faces one of crypto’s existential questions: When is a crypto product a security? The suit alleges that Gemini failed to register Earn with the S.E.C. and didn’t disclose material information to investors. (In previous cases, BlockFi, the bankrupt crypto lender, settled charges with the regulator last year after failing to register a similar product, and the agency blocked a proposed interest offering from the crypto exchange Coinbase in 2021.)
Brad Harrison is the leader of the team behind Venus. A Genesis bankruptcy would come as no surprise in the aftermath of the “tectonic” events that shook the crypto industry over the past year, he says. But as for the specifics, “we’re all just guessing what happens behind closed doors.”
Venture capital investment in crypto is drying up, according to a recent paper released by market data house PitchBook. After a “breakout year” in 2021, in which $21 billion of capital flooded into the industry, appetite for crypto investment is collapsing rapidly. The volume and funding of deals fell to a two-year low by Q3 2022, as funding was down 34.6% year on year.