The Crypto Casino Fails, FTX Files for Bankruptcy $8 Billion in the Hole

Image of Sam Bankman-Fried and Bill Clinton courtesy of CoinDesk.

CoinDesk reports Washington, D.C.’s Buddy Sam Bankman-Fried Has Some Explaining to Do.

FTX was a big donor to Democrats in the mid-term elections. 

FTX hit an all-time high of $85 on Sept. 9, 2021 but may soon be worthless. It is the biggest plunge ever in market cap.

FTX Files for Bankruptcy

It’s all over for FTX. It filed for bankruptcy today and Sam Bankman-Fried, widely known as “SBF”, stepped down as CEO. 

The company has a shortfall of $8 billion because it lent customer money to fund trading bets to its affiliated trading firm, Alameda Research.

Unless agreements explicitly allow lending of customer deposits that’s illegal. 

SBF Apologizes 

In a 22-Chain Tweet Thread SBF Apologizes. 

Here are a couple of pieces.

Point 4 appears to be a lie. FTX is bankrupt with liabilities reported to be $8 billion. 

This is not a liquidity issues. FTX lent customer money to Alameda Research and that money went to money heaven.

Hoot of the Day

“Every penny of that–and of the existing collateral–will go straight to users, unless or until we’ve done right by them.”

It’s impossible to make this right. The money vanished in a black hole. 

If you have money in FTX US you are nuts if you do not get that money out immediately. And when everyone does, let’s see what is left.

Sparring Partner? WTF?

“Well played; You won.”

WTF?!

These exchanges are not (at least they should not be sparring partners). If FTX did not lend out customer’s money then it would not be in this mess.

Nothing was well played here, by anyone. 

The sparring partner did not win a damn thing. The entire crypto space took a hit. 

“Sorry” does not work. If SBF illegally lent customer money, he belongs in jail.

Well played my ass. Nothing was well-played by anyone. Bring on the criminal indictments. 

Meanwhile, the crypto space which rebounded a bit in yesterday’s stock and bond market melt-up is tumbling again today.

Bitcoin is under $17,000 again, down about 4 percent, and Ethereum is down about 5 percent to $1,250.

The US bond market is closed for Veteran’s Day. 

For discussion of yesterday’s melt-up please see Stocks Market Biggest Gains in More Than Two Years, Bond Yields Crash

This post originated at MishTalk.Com.

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Luke McIlveen
Luke McIlveen
8 months ago

FTX’s bankruptcy and the alleged illegal lending of customer money to Alameda Research is a major blow to the crypto space. Trust is vital, and this incident erodes it further. It’s imperative that regulators investigate thoroughly to protect investors and maintain the credibility of the cryptocurrency industry.

Arafen
Arafen
1 year ago
Därför tror jag inte på alla typer av kryptokasinon och andra kryptovalutalotterier. Det är lättare för mig att tjäna live pengar på ett beprövat nätcasino link to betinia.se i Sverige och ändå enkelt kunna ta ut dem till vilken plånbok eller vilket kort som helst.
david halte
david halte
1 year ago
April 2022 survey by Charles Schwab and Ariel Investments found that individuals under 40, about 38% of blacks own digital currencies, compared to 29% of whites. At what price point will the government consider a bailout of bitcoin for reasons of equity.
Salmo Trutta
Salmo Trutta
1 year ago
Crypto is not legal tender.
Call_Me
Call_Me
1 year ago
Wise investment by SBF to bring in WJC (one has to presume that there was a financial investment to get the old man up on stage), as that guy knows how to avoid consequences of actions!
That is a nice, shiny lapel pin — way to be part of the solution, Bill!
Call_Me_Al
Agave
Agave
1 year ago
Goes to show the disastrous implications of the RW SCOTUS Citizen’s United decision farce that money is speech in the political arena. Extreme amounts of money funneled by corporations to politicians necessarily pollutes the process beyond redemption, regardless of which party it goes to. We need a large enough majority to overturn this at the Congressional legislative level and a change in the SCOTUS composition to bring back sanity and balance from their autocratic religious and 17th century historical precedent nuttery that might try to retain it upon legal challenge.
As for crypto, I’m just awaiting its continuing demise and ultimate disappearance, eventually to be buried next to Pets.com in the crypt of bursted bubbles and foolish hype machines.
Doug78
Doug78
1 year ago
I wonder how much of this is a Gen Z and Millennial thing?
MarkraD
MarkraD
1 year ago
Reply to  Doug78
Any fellow Gen X I mention bitcoin to gives me the same dumb look I give others when they mention it to me, baby-boomers think it’s a video game those darned kids play on their darned computer thingies.
Doug78
Doug78
1 year ago
Reply to  MarkraD
Cryto investing makes me think of this.
OBERON:
What thou seest when thou dost wake
Do it for thy true love take.
Love and languish for his sake.
Be it ounce, or cat, or bear,
Pard, or boar with bristled hair,
In thy eye that shall appear
When thou wak’st, it is thy dear.
Wake when some vile thing is near
phil
phil
1 year ago
Reply to  Doug78
Good question. One thing I’ve noticed the last five years or more, is the willingness of kids to line up at a upscale coffee shop, in a very, very long line. And other venues. Four years back there was a fad for close to year for a joint in the financial district of SF, selling bowls of salad with hip beans and whatnot, disbursed through some kind of automat delivery system, but no doubt folks in the back room hustling to get bowls ready. Order ahead. You get an hour for lunch, and spend 15 minutes in line? A good bakery is a different matter, but 30 yards out the door for a couple croissant? My point is, the willingness to queue up for so long is baffling to me, and it looks like a line of sheep. Right, does it carry over to the crypto space? baaah, baaah, baaah.
Doug78
Doug78
1 year ago
Reply to  phil
Monkey see, monkey do.
TheCaptain
TheCaptain
1 year ago
If you think crypto is the new gold, you need a new shrink. Money is gold and everything else is gambling in some form or fashion. Silver is money that has an industrial side. Because of this, it can never go worthless like crypto, dollars, other fake paper money, etc. but it still has huge upside when solar panels and electric cars really take off over the next few years. At current price, silver is gambling without any long term downside risk but with big time upside potential.
Doug78
Doug78
1 year ago
Reply to  TheCaptain
The problem with silver is that most of the time silver is mixed in with other minerals so when you mine one you end up with some silver as well with the consequence of having a good amount of silver coming into the market continually. Besides when was the last time you bought something with silver and when was the last time you were paid in silver?
TexasTim65
TexasTim65
1 year ago
Reply to  Doug78
Not to mention Silver is incredibly unwieldy weight wise compared to value.
At $21 Oz it’s takes approximately 2900 lbs to get to 1 million dollars which isn’t that much money anymore. Who can even move 1.5 tons of metal in any reasonable amount of time.
RonJ
RonJ
1 year ago
“Unless agreements explicitly allow lending of customer deposits that’s illegal.”
I don’t remember Corzine going to prison after betting with the customers deposits.
RonJ
RonJ
1 year ago

“Nothing was well-played by anyone. Bring on the criminal indictments.”

There never were any criminal indictments for the bankers crimes committed during the housing bubble.
Doug78
Doug78
1 year ago
Reply to  RonJ
The Obama administration never prosecuted them which is why there were no indictments. For eight years we waited and….nothing. Will the Biden administration do the same? Sam Bankman was one of the biggest donors to the Democrat Party and Democrat causes so we will see if that generosity will pay off.
Maximus_Minimus
Maximus_Minimus
1 year ago
Reply to  Doug78
The mafia called it proactive protection.
Doug78
Doug78
1 year ago
Scratch my back and I will scratch yours.
Captain Ahab
Captain Ahab
1 year ago
“…If SBF illegally lent customer money, he belongs in jail.”
NOT IF. Sam tweeted he took money from so-called misidentified customer accounts.
How long in jail for someone who gave heavily to the Democrap party? My bet is zero.
HippyDippy
HippyDippy
1 year ago
And now we get a glimpse of what the market really is; or at least what it has almost entirely become after making sure a financially illiterate people have easy access to the market. A giant lying casino promising easy riches, yet taking everything from the fishes who think they’re sharks.
Captain Ahab
Captain Ahab
1 year ago
Reply to  HippyDippy
Thanks to the Fed, negative real rates ‘forced’ savers into risky investments. Being financially illiterate and having easy (free) access to the market did not help.
KidHorn
KidHorn
1 year ago
Crypto is such a scam. Just because it’s more high tech than cash doesn’t make it any more valuable. In fact, it’s just the opposite.
Roadrunner12
Roadrunner12
1 year ago
Reply to  KidHorn
“Crypto is such a scam.”
Odd the great scam artist realist/papadave/imgreen/mpo45 stopped commenting on any cryptocurrency post after touting crypto.
KidHorn
KidHorn
1 year ago
Reply to  Roadrunner12
I think he’s posting under another name now. Some new person popped up at the same time the others stopped posting. At least he no longer logs on as 2 people who praise each others posts.
Maximus_Minimus
Maximus_Minimus
1 year ago
Reply to  KidHorn
Precisely because it sounds high tech it’s beyond the grasp of the majority of the participants who resort to religious zeal to talk about it.
And it’s also driven by herd mentality.
It doesn’t help that the official fiats are being destroyed by stupendous, neverending printing.
It a unholy mess perpetrated by the guardians of the currency and their political enablers.
Avery
Avery
1 year ago
I guess after I drank a 12 pack of half quarts I can understand what George Schultz, Mad Dog Matis, etc. saw in Elizabeth Holmes. But this clown with Bubba and the likes of Tony Blair – there is more to it.
Doug78
Doug78
1 year ago
If the chart looks good you will have people buying it because the chart looks good and they will rationalize the purchase by inventing valuation stories.
MarkraD
MarkraD
1 year ago
A year ago my gen Z nephew started talking bitcoin at Thanksgiving, I asked him what value he thought it had, he responded with a word salad of “valuation”, “metrics” and “The chart looks strong”, basically parroting what he’d read, but not really understanding what he was saying.
He’d made a ton and despite that he was convinced it was going much higher, I managed to convince him to get out and buy something tangible after gradually helping him to deduce that they were nothing more than digital images.
Tulip bulbs at least have a real value.
.
Tony Bennett
Tony Bennett
1 year ago
Bitcoin < $17K
When do they take Michael Saylor out on a stretcher?
I volunteer to drive the ambulance … to the edge of a cliff … and then push it over …
dbannist
dbannist
1 year ago

This is one for the record books, and is a poster child of why audits are necessary. You want a good auditor for your books. They prevent mess ups like this.If he really lent customer money to speculate, he’s toast. There’s going to be a long jail time for this.From billions to jail in a year. That’s gotta be a record except for Madoff.

Tony Bennett
Tony Bennett
1 year ago
Reply to  dbannist
“You want a good auditor for your books.”
True.
The problem is that anyone with a lick of sense should realize the whole crypto market nothing more than tulips. Any “investment” likely to go bad.
MarkraD
MarkraD
1 year ago
Reply to  Tony Bennett
Tulips are real objects, they have a use.
Tony Bennett
Tony Bennett
1 year ago
Reply to  MarkraD
you win … I draw the line at NFTs of tulips, though …
HippyDippy
HippyDippy
1 year ago
Reply to  Tony Bennett
Except that the tulips made more sense. At least they were an actual commodity and not just a string of 1s and 0s.
StukiMoi
StukiMoi
1 year ago
Reply to  Tony Bennett
“You want a good auditor for your books.”
Problem is: Straight up idiots can’t distinguish a good auditor from a hole in the ground. Much less from an even half literate conman. And by now, straight up idiots are the ones The Fed and Junta have redistributed all and anything worth auditing to.
So: The idiots will misallocate, waste and destroy it. Every penny, ounce and bit. Doesn’t even matter whether they want to be scammers or not. They are simply all, to a retard, too dumb for that to matter at all.
Tony Bennett
Tony Bennett
1 year ago
Reply to  StukiMoi
“Straight up idiots can’t distinguish a good auditor from a hole in the ground.”
No one can.
Arthur Andersen signed off on Enron’s books. I read that only a couple of dozen AA insiders knew real story of Enron. Money talks. Always. Enron was paying AA $80 million / year in fees … and threatened to move if they didn’t go along. Tens of thousands lost their jobs.
I went to business school so I can find my way around a balance sheet. There are many ways to bury bodies.
Wall Street an incredible movie. Gordon Gecko doled out so much wisdom:
“If you’re not on the inside you’re on the outside.”
StukiMoi
StukiMoi
1 year ago
Reply to  Tony Bennett
Wall Street an incredible movie. Gordon Gecko doled out so much wisdom:
“If you’re not on the inside you’re on the outside.”
Systemically, the problem is that he was talking about being on the inside vs outside of; was never anything more than a simple theft racket. As in: A massive, systematic destroyer of economic value. Which produces absolutely no value of it’s own. Instead doing nothing but sucking in value produced by others. Until said others slowly but surely wake up and stop bothering to produce loot for the connected imbeciles on the “inside” to be handed control over.
KidHorn
KidHorn
1 year ago
Reply to  dbannist
Doubt the DOJ will go after him. He donated to the party that doesn’t go to jail.
randocalrissian
randocalrissian
1 year ago
Reply to  dbannist
At least Madoff understood why he was donezo. SBF seems to have the GAAP/money savviness of a potato chip.
Captain Ahab
Captain Ahab
1 year ago
Reply to  dbannist
He gave $$$ to democraps. Don’t hold your breath.
Tony Bennett
Tony Bennett
1 year ago
“That leaves SBF’s net worth at about $1 billion, down from $15.6 billion heading into Tuesday. The 94% loss is the biggest one-day collapse ever among billionaires tracked by Bloomberg.”
Hang in there. Has to be really tough.
I remember an article on Ted Turner. At one point in the 90s his net worth somewhere around $10 billion. Then along came the tech bust and his net worth dropped to a $billion or so (thanks to AOL). Had suicidal thoughts.
Jack
Jack
1 year ago
Reply to  Tony Bennett

…and his wife Jane divorced him.

Captain Ahab
Captain Ahab
1 year ago
Reply to  Tony Bennett
When SHTF, low-hanging fruit get splattered first.
Mish
Mish
1 year ago
In the I shouldda figured category
Doug78
Doug78
1 year ago
Reply to  Mish
As a rule i never trust anyone who goes on stage wearing shorts.
dwkeller
dwkeller
1 year ago
You hit it – this guy needs to be charged and if found guilty put in jail.
shamrock
shamrock
1 year ago
What did Alemada research lose the money on? Other cryptos I would guess.
PreCambrian
PreCambrian
1 year ago
Maybe he will pull a Jon Corzine.
Salmo Trutta
Salmo Trutta
1 year ago

Asset valuation prices are driven from the appraisal
of loan collateral, and loanable funds, which depends upon Gresham’s law: “a
statement of the least cost “principle of substitution” as applied to money:
that a commodity (or service) will be devoted to those uses which are the most
profitable (most widely viewed as promising), that a statement of the principle
of substitution: “the bad money drives out good”.

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