• 2022-11-07

The Beginning of the Event

This event started on a @whale_alert Tweet, indicating 22,999,999 #FTT (approximately 500k in USD) was transfered from an unknown wallet to Binance, followed with Binance CEO CZ @cz_binance retweeting it: Yes, this is a part of it. And in previous tweets, CZ also said: 

As part of Binance's exit from FTX equity last year, Binance received roughly $1.2 billion USD equivalent in cash (BUSD and FTT). Due to recent revelations that have came to light, we have decided to liquidate any remaining FTT on our books.

We will try to do so in a way that minimizes market impact. Due to market conditions and limited liquidity, we expect this will take a few months to complete.

Binance always encourage collaboration between industry players. Regarding any speculation asd to whether this is a move against a competitior, it is not. Our industry is in it's nascency and every time a project publicly fails it hurts every user and every platform.

We typically hold tokens for the long term. And we have held on to this token for this long. We stay transparent with our actions.

And this tweet has triggered a chain reaction, and eventually led to the collapse (insolvency) of two of the companies founed by SBF(Sam Bankman-Fried): FTX Group and Alameda Research. Most of the siginificant events that follows will be put down into this document cronical order as it unfolds.

Then Alameda Research CEO Caroline Tweets

A few notes on the balance sheet info that has been circulating recently: 
- that specific balance sheet is for a subset of our corporate entities, we have >$10b of assets that aren't reflected there.
- the balance sheet breaks out a few of our biggest long positions; we obviously have hedges that aren't listed.
- given the tightening in the crypto credit space this year we've returned most of our loans by now.

SBF tweeted something else (about a new feature)

  • 2022-11-10

FTX suspends addition of new clients and withdrawals

  • Some Facts:

    • SBF was worth $26b at peak time.

    • SBF was a part of Effective Altruism movement / belief. (Source: Sequoia)

    • FTX and Binance were at war with eachother (Long thread by Alex Valaitis)

    • Dirty Bubble Media Link

    • High volume on FTX, lots of investment, buying Robinhood, contacted ElonMusk, Twitter legal dispute, showing Elon Musk raising money trying to spend $3b, he had a large amout of money to play with, Structual Ownership, and prop shop entity (alameda research), operate exchange under same ownership. Hedge Fund is breaching the wall, be able to protect stop losses, anybody can make a lot of money. Indication is successful, wouldn't touch that platform, citidal & robinhood, online poker in god mod. cleared the trades, fast what retail is against, illiquid assets, short some token. Alemeda is market making on FTX. FTX has a $10B hole, put risk on client funds. Initial story is that they are illiquid, withdrawal was off the charts, Initially was stay calm, some people are pointing out discrepencies. CZ at Binance said that ultimately he wouldn't invest.

    • It's okay for share brokrages to loan the share to someone. They are lending the share, for exchanges people don't like that. Collect interest. Lend the dollars on margin lending. There are yield instument 0.5% for Bitcoin, dollars 10% or more. Then there is the #FTT, token, it's like a structured share product, a dividen and a share buy back. Revenue of exchange commitions 30% to buy back FTT and burn them. Very unusual type of share, and you get trading discount. Securitized revenue sharing agreement. They created a lot of these and they created lots of them.

  • Must of the shares were owned by Alemeda(FTT) Traded on exchanges, put it in a basket buy bitcoin of it. They won't end up loss on the exchange. Assumption is that alemeda is using god mod given themselves, no hard liquidition. Norminal Collateral take out positions.

  • That doesn't explain why the client funds are missing. They could buy dollars using FTT as collateal, with a rationale in their mind the bitcoin is still there. And there is FTT there. That's pretty bad, SOBTC, Solana wrapped BTC 16k BTC. 300 Million, so that soBTC is managed by FTX.

  • Chapter 11 is protection from creditors. Liquidate. SBF has resigned, a new CEO, they guy was the Enron Bankruptcy manager. Try to liquidate with all assets.

  • Mt.Gox case, it's 8 years.

Bitfinex

  • Took snapshot, they would assign some part of the revenue to buy back. Hold on to them. If the coins were recovered. It was fast, and for individuals it's highly preferable. That's preferable, even if the exchange has lost the brand, it still could give people immediate access to what's left. Filed for Chapter 11, it's too late don't get anything back until accounting is finished.

  • Operator has lost trust.

  • Made so much noise with regulators, meet and greets with top tier regulators. When BFX did the method, there was less on shore regulations. Lacks 3AC, Voyager. There is no way to know even if there is third party audit. Tether mass redemption. Buying BTC with fake dollars, auditors. Mistake is more likely trading mistakes. Trading with very illiquid asset. Collect yield by lending client assets, solvent but not liquid.

  • Trade, don't put more than 10% of your funds on an exchange. Most Defi token are like that, all varients of Luna.

  • Dangerous to use illiquid tokens for collateral.

  • Carefully managed brand image, 200M by Sequoia, Therons high profile board members.

  • Brings product to the market very quickly