- cross-posted to:
- technews@radiation.party
- cross-posted to:
- technews@radiation.party
FTX execs blew through $8B — testimony reveals how::Sam Bankman-Fried and other FTX executives spent $8 billion worth of customer funds on real estate, venture capital investments, campaign donations,
It was a crypto exchange, I don’t think there is a “legit way” to run one of those.
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My understanding is the exchange itself wasn’t really their downfall. Their downfall was was using the money deposited with them or invested into their company to gamble on risky trading with an affiliated investment firm. They kind of ran this firm, it was supposed to be separate but really wasn’t. It sounds like at least $10 billion was moved from the exchange to this investment firm, who lost most of it. Didn’t help that the main thing that firm was involved in was… buying crypto of course. In an incestuous ouroboros of fraud.
But yeah I think you’re right, even if they hadn’t engaged in all that fraud, how does an exchange determine how much money in usd and different cryptocurrencies to keep on hand to safely cover all depositors with them when there is such dramatic volatility in all the different cryptocurrency values? Every crypto exchange is probably doomed to a massive dramatic collapse at some point or another just from a volatility standpoint alone. Not to mention the massive underlying issues with many cryptocurrencies like wasting energy, wasting resources, co2 generation. Hard to argue there’s such a thing as a “legit” exchange.
If you move 1 BTC to an exchange, and you keep it in your account on the exchange, the exchange is meant to keep the 1 BTC on behalf of you.
They are not meant to do anything other than keep it.
An exchange is not a bank.
If the exchange takes your tokens (or fiat) and does anything other than what you ask them to do, they’re not legit.
Properly run, an exchange does not speculate on the underlying asset, it only facilitates trades, and there is zero volatility.
Yeah we’re not talking about fractional reserve banking here
They also had practically no accounting of money going in or out, other than Quickbooks. Their entire platform was coded as a ponzi scheme with explicit cases to skip checking if balances would go negative when withdrawing money for Alameda Research.
It’s still a bit hazy how Alameda lost so much money. Normally when hedge funds blow up, there are some identifiable bad trades that take down the rest of the fund. We still haven’t been told that story in the Alameda/FTX case.
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