/biz/ - Business & Finance

>>54353158
People don't like bankers at all; however they prefer them to scamsters and internet jagoffs like yourself.

>>54295416
>I don’t have tens of millions of dollars I’m investing in security every year like an exchange does.
Is that what they are buying with all the money? Are you certain?

>>53723051
Meanwhile, in the US, a lot of the law around this stuff is a bit uncertain and debatable. There are long-running boring debates about whether certain sorts of cryptocurrencies are “securities” subject to the SEC’s jurisdiction. The SEC tends to think that almost everything in crypto is a security; most crypto companies think that almost nothing is a security. (Very few crypto companies register their token or product offerings with the SEC, and the SEC sometimes sues them for doing unregistered securities offerings.) The general rule — called the “Howey test” — is that a security is “the investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others.” A lot of crypto projects look a lot like that, but you can debate the specifics.

In 2021, if the SEC thought your token was a security and you thought it wasn’t, you could go to court to argue about it, and try to convince a judge that the SEC was wrong on the law. You might win, who knows. (Ripple Labs Inc. is in a court fight with the SEC about whether its XRP token is a security; the SEC sued in 2020, and a ruling is expected pretty soon.) But in 2023, the SEC can go to court and say to a judge “we need to protect investors from unregistered crypto securities offerings, because look at how many of them are frauds that went bankrupt,” and while that legal argument is no better than it was in 2021, it is much more persuasive now. [1] At some emotional level the debate is “we need to stop fraudsters” versus “we need to allow for innovation,” and the fraud/innovation balance has shifted a lot in recent months.

>>52651636
Oops! That was all wrong; FTX had been misplacing tons of its customers money, and did not in fact have enough to bail out everyone else; FTX filed for bankruptcy earlier this month. And today:

>BlockFi Inc. filed for bankruptcy, the latest crypto firm to collapse in the wake of crypto exchange FTX’s rapid downfall.

>BlockFi said in a statement that it will use the Chapter 11 process to “focus on recovering all obligations owed to BlockFi by its counterparties, including FTX and associated corporate entities,” adding that recoveries are likely to be delayed by FTX’s own bankruptcy. Chapter 11 bankruptcy allows a company to continue operating while working out a plan to repay creditors. …

>Citing “a lack of clarity” over the status of bankrupt FTX and Alameda Research, the Jersey City, New Jersey-based company earlier halted withdrawals and said it was exploring “all options” with outside advisers.

>FTX US is listed in the company’s petition as one of its top unsecured creditors, with a $275 million loan.

>The company’s largest unsecured creditor, Ankura Trust Company, is owed about $729 million, according to the petition. Ankura acts as a trustee for BlockFi’s interest-bearing crypto accounts, according to its website.

>BlockFi in July received a capital injection from a now-collapsed FTX US, and also had collateralized loans to Sam Bankman-Fried’s trading firm Alameda Research.

>>52561008
This weekend, FTX disclosed a list of the top 50 creditors in its bankruptcy. All the names are redacted, so it’s not all that interesting, though the biggest creditor has an unsecured claim of $226.3 million, and the top 10 — all listed as customers — all have nine-digit claims. [1] The total claims of the top 50 creditors come to about $3.1 billion. But the list also contains this caveat:

>PLEASE TAKE FURTHER NOTICE the Top 50 List is based on the Debtors’ currently available creditor information, including customer information that was able to be viewed but is not otherwise accessible at this time. The Debtors’ investigation continues regarding amounts listed, including payments that may have been made but are not yet reflected on the Debtors’ books and records. The Debtors are also working to obtain full access to customer data.

FTX does have a list of its customers and how much it owes them. But it can’t edit that list, and it is not confident that the list is right. It’s possible that it paid some of those customers back but didn’t write those repayments down. Keeping a list of customer account balances is just about possible, but making sure that the list matches reality at any point in time is hard work, and FTX is not sure that it did it.

FTX

I don’t want to minimize the likelihood of intentional fraud and theft. Stuff seems bad. But I want to say that the story of FTX also reads like what would happen if you and a few of your college friends set up a gigantic international financial exchange after like a year or two of working in finance. Oh, your friends are smart. They have decent intuitions about financial stuff; they have good ideas for what products to trade and how to trade them; they can code up a good-looking website. But do they have hard-won expertise, built up over many years, in accounting controls and business processes for running a giant organization? Are they excited about making sure all the paperwork is correct? No, that stuff is boring. Your friends are traders and engineers, not accountants and compliance officers. Also there just aren’t that many of them, and they are running a huge exchange; they are too busy for paperwork. They move fast and break things. They break so many things.

>(bump if reading)

>>52459970
What exactly No. 2 means can vary. It could mean, like, on a market microstructure level, Alameda did not have the best view of crypto prices, and so sophisticated high-frequency crypto traders could reliably make money trading against it. (Colkitt: “Crypto trading firms had the illusion they were skilled. Instead all they were doing was winning against the Washington Generals.”) But it could also be a story about FTX’s liquidation engine: Customers could make levered bets on cryptocurrencies on FTX and be automatically liquidated if the bets moved against them, and this liquidation seems to have consisted largely of Alameda buying their positions. This was a good experience for customers — it made betting on FTX more predictable and less risky — and possibly good for Alameda, if it bought stuff that went down and then the stuff went up again.