Sources: spreadsheets shown by SBF to FTX's regulatory and legal teams show that at least $1B of client funds that moved from FTX to Alameda is unaccounted for
At least $1 billion of customer funds have vanished from collapsed crypto exchange FTX, according to two people familiar with the matter.
The disclosure also explains the urgency behind Bankman-Fried’s later search for more than $7 billion in outside financing. With FTX already collapsed, its legal and regulatory teams must establish what customer assets existed, where they went, and which records can support recovery efforts.
First-order effects
FTX customers face a larger potential shortfall, while FTX’s legal and regulatory teams must reconcile transfers to Alameda against incomplete records.
Alameda and SBF face intensified scrutiny over whether customer funds and exchange records were separated and accurately represented.
Second-order effects
Potential investors and counterparties have less basis to rely on FTX or Alameda balance-sheet claims after reporting that the firms showed some of the same assets on their books.
The reported recordkeeping failures add to the administrative burden of FTX’s collapse, where a lack of records and weak controls later drove bankruptcy adviser fees higher.
Third-order effects
If exchange operators cannot demonstrate segregation of customer assets from affiliated trading firms, crypto-market credibility will depend more heavily on verifiable controls than on founders’ collateral claims.
FTX’s collapse is a defining case in the crypto legitimacy gap: failures in internal governance can turn a liquidity crisis into a costly recovery and accountability process.
The trend: Crypto platforms are being judged increasingly on whether customer-asset custody and affiliated trading operations can be independently verified.
1/ Very rough and speculative sketch of what I increasingly think happened at FTX as more info comes out... The central question is where did the money go? Yes malfeasance and fraud is necessary, but at one point in the cycle cash actually has to go out the door
REUTERS: “Backdoor” allowed Bankman-Fried to execute commands to alter financial records without alerting others, including external auditors. So movement of the $10 billion in funds to Alameda did not trigger internal compliance or accounting red flags https://www.reuters.com/..…
musk is now in this twitter space saying he spoke to SBF for a half hour when Elon was putting money together for the twitter deal and Elon's “bullshit meter” was going off and he didn't cut him in what is even happening
16/ Imagine a casino where all the games were +EV, except the house doesn't actually have money to cash out the chips. Nobody would notice because instead of cashing out, they'd just keep pouring bee funds into the money machine. FTX was a ponzi targeting trading firms
SBF secretly transferred $10 billion from FTX to Alameda of which $1-2 billion is now missing. SBF: “We didn't secretly transfer,” he said. “We had confusing internal labeling and misread it,” Asked about the missing funds, Bankman-Fried responded: “???” https://www.reuters.com/.…
14/ At one point or another Alameda lost more than it could internally fund. At that point it had to dip into FTX reserves. This probably seemed innocuous at first. After all SBF, on paper was worth near $100bn between FTX and Solana at peak market cap. What's a few million USD
FTX Legal & Finance teams say @SBF_FTX implemented a “back door” into the book-keeping system that allowed Sam to alter records & move money undetected The “back door” was used to send $10 Billion from @FTX_Official to @AlamedaResearch without triggering red flags on the books ht…
This is why billionaire tech and crypto bros despise journalists. They always end up shining light in places that were kept dark, telling stories that were meant to be never discovered, and reporting facts that are inconvenient. A back door 😑 https://www.reuters.com/... https://t…
5/ I think at this point Alameda hatches a much more audacious exit plan. (Linear utility is a hell of a drug.) The prop trading operation as an independent entity won't survive. But it's liquidity can be used to bootstrap a lucrative consumer facing crypto exchange
There's a lot going on right now, so I'm not seeing a tone of mentions about this, but: this is a big deal. FTX paid influencers literally millions of dollars to promote them to their fanbases. A lot of folks just got screwed over by their favorite YTer/TikToker. https://twitter.…
7/ Sam has now turned a -EV trading strategy into an exchange valued at tens of billions based off growth metrics being basically generated by Alameda itself. Riding off nosebleed valuations and VC demand for crypto tech exposure.
4/ But inefficient markets rarely stay that way. As more actual pros enter the space their alphas are starting to decay to zero. It happens. It's a self-contained process. You size down and eventually shut off. You don't lose (much) money, you just stop making money and move on
Backdoor? “The documents showed that between $1 billion and $2 billion of these funds were not accounted for among Alameda's assets, the sources said. The spreadsheets did not indicate where this money was moved, and the sources said they don't know what became of it.” https://tw…
@0xdoug their onchain bots were visibly making millions per day on arbs on solana and other chains. also you can't hide non stop losses from all hedge fund employees. it doesn't add up.
Bankman implemented what the two people described as a “backdoor” in FTX's book-keeping system... They said the “backdoor” allowed Bankman-Fried to execute commands that could alter the company's financial records without alerting other people, including external auditors. Enron
“Bankman-Fried showed spreadsheets to the heads of the company's... that revealed FTX had moved around $10 billion in client funds from FTX to Alameda... The spreadsheets displayed how much money FTX loaned to Alameda and what it was used for” This guy lied to fuckign everyone. h…
3/ Let's rewind to 2017/18. Alameda the prop firm is a big fish in a little pond. They're mediocre traders (there's a video of SBF bragging about how their quoter latency is down to something like two seconds). But crypto is still a weird asset class that most won't touch
23/ Normally liqs are easily profitable layups. But if you have mediocre trading systems, a big liquidation with a lot of toxic one way flow in a fast market is bad Seems likely that Luna pushed them over the edge, not because of prior exposure but just the FTX liquidations