The Collapse of Trust in Crypto - SBF and FTX
The Collapse of Trust in Crypto - SBF and FTX
Worst fraud we have seen in Crypto yet
Hey Guys,
Cryptocurrency has a long history of fraud and hype that turned out to be exploitive of FOMO hooks and greed. Everyone in the space seems to want to get rich fast, since they know the window is always closing.
From ICOs to NFTs it’s been an astounding ponzi scheme on so many levels as well as Bitcoin’s inherent and manipulated volatility.
The FTX saga really is potentially the beginning of the end of crypto. The kids are not okay, or they were having too much fun in the Bahamas.
There’s been a lot of sober articles that expose our collective reaction to what’s coming out. Reuters did a tremendous job covering breaking news. A lot of FTX sources came forward. The coindesk article and Binance selling FTT triggered a cascade that they must have known would be the downfall of SBF. So little loyalty among the Crypto bro culture. Another huge red flag for the sector.
Futhermore FTX founder Bankman-Fried secretly moved $10 billion in funds to trading firm Alameda - sources. Now we are to believe that FTX got hacked? Not just another back-door withdrawal? FTX and Sam Bankman-Fried just experienced a shocking downfall. It hurts because so many investors, companies and lifetime savings are caught up in the scam.
Contagion is a real concern to the trust and credibility of the sector. The lack of regulation is very shocking after all these years. The amount of lobbying and marketing SBF spend and how political he was in his financial leverage from crypto is pretty much a sign of how corrupt American Democracy has become.
Silicon Valley, venture capitalists and cryptocurrencies have for years used hype in an illegal manner to drive up their business interests in an algorithmic system very prone to misinformation. The internet is not only toxic, it’s very prone to this sort of hype to trash bin syndrome. Cryptocurrencies aren’t a movement, they are a massive re-distribution of wealth. These tokens have never provided much utility.
The lack of risk mitigation at FTX or any firm that leverages its own crypto token (even as Binance does), is both a serious conflict of interest and a sign of significant poor business practices.
Reuters reports that at least $1 billion worth of customer funds have vanished from the failed crypto exchange. It’s actually closer to $1.7 billion. FTX was a black box that was not just not transparent, it was using its users money in ways that mean this entire team should go to prison for a very long time.
The Contagion effect of FTX on Bitcoin hasn’t been so significant. Bitcoin’s price only went down to around $16 thousand. This means in the last month Bitcoin’s price has gone down just 16%. But the damage it has done to the public and mainstream is relatively high. This “crypto winter” fiasco just put crypto back about 4 years. It was already an immature marketplace for frauds, money laundering and ponzi-schemes.
The problem is this keeps happening, from ICOs to NFTs, to SBF - crypto is made for unhealthy projects. Projects that have zero chance to be sustainable. Companies based on misinformation, preying upon a youthful generation’s lack of hope in their future. It’s very disturbing. This is not innovation, this is profiteering of the worst kind, pretending to be something else.
When Binance telegraphed that it would sell FTT, FTX was doomed. How to rid yourself of a competitor that was growing too fast? CZ knew a thing or two about SBF’s weakness. If a company like Binance is capable of plunging the crypto winter even deeper just for greed, what else is the crypto community capable of doing?
Two sources familiar with the matter told Reuters that ex-CEO Sam Bankman-Fried transferred $10 billion of customer funds from FTX to the digital asset trading house, Alameda Research. How SBF used FTT and Almeda for his shady interests is just really upsetting.
There is no feeling sorry for someone that was clearly a puppet of others, it’s a bit like Elon Musk’s Billionaire peers convincing him to purchase Twitter, a move that might ruin him. Sam wasn’t just over his head, he was likely just the pawn of elicit and powerful entities.
FTX, one of the world’s largest cryptocurrency exchange platforms, is in major financial turmoil. The contagion from the downfall is going to impact the future of crypto, see my Poll here.
Revelations about FTX shows how the crypto community really operates and works and it will spur a massive amount of regulation. You cannot let this continue as it is given these losses for so many entities, shareholders, traders and major financers involved. FTX grew too fast and too big and that in itself was suspicious.
Earlier this year, the exchange was valued at $32 billion, and Bankman-Fried was billed as crypto’s white knight as he bailed out multiple digital asset companies. When we live on an internet where the “good guys are the bad guys”, something is deeply wrong about American internet culture and business practices. When FSD faces literation over safety and Elon Musk is worshipped in a cult of personality scenario, something is wrong. We are manufacturing male leaders who become famous without accountability.
SBF is a symptom of crypto culture. FTX is a sprawling entity symbolic of its corruption. You can change your name to “Web 3”, it doesn’t change the fact that you prey upon a FOMO narrative, at every turn. There is no law, no regulation, no accountability so ruthless risk-takers can thrive in a mafia type scenario.
Sam Bankman-Fried — better known as SBF is now a symbol of the growing Millennial mistrust in crypto and what kind of repercussions might it have on the ecosystem and its future? When Coinbase is itself bleeding so much money in the crypto winter is itself worrisome. It doesn’t even have that many users. Binance exists on such a grey area of global regulations nearly outside the jurisdiction of any regulatory entity. It could be controlled by the CCP for all that we know and that scenario is somewhat probable given its historic ties to Singapore. If this is true, it would also explain its behavior towards FTX, a huge democratic donor.
You have to understand the incentive network of crypto to understand why it does the things it does. It’s not enough to rant up about what Twitter is saying. That’s not journalism and you won’t find the truth on Twitter. A lot of posts have leveraged SBF’s downfall for their personal gain. It’s fun to talk about FTX’s collapse and scary to think of what it could do to an ecosystem that’s never easily or well above a $1 trillion market cap as a whole. All crypto tokens basically “tethered” to the price of Bitcoin, that has no inherent value and a manipulated supply-demand dynamics.
People are not good actors when it comes to incredible amounts of money, it makes them a bit crazy and that includes the best among us. SBF is liable or is he? With so many regulations lacking and not even existing, there are grey areas of crypto beyond the law where they become like cartels and tycoons in their own dirty playground. Is this really a younger generation’s attempt to remake and democratize finance? You have to be an idiot to believe that. Misinformation is leveraged by bad actors and Twitter’s ecosystem has mafia boss leaders entrenched like a dystopia of false symbols of power.
Power is not decentralized in crypto. Whales and tycoons exist more than ever in its ponzi-schemes. Companies operate beyond the law and behind the veil with no transparency. If you you are dumb enough to leverage behind your own internal token like FTX was with FTT or Binance is to some extent, you deserve to blow up.
SBF was such an evil genius he has "back doors" that thwarted red flags and auditors. That’s some short-time thinking and crypto incentivizes the kind of errors young men are most prone to make among us all.
Now, its ex-CEO is reportedly facing probes by the Department of Justice, the Securities and Exchange Commission, and the Commodity Futures Trading Commission. The American regulators and Congress have been dragging their feet in regulation for years, likely receiving kickbacks and lobbying from entities that are against it. It’s a very corrupt situation. There’s a reason why crypto is banned in some countries. After the FTX downfall I’m not sure crypto is “even worth saving”. Perhaps you do and own NFTs, I do not know.
Both Reuters and The Wall Street Journal found that Bankman-Fried, now the ex-CEO of FTX, transferred $10 billion of customer funds from his crypto exchange to the digital asset trading house, Alameda Research. To what amounts to his ex-girlfriend. The lack of fundamental best business practices here is astounding.
SBF was already squirrely eyed and looked like a villain in training.
But in the hype of cryptocurrency, everything goes, and FTX truly demonstrates this. The crypto bro culture has elements of the worst of society. FTX’s decline at least brings some of this to light yet once again.
John J. Ray III, who has been tapped as FTX’s new CEO, said in a statement on Friday that Chapter 11 is “appropriate to provide FTX Group the opportunity to assess its situation and develop a process to maximize recoveries for stakeholders.” If you have backdoors and are using your client’s money in your own private schemes, you basically deserve to go to prison.
Crypto Tokens are a Scam
Newsflash crypto tokens typically don’t have utility or value outside of their own ecosystem. Did you see how far Solana’s token fell on the FTX news? This isn’t just contagion its rumor. Solana is losing value consistently based on the presumption that Alameda could dump millions of SOL tokens. Now how much will you lose personally due to FTX’s downfall? Perhaps you put more than 10% of your net wealth in things like crypto and Tesla. The younger you are, the most likely the case that you actually did this. Bravo but that’s not financial literacy at work.
Solana turned out to lose the most among all other cryptos after the rumors of its entanglement in the insolvency of the FTX spread. As a consequence, SOL prices fell below 20% in just 24 hours.
On the 5th of November SOL was worth nearly $38, today it’s closer to $12. That’s just one week.
I’m starting to feel a bit disappointed by ecosystems, communities and products that attempt to use ideology as part of their value prepositions. This typically means they don’t have real product-market fit. They are faking it and over-compensating. Crypto has always been worrisome in that regard.
There are millions of real people impacted by FTX’s downfall, caused by Binance’s actions of telegraphing the sale of FTT. Approximately 130 additional affiliated companies are part of the proceedings, including Alameda Research, Bankman-Fried’s crypto trading firm, and FTX.us, the company’s U.S. subsidiary. Binance should be under investigation as well. As should some of the statement of Coinbase related to this case.
Crypto’s Enron Moment
In the 23-page bankruptcy filing obtained by CNBC, FTX indicates it has more than 100,000 creditors, assets in the range of $10 billion to $50 billion, as well as liabilities in the range of $10 billion to $50 billion. By comparison, Lehman had more than $600 billion in assets and Enron had $60 billion.
Crypto was nascent but now this crypto winter feels different. A crypto winter heading into a global recession amid a stagflationary and zero-covid atmosphere.
Crypto Winter + Global Recession + Enron moment for Crypto (FTX)
Venture Capital with higher interest rates is permanently changed in a new normal
American productivity is plummeting with a lower labor participation rate in the next two decades
Silicon Valley innovation has grinded to a halt in a seasonal Advertising slowdown in late 2022 and 2023
All good things must come to an end if they fail hard and long enough.
Crypto is not immune to failure, in spite of Bitcoin’s cult like following.
Trust is breaking down on multiple levels in society including for capitalism, banks and democracy - but also the youth culture movements around things like crypto, TikTok, etc… People begin to grow up and mature and see the world differently.
The reality is Telegram, Twitter and Discord have de-evolved into crypto clans and their progeny. Discord was a pretty good product before this unfortunate turn of events. Reddit is experimenting with NFTs. Like ICOs before them, NFTs are the new meme-like explosion of fraudulent practices in crypto. The ecosystem continues to lose credibility, trust and a sense of basic lack of viability and real products continues. Yet we continue to play the games.
When Twitter told you that banks are evil and on Discord you get mind-melded into a cult or tribe, no wonder you are putting 10% of your total worth into gamified misinformation like crypto tokens and projects. Bitcoin’s influence on our institutions and financial systems is getting dangerous.
Whether you are bullish or bearish on Bitcoin or crypto, it is causing a lot of chaos and spreading misinformation with serious consequences on people’s lives without adequate regulation. Where the U.S. already is suffering from a lack of trust in democracy, capitalism and its institutions, this is a big problem. With inflation, it’s a trigger for civil war, revolution or some kind of reckoning. Crypto is likely to be a major instrument in this foreign interference. The Binance founding story does not make sense at all. Nor do I think Coinbase is viable in this volatility. Bitcoin’s cycle is likely artificial and its bubble will one day pop and never return to life. We just don’t know when that will occur.
Crypto’s Influence on Politics & Crypto’s Influence on Ethics
Presumably even Bitcoin will have to be regulated out of existence for National Security and civil order reasons. Worse downfalls could occur than the rapid rise and fall of FTX. There will be more SBFs in this society of crypto obsession and the cult of the profit motive. To say that Binance is a monopoly with bad intentions to its rivals would be a fact, according to recent revelations and history. Binance has systematically thwarted regulators and national rule of law in many districts. What is their incentive to behave this way?
We haven’t been asking the right questions in this fiasco.
Alameda, also founded by Bankman-Fried, was considered to be a sister company to FTX. Those cozy ties are now under investigation by multiple regulators, including the Department of Justice, as well as the Securities and Exchange Commission, which is probing how FTX handled customer funds, according to multiple reports. Firms should not be allowed to have “their own” tokens. It just creates too many conflicts of interests, especially when they use it as collateral.
Chapter 11 bankruptcy means the company can keep operations going as it figures out how to pay creditors. Some 130 entities, including FTX, FTX US, and Alameda Research, are involved in the proceedings. The bigger impact on crypto and the future of token could taken many months and several years to fully play out as we learn more.
The entire Crypto community is accountable for creating leaders like SBF, it’s not in any way an isolated incident. There are thousands of young men who would have done the same in his shoes. Everyone how meets Sam say what a likeable young character he is. But what he has done for trust in crypto may be the end of tokens and cause irreparable damage to the ecosystem. That CZ caused this directly by selling FTT tokens is pretty hilarious as Tycoons advocate for their industry.
The most logical conclusion is that he was ordered by the CCP to do this. The FTX founder has reportedly spent almost $40 million mainly supporting Democrats during the current political cycle, according to Open Secrets. He planned on donating $1 billion to the 2024 elections, not something that China or Russia would like. The FTX founder has reportedly spent almost $40 million mainly supporting Democrats during the current political cycle, according to Open Secrets.
According to Open Secrets, a platform following the money in politics, SBF is the sixth largest political contributor. The platform reports that he has made a total contribution of $39.8 million for the 2021-2022 cycle. This reported by Cointelegraph.
Of that total, 92% has gone to the Democrats, with the remainder going to Republican candidates and campaigns.
End of Crypto and Failure of the Internet
The fall of FTX points to any number of things wrong with crypto and the incentives of anything remotely related to Bitcoin’s technological cult. Silicon Valley, venture capitalists and Bitcoin are turning our civilization into a dystopia with an internet that is failing and needs to be entirely dismantled and redone. Nothing now can save it. There’s been a massive failure in leadership, good architecture and ethics in American free market capitalism in how the internet evolved and has been managed for humanity.
Internet money did not save us all. Heck, tokens aren't even used as a legit means of exchange. If the Bitcoin bubble popped due to more strict regulation, it would be business as usual in a world with less ponzi schemes and less risk.
That would not be such a bad thing after all!