Kevin McCarten’s Post

#FTX vs. #Binance:( ⚔️ The Billion-Dollar Blame Game – Crypto’s Biggest Courtroom Brawl to Claw Back Billions💰🔄 ⬇️📊FTX’s fall sent shockwaves through #crypto, and now the #bankrupt exchange is waging a legal war to recoup billions. Leading the charge? A lawsuit against Binance and its CEO Changpeng #Zhao (#CZ) for a whopping $1.76 billion. But this is just one piece of a massive effort to make creditors whole as FTX unleashes lawsuits on big names and institutions worldwide. Here’s how it all went down – and who’s in the hot seat. 💼📉The $1.76 Billion Buyback that Broke FTX In July 2021, Binance and CZ decided to cash out of their stake in FTX. They sold 20% of their international holdings in FTX’s global arm and an 18.4% stake in FTX’s U.S. entity for a sky-high $1.76 billion, paid in a mix of FTT,#BNB, and #BUSD. But here’s the twist: FTX alleges it was already insolvent at the time. According to the lawsuit, FTX’s founder #SamBankmanFried used customer deposits, funneled through its sister firm Alameda Research, to fund the buyback and keep up appearances. FTX now calls the buyback part of a larger scheme to hide its financial instability. 💴🦹CZ’s Alleged Hand in FTX’s #Collapse: But CZ didn’t just cash out, according to FTX – he allegedly played an active role in FTX’s downfall. In November 2022, CZ’s tweets about selling Binance’s FTT holdings caused a panic. FTX claims these tweets were no coincidence but part of a calculated strategy to incite a “bank run” and force its rival’s collapse. As customer withdrawals soared, FTX found itself unable to keep up, leading to its implosion. CZ’s move, which he called “post-exit risk management,” is portrayed by FTX as a deliberate attempt to undermine FTX. 🕸🌎A Web of Binance #Entities in the Crosshairs: This lawsuit doesn’t stop with CZ and Binance as a company – it targets a network of Binance entities spanning jurisdictions from the #CaymanIslands to #Ireland. FTX claims Binance set up this intricate structure to avoid regulatory scrutiny and shield itself from liability, leaving behind a trail of billions owed to FTX creditors. 🫵👮Who Else Is FTX Going After? Altogether, FTX has filed 28 #lawsuits, aiming to recover at least $284 million from other parties in addition to the $1.76 billion from Binance. There’s former White House comms chief Anthony Scaramucci (Skybridge Capital) allegedly snagged a $67 million “influence-buying” boost from FTX. And then there’s “Humpy the Whale” – Nawaaz Mohammad Meerun – accused of market schemes that cost Alameda a cool $1 billion. 🌎📊The lawsuits also extend to crypto exchanges like #Crypto.com, #Huobi, and #MEXC Global, where FTX alleges Alameda traded under aliases to shield assets now withheld from FTX’s estate. 📢😇It’s not just billions at stake – it’s reputations, rivalries, and the fight for crypto’s future. And FTX’s crusade to pay back their #creditors? Just getting started......💨

Lessons from the FTX trial: Regulating CEXs may not be enough to prevent bad actors | OpinionDisclosure: The views and opinions expressed here belong solely to the author and do not represent the views and opinions of crypto.news’ editorial. The fallout from the FTX collapse and the accompanying media circus left unexpected and wide-reaching disruption. Still, the truth is that it expedited the realization that centralized exchanges (CEXs) are broken. How we pick up the pieces will have a long-lasting impact on our industry. It is not the role of regulators to prevent another FTX collapse.  Without meaningful change, this new money system will continue to repeat mistakes from the past. Our industry and our emerging... https://lnkd.in/d8agphUH #Actors #Bad #CEX #CEXs #crypto_regulation #DEX #FTX #Lessons #opinion #Prevent #Regulating #Self_Custody._Custodian_Services #Trial

 The Betrayal: When Dreams Turn to Dust In the world of high-stakes dealings and unforgiving betrayals, reality often mirrors fiction in the most chilling of ways. As I was watching the series "Snowfall," a haunting incident struck a chord, drawing an eerie parallel to a real-life saga involving FTX Exchange and its founder, Sam Bankman-Fried. The series followed Teddy, a seasoned player in the drug business, who took Franklin-Saint from obscurity to immense wealth, amassing a staggering $73 million in profits over the years. Their partnership was built on trust and ambition until Franklin decided to leave the dangerous world behind. The parting seemed amicable, but Teddy had other plans. In a ruthless twist, he emptied Franklin's bank account, leaving him destitute and erasing years of hard-earned success. This haunting narrative echoed eerily in the saga of FTX Exchange. Sam Bankman-Fried had become a beacon of hope in the cryptocurrency world, leading many to prosperity through his platform. Customers entrusted their savings and dreams to FTX, believing in its promises of growth and security. However, like Franklin's fatal mistake, many customers overlooked a crucial principle: "Not your keys, Not your Crypto." They entrusted their funds to FTX without holding their private keys (Well, no private keys in Centralized exchanges), a decision that would later prove disastrous. As the story unfolded, FTX faced tumultuous times. In a shocking turn of events, Sam Bankman-Fried made decisions that wiped out accounts, leaving many who had worked tirelessly back at ground zero. The dreams of prosperity turned to dust as FTX customers realized the painful truth: they had allowed someone else to hold the keys to their futures. In a bid to capture the essence of this tale, I decided to try out my video editing skills, creating a poignant meme video that echoed the rise and fall of FTX Customers. FTX is supposed to mark its five-year in 2 weeks, the memories of its successes and failures in Africa linger, a cautionary tale of trust, betrayal, and the high cost of misplaced faith. I miss FTX Exchange, one of the best developed to date, and everyone who contributed to its success in Africa. #FTXFiveYears #BetrayalInHighStakes #SnowfallEchoesReality #FTXExchangeSaga #TrustAndBetrayal #CryptoCautionaryTale #NotYourKeysNotYourCrypto #DreamsToDust #FTXFiveYears #TrustFall #Cryptocurrency #BitcoinHalving

From Crypto Kingpin to Convict: The Downfall of Sam Bankman-Fried. Sam Bankman-Fried, once hailed as a cryptocurrency prodigy, has been dethroned. Convicted on multiple counts of fraud and conspiracy, he faces 25 years behind bars – a stark contrast to the lavish lifestyle he built on a foundation of stolen funds. A Meteoric Rise and a House of Cards In 2019, Bankman-Fried launched FTX, a crypto exchange that skyrocketed to success. Top investors piled in, propelling FTX to a valuation exceeding $32 billion within just three years. However, cracks began to show in November 2022. Unveiling the Deception A report exposed a critical flaw – Alameda Research, another firm founded by Bankman-Fried, held a massive amount of FTX's token (FTT) as an asset. Leaked documents revealed a lack of diversification and an alarmingly interconnected relationship between the two companies. FTX's balance sheet painted a grim picture: liabilities ballooned to $9 billion, while assets barely reached $900 million. To make matters worse, poorly labeled entries hinted at a staggering $8 billion deficit. The truth was far worse than an accounting error. Alameda had been borrowing heavily from FTX, using customer deposits to fuel its operations. This wasn't a temporary misstep – it was a deliberate act of fraud. The Collapse and the Aftermath The facade crumbled in November 2022. As the value of FTT plummeted, customers rushed to withdraw their funds from FTX. The exchange, hemorrhaging billions, froze withdrawals, leaving hundreds of thousands locked out of their accounts. FTX, unable to repay its $8 billion debt, filed for bankruptcy. A potential rescue by Binance fell through as the extent of the fraud became clear. Beyond the financial ruin, Bankman-Fried used FTX funds for personal gain, indulging in luxury purchases, extravagant advertising campaigns, and political donations. Facing the Consequences At his sentencing, Bankman-Fried attempted to downplay his actions, claiming they weren't driven by self-interest. But the judge countered that bad decisions, regardless of intent, have severe consequences. Bankman-Fried, the once-celebrated crypto king, will now spend the next 25 years behind bars, a cautionary tale for anyone tempted to gamble with other people's money. #ThisIsOurAfrica #MurakwaniAdvisory #ChurchToiletSunday

⚖️ Sam Bankman-Fried’s 25-year prison sentence doesn't reflect a failure of FTX, it reflects a failure of America. ⚖️   Binance’s Changpeng Zhao was recently sentenced to four months in prison rather than the three years recommended by prosecutors, roughly a month after FTX’s Sam Bankman-Fried (“SBF”) was sentenced to 25 years. In SBF’s sentencing, Judge Lewis Kaplan cited that SBF knew what he did was wrong and that he’d got caught. But after listening to “Going Infinite” by Michael Lewis on Audible, it’s difficult not to feel sympathetic towards SBF. My own take – he never should have had the freedom to make the mistakes that he did. The regulators stuck their heads in the sand, and Sam paid the price. Michael Lewis is a phenomenal storyteller and famous for his books on financial crises and behavioral finance, like “Liar’s Poker” and “The Big Short”, many of which have been adapted into movies. 📚 For “Going Infinite”, Michael Lewis was embedded with the FTX team, both before and during the meltdown. He saw the trainwreck from INSIDE the train. This made for an amazing book, which highlighted for me that the failure of FTX was our failure to regulate crypto. 🏛 Some key insights from the book: 📈 SBF is an effective altruist (EA). EA’s core idea is to maximize potential good for the world. This leads many, like SBF, to choose to make as much money as possible just to give it away, since they believe that approach will have the largest positive impact on the world. 📈 Initially FTX could not get a bank account because it was a crypto business. At the start all funds for FTX went to Alameda because they HAD TO. And in the beginning Alameda was the key market maker on FTX because they needed to be. 📈 Why does that matter? Because FTX was a startup run by kids. I've been at a startup that grew at hockey stick graph angles during the early days of China's online game boom— it's messy. I've seen it. 📉 But here, FTX had billions of other people’s dollars, AND they had zero regulatory oversight. Did SBF misuse customer funds? The jury said yes, but if FTX was regulated (like any other financial intermediary) he never would have had that opportunity. The true culprit is the US financial regulatory system – the SEC, Congress – for not regulating an emerging and immensely impactful market. In SBF’s own words, he screwed up, but he never should have had the chance to do so in the way that he did. FTX failed because America failed to regulate FTX. We can do better. It’s time to bring crypto in from the cold before we lock up another of our best and brightest. You can find Michael Lewis’s book, Going Infinite, here (or on Audible, which I LOVE): https://lnkd.in/eysmhNmR #SBF #CryptoRegulation #Fintech

⚖️ Sam Bankman-Fried’s 25-year prison sentence doesn't reflect a failure of FTX, it reflects a failure of America. ⚖️   Binance’s Changpeng Zhao was recently sentenced to four months in prison rather than the three years recommended by prosecutors, roughly a month after FTX’s Sam Bankman-Fried (“SBF”) was sentenced to 25 years. In SBF’s sentencing, Judge Lewis Kaplan cited that SBF knew what he did was wrong and that he’d got caught. But after listening to “Going Infinite” by Michael Lewis on Audible, it’s difficult not to feel sympathetic towards SBF. My own take – he never should have had the freedom to make the mistakes that he did. The regulators stuck their heads in the sand, and Sam paid the price. Michael Lewis is a phenomenal storyteller and famous for his books on financial crises and behavioral finance, like “Liar’s Poker” and “The Big Short”, many of which have been adapted into movies. 📚 For “Going Infinite”, Michael Lewis was embedded with the FTX team, both before and during the meltdown. He saw the trainwreck from INSIDE the train. This made for an amazing book, which highlighted for me that the failure of FTX was our failure to regulate crypto. 🏛 Some key insights from the book: 📈 SBF is an effective altruist (EA). EA’s core idea is to maximize potential good for the world. This leads many, like SBF, to choose to make as much money as possible just to give it away, since they believe that approach will have the largest positive impact on the world. 📈 Initially FTX could not get a bank account because it was a crypto business. At the start all funds for FTX went to Alameda because they HAD TO. And in the beginning Alameda was the key market maker on FTX because they needed to be. 📈 Why does that matter? Because FTX was a startup run by kids. I've been at a startup that grew at hockey stick graph angles during the early days of China's online game boom— it's messy. I've seen it. 📉 But here, FTX had billions of other people’s dollars, AND they had zero regulatory oversight. Did SBF misuse customer funds? The jury said yes, but if FTX was regulated (like any other financial intermediary) he never would have had that opportunity. The true culprit is the US financial regulatory system – the SEC, Congress – for not regulating an emerging and immensely impactful market. In SBF’s own words, he screwed up, but he never should have had the chance to do so in the way that he did. FTX failed because America failed to regulate FTX. We can do better. It’s time to bring crypto in from the cold before we lock up another of our best and brightest. You can find Michael Lewis’s book, Going Infinite, here (or on Audible, which I LOVE): https://lnkd.in/eg54Acre #SBF #CryptoRegulation #Fintech

If you don't really understand what's going on with Sam Bankman-Fried/FTX, here's a (very!) simplified explanation: If I wanted to buy some bitcoin in 2021, I might have gone to FTX. It’s an exchange that allows you or me to buy cryptocurrencies, as well as carry out more complex crypto trades, like buying options or futures. During that time, FTX became popular very quickly. It had support from big institutions, a Super Bowl ad, and endorsements from celebrities. At a time when bitcoin was booming, FTX was positioned as the ‘safe’ alternative in a murky crypto industry. And behind FTX was Sam Bankman-Fried. An effective altruist, Sam promised to give away billions to charity. So why did a US judge sentence Sam to 25 years in prison? The sentencing follows Sam’s conviction of seven charges, including wire fraud and conspiracy to commit wire fraud, which is what I’ll focus on here. When customers deposited money into FTX, under Sam’s direction, that money was used for other purposes - like funding his other trading firm, Alameda Research, contributions to political campaigns, and paying back lenders. Sam did this knowingly (a key part in establishing fraud). Little did FTX customers know, they were depositing their money into accounts under Alameda, rather than FTX, and he had a backdoor system that basically allowed Alameda to withdraw customer funds from FTX. All of this was despite representations to FTX customers that FTX and Alameda were separate. This became a huge problem when the website Coindesk publicly shared Alameda’s balance sheet in 2022. The balance sheet showed that Alameda had a lot of 'FTT' on its balance sheet, a digital currency from FTX. This was weird. If they were two separate companies, why was Alameda's solvency dependent on this token, something that was hard to value and sell? The news led to the CEO of Binance, a competitor of FTX, to sell its holdings of FTT. This triggered a typical bank run as customers raced to withdraw customer deposits. Only remember that Sam had used these customer deposits to finance other things. So FTX didn’t have enough money to meet customer withdrawals. Despite Sam’s public assurances, in a matter of days, FTX filed for insolvency. Ultimately, Sam falsely promised FTX customers that their money was kept separate and their interests were protected. He was accused of knowingly building systems to use customer deposits for other purposes without being detected and misleading customers, banks and investors regarding the relationship between FTX and Alameda. PS: As always, this is very simplified - and just a starting point on a complex series of events!

FTX: A Cautionary Tale of Greed and Hubris ✴Introduction: #FTX, once hailed as a major player in the cryptocurrency exchange arena, witnessed a spectacular #downfall that sent shockwaves through the industry. Led by Sam Bankman-Fried, the exchange's collapse unfolded over a tumultuous 10-day period, leaving a trail of #mistrust and financial ruin in its wake. ✴Timeline of #Events: #November2022: CoinDesk Exposes #Alameda Research's #Holdings: CoinDesk's report revealed that Alameda Research, closely associated with FTX, primarily held #FTT and other tokens controlled by FTX #insiders instead of #conventional assets. Market #Reaction and Customer #Withdrawals: The leak led to a significant drop in FTT's market #cap, prompting Binance to announce the sale of its #FTT holdings. Scores of investors and customers began withdrawing their funds from #FTX, totaling $6 billion over three days, signaling a crisis. Failed #Acquisition and #Regulatory Scrutiny: Binance CEO Changpeng Zhao announced a #nonbinding agreement to #acquire FTX's non-U.S. unit. However, Binance cancelled the deal citing regulatory #investigations and #mishandling of funds, exacerbating FTX's predicament. #Misappropriation of Funds and Legal Actions: Allegations emerged that FTX #diverted billions from customers to finance Alameda's activities and #lavish spending. Subsequently, the U.S. DOJ, #SEC, and #CFTC filed charges against Bankman-Fried for #wirefraud, #moneylaundering, and #securitiesviolations. FTX #Bankruptcy and #Recovery Efforts: FTX declared #bankruptcy amidst mounting losses, with approximately $9 billion in customer assets lost. However, efforts to recover assets during bankruptcy proceedings #yielded about $5 billion. #Legal Repercussions and #Celebrity Involvement: Bankman-Fried and his associates faced legal troubles, with some pleading guilty and negotiating deals. #Celebrities endorsing FTX faced #legal action for nondisclosure of #financial ties. #Corporate Governance Failures: Court-appointed #CEO John J Ray described FTX's corporate governance as the #worst he has seen in his 40-year career,, highlighting the absence of #controls and trustworthy #financial information. #Sentencing and #Asset Forfeiture: Sam Bankman-Fried was sentenced to #25 years in prison for #fraud, #conspiracy, and #moneylaundering. Despite seeking a shorter sentence, the judge ordered Bankman-Fried to forfeit approximately $11 billion in assets, emphasizing the #severity of his actions. Conclusion: The #fallout from #FTX's collapse reverberates far beyond the realms of #finance, underscoring the importance of #regulatory oversight, #transparency, and #accountability in emerging markets.

Does the S in SBF stand for sociopath? Bloomberg reports: "Sam Bankman-Fried came up with a lot of ideas to rehabilitate his image and launch a new crypto exchange after FTX went into bankruptcy. Bankman-Fried thought he might “Go on Tucker Carlson, come out as a republican;” “Come out against the woke agenda;” tell people the team running his bankrupt former company “has no idea how to run FTX;” tell people he’s “really glad” the bankruptcy team stepped in and “they’re great.”" He's about as anti-woke as he is woke. There seems to be no narrative he will not consider selling to manipulate observers. Given that he was in the business of selling an asset class based purely on narratives, it should come as no surprise that he regarded his trial similarly as an exercise of marketing a suitable narrative regardless of whether it is true. "In a Google document, which prosecutors attached to a court filing seeking to put Bankman-Fried behind bars for as long as 50 years, the fallen crypto king considered having author Michael Lewis interview him on TV, asking people what to do in a Twitter poll and leaking a document to the press. ... Prosecutors said the Google document helps show that Bankman-Fried is “motivated to launch his redemption narrative” and possibly defraud investors in the future." For future criminals considering a narrative defence, perhaps don't store your conflicting narratives on Google docs? 🤔 And perhaps don't especially label them like SBF? "Applying the maxim that there are no bad ideas in a brainstorm, Bankman-Fried headlined the document: “Note: these are all random probably bad ideas that aren’t vetted; CONFIDENTIAL.”" 🤦🏻 It's probably not a good idea to include a bunch of inconsistent defences in a document. Even if one of them were true, how likely do you think a jury is to believe in it? And an all caps confidential only emphasises you have something to hide. The question remains: how long will the modern idiot Machiavelli spend behind bars? Prosecutors are asking for 50 years (https://lnkd.in/g5RUWTTZ), but I wonder if we should simply slap on an extra 10 for sheer stupidity?

Most Absurd Headline of the Day Award goes to: The New York Times, for "FTX creditors to recover their money." So ... no. Not exactly. Not even close. See, the recovery is presented as the current US dollar equivalent of the underlying crap coins or other stuff in the accounts of the creditors, and the only way to recover that value in US dollars is to NOT SELL the underlying stuff. Oh, and you get far fewer of the underlying stuff, so you have lost a portion of that underlying stuff. How can you call it full recovery when you don't recover all of your stuff? Say I had three gold bars when a custodian went bankrupt, and they were valued at $800 each at that time. If, now, I recover only one of those three gold bars, but the value of gold has tripled in the meantime, is it accurate to say (pretend!) that I "recovered" all of my money? Absurd. (The reporter got it right; the headline writer needs some help.) David Yaffe-Bellany The New York Times FTX #crypto #bankruptcy