Since Satoshi Nakamoto launched Bitcoin in 2008, cryptocurrencies have gradually crept into our lives, but they have yet to shake off the bad reputation regarding financial fraud and unethical practices.

I read this every day in the comments to my posts: many view crypto simply as an unregulated and untracked medium of exchange for the use and consumption of criminals.

Not only has the “Ftx issue” not improved the perception of blockchain in the eyes of the hard core of skeptics, but it has also negatively polarized a portion of the audience that was not opposed to crypto regardless.

Chain of lies

SBF owned everyone:

BCZ (Before Changpeng Zhao)

For those who had lived on the LUNA until now (not that things change much on TERRA), here are the highlights of Ftx’s collapse.

It all began on November 2, 2022, when CoinDesk dropped the load, revealing some “shady business” going on at Alameda Research: of the $14.6 billion in assets held by the company at the time, FTX’s FTT token accounted for $3.66 billion unlocked and $2.16 billion in collaterals. It was already suspicious enough that SBF were the founder of both companies, but at this point, it was clear that Alameda could not hold all these FTTs while, at the same time, the amount circulating remained the same.

It was quick to do 2+2 (meaning 3.66+2.16)

SBF was conducting fractional lending to dip into the accounts of FTX users, take their FTT holdings, and use them to fund Alameda. Alameda, in turn, would then redistribute the refurbished FTT to numerous Web3 projects it had invested in, relying on the Alameda AMM protocol to receive liquidity.

A month later, a huge excel sheet with Alameda’s venture capital portfolio was leaked, full of names and figures that seemed randomly generated, and maybe they were!

Flick of the Tweet

All in all, it was still fun and (GRP) games until on November 6, 2022, Binance CEO Changpeng Zhao announced on twitter that he would be liquidating all of Binance’s FTT holdings.

This tweet set off a two-day bank run, with panicked customers scrambling to withdraw their holdings from FTX. Within 48 hours, requested withdrawal amounts totaled a staggering $6 billion, coincidentally slightly more than those who, at the very least, were missing from the roll call.

FTX paused all user withdrawals on November 8, 2022, but it was too little, too late: it was now clear as day that FTX had been using customer assets to fund Alameda and that the exchange was insolvent. Bahamian regulatory authorities stepped in and seized the remaining assets of FTX, freezing all activity on the exchange.

The situation was so desperate that SBF accepted a non-binding takeover agreement from Binance, but it foundered within hours, as soon as CZ realized that the whole picture was falling apart. In one week, upwards of $9 billion in user assets had been lost.

On November 10th, during a Twitter Space Live event featuring Mario Nawfal and Wendy Wang, the director of international affairs at Huobi, it was revealed that SBF had dumped 285 million UST in order to take out LUNA, then took out 3AC, a competitor of Alameda and user funds from FTX to support Alameda after the collapse of 3AC that he had caused. CZ, the CEO of Binance, was reportedly aware of these actions and had questioned SBF, who has always turned a deaf ear.

As in a mexican standoff CZ, SBF and DK (Do Kwon) went at each other’s throats, with SBF accusing CZ of lying and threatening to walk away from the deal at the last minute. CZ, on the other hand, insisted that no one “won” and that the situation was not a competition. DK also accused SBF of collapsing the entire TERRA/LUNA ecosystem for his own personal pleasure.

Super Size me and Rats

Being a movie buff, I couldn’t help but notice how Morgan Spurlock’s two most successful films, Super Size Me (2004) and Rats (2016), are actually enlightened allegories about the crypto world that was to come.

During a bull market, the value of cryptocurrencies and crypto-assets are on the rise, leading to inflated account balances and a sense of gluttony among investors. Similarly, in Super Size Me, people were indulging in unhealthy food without much concern for the consequences and the future(s).

In a bear market, on the other hand, when resources are scarce, investors and the companies themselves, begin to attack each other, wrecking all the fine talk about marching together toward a better future, just as in Rats. The Exterminator, with ill-concealed pleasure, locks the rats in the attic and they, with no way out, begin to eat each other, down to the last mouse.

The rekt continuum

Have your lollipop and eat it

The feud between Gemini Co-Founder Cameron Winklevoss and Digital Currency Group (DCG) CEO Barry Silbert has been escalating since the Ftx crash. Winklevoss accused Silbert of using $1.675 billion of money he claims DCG “owes” Genesis and using it for purposes that helped DCG, rather than Genesis. This dispute centers around a loan Gemini provided to Genesis Global Capital, a subsidiary of DCG. The loan was used to provide capital to the troubled brokerage.

Gemini has accused DCG of using the loan for purposes other than what it was intended for, while DCG has stated that the funds were used to shore up the liquidity of the firm and that Genesis is a separate entity.

Barry Silbert only admitted the $1.675bn loan, with the first 575 million tranche due in May, and the other in June(2032)

Gemini has demanded that DCG return the funds, and has also threatened legal action. The situation is still ongoing, with both sides continuing to trade accusations and counter-accusations.

In short:

See no evil, hear no evil

It has recently emerged that Goldman Sachs and Jp Morgan (yes, the very ones who have been pouncing on cryptos for years) have also been burned by Ftx.

Also included in the list of creditors that have been leaked (this time there are 1.6 million whose top 50 owed more than $3 billion) are Apple, Netflix and Meta.

None of them have claimed any.

Shysters!