While this is all being sorted and we figure out what is next, I would like to emphasize wishes of wellness and care for the many impacted by this.

Note: The original post was edited to clarify the need for compassion and to remove anything resembling “tribalism,” including a comment of thanks, which may be referenced in comments.

I think most people reading this thread should totally ignore this story for at least 2 weeks. Meantime: get back to work.

For >90% of readers, I suspect:

1. It's not action relevant right now.
2. It's very distracting.
3. It would be better to just read a sober update on the situation in a couple of weeks from now, after dust has settled.

I think this is true even of most people who have a bunch of crypto and/or are FTX customers, but that's more debatable and depends on exposure.

These are the standard problems with following almost any BREAKING NEWS story (e.g. an election night, a stock market event, an ongoing tragedy).

Agree, but still find it hard to stop watching? You are glued to your screen and this is unhelpful. This is an opportunity to practice the skill of ignoring stuff that isn't action-relevant, and allocating your attention effectively.

Not actively trading crypto or related assets? Just ignore this story for a while, and get back to work.

Added 2022-11-09 2200 GMT:

If I had a good friend who has a lot of crypto and who may be concerned about losing more than they can afford to lose, I would call them.

Given what I'm seeing online, the situation looks grim for people with big exposure to crypto in general, and those with deposits at FTX in particular.

(To repeat what I said in other comments on this post: I don't follow crypto closely. My takes are not investment advice.)

Back to earning the give I guess, I’ll see you guys at the McKinsey office

A quick note from a moderator (me) about discussions about recent events related to FTX: 

• It’s really important for us to be able to discuss all perspectives on the situation with an open mind and without censoring any perspectives. 
• And also: 
  • Our discussion norms are still important — we won’t suspend them for this topic. 
  • It’s a stressful topic for many involved, so people might react more emotionally than they usually do.
  • The situation seems very unclear and likely to evolve, so I expect that we’ll see conclusions made from partial information that will turn out to be false fairly soon. 
    • That’s ok (errors happen), but…
    • We should be aware that this is the case, caveat statements appropriately, avoid deferring or updating too much, and be prepared to say “I was wrong here.” 
• So I’d like to remind everyone: 
  • Please don’t downvote comments simply or primarily because you disagree with them (that’s what “disagree-voting” is for!). You can downvote if you think a comment is particularly low-quality, actively harmful, or seriously breaks discussion norms (if it’s the latter, consider flagging it to the moderation team). 
  • Please keep an open and generous mind. Most people are saying what they’re saying in the comments because they genuinely believe it and want to share their opinion — don’t assume that someone is misrepresenting anything deliberately unless you have good reason to believe it, and respond kindly and collaboratively. 

The moderation team will be keeping an eye on these discussions — as we do with all discussions — and we plan to enforce the norms as usual. To be clear, however, we will not be censoring any particular perspective on the topic. 

Just a note from someone who is an FTX customer. 

I moved some of my crypto holding to FTX because I trusted them and Sam and wanted the profits from my crypto holdings to go to EA/FTX Future Fund. FTX have always told me my funds would be secured, I did not trade leveraged funds, so I'm the only rightful owner of that crypto and FTX has likely been using it to make money on leveraged instruments. This seems like fraud, and the optics of this for the EA community, and the already difficult optics of lontermism, seem to me like they will be very bad. 

I'm priviliged, my holdings in FTX were 2% of my net worth (I enjoy following crypto) so I'll be fine, but many will not. 

Rather than further praising or critiquing the FTX/Alameda team, I want to flag my concern that the broader community, including myself, made a big mistake in the "too  much money" discourse and subsequent push away from earning to give (ETG) and fundraising.  People have discussed Open Philanthropy and FTX funding in a way that gives the impression that tens of billions are locked in for effective altruism, despite many EA nonprofits still insisting on their significant room for more funding. (There has been some pushback, and my impression that the "too much money" discourse has been more prevalent may not be representative.)

I've often heard the marginal ETG amount, at which point a normal EA employee should be ambivalent between EA employment and donating $X per year, at well above $1,000,000, and I see many working on megaproject ideas designed to absorb as much funding as possible. I think many would say that these choices make sense in a community with >$30 billion in funding, but not one with <$5 billion in funding, just as ballparks to put numbers on things. I think many of us are in fortunate positions to pivot quickly and safely, but for many, especially from underprivileged backgrounds,  this collapse in funding would be a complete disenchantment. For some, it already has been. I hope we'll be more cautious, skeptical, and humble in the future.

[Edit 2022-11-10:  This comment started with "I'm grateful for and impressed by all the FTX/Alameda team has done, and", which I intended as an extension of compassion in a tense situation and an acknowledgment that  the people at FTX and Alameda have done great things for the less fortunate (e.g., their grants to date, choosing to earn to give in the first place), regardless of the current situation and any possible fraud or other  serious misbehavior. I still think this is important, true, and often neglected in crisis, but it distracts from the point of this comment, so I've cut it from the top and noted that here. Everyone involved and affected has my deepest sympathy.]

Obviously this is very breaking news, but depending on the ultimate facts, I would be nervous about the risk of a clawback action if I were an organization that had received funding from an FTX-aligned source in the past few years. It's been a while since I took bankruptcy law, but the trustee can have pretty significant clawback powers when the debtor was actually insolvent at the time of transfer and the transfer was not for value. Of course, we do not know at this juncture whether the insolvency is of recent origin or existed for a while before this week.

I would also consider deferring any sizable donations to an organization I thought might be at risk for a crippling clawback, stick those monies in a DAF or similar entity for the time being, and ask the DAF to slowly regrant to the at-risk organization over time depending on the circumstances until it became clear there was no clawback risk. If a charitable organization is subject to a large clawback, it might be more efficient to move the charity's operations to a new charity (paying FMV for any assets, of course). In that case, it would be better to have not given money to the exposed charity as that money would end up in the hands of FTX's creditors. For instance, a number of charities had to pay clawbacks in the Madoff scandal despite not having committed any wrongdoing -- despite the name, there does not have to be any evil intent to have been involved in a fraudulent conveyance.

None of this is intended to be in the least bit authoritative -- it is merely a suggestion to stop and assess risk before taking certain significant actions in the short run.

Matt Levine seems to agree. Some quotes from his article:

Is Binance paying FTX tens of billions of dollars for its equity? I would be very, very, very surprised!

My main assumption is that if you are a crypto exchange facing a “significant liquidity crunch,” and you call up a bigger crypto exchange to ask for help, and you sign a deal for them to buy you the same day, then the price that they are paying you is, roughly speaking, zero.

There is precedent. In my world, the most famous precedent is probably JPMorgan Chase & Co. buying Bear Stearns Cos. for $2 per share one Sunday in 2008, “less than one-tenth the firm’s market price on Friday.” (Later the price was revised up.) If you need a bailout from JPMorgan over the weekend, JPMorgan will step in and make sure that your business can keep operating and that your customers will get paid and that the financial system does not collapse, but you won’t get paid much.

But in the crypto world, the famous precedents are pretty much Sam Bankman-Fried bailing out crypto lenders this summer. FTX bailed out BlockFi Inc., getting an option to buy it for as little as $15 millionor as much as $240 million; it had been valued at $3 billion in 2021. Alameda helped out Voyager Digital with a $75 million loan, and FTX ultimately agreed to buy its assets out of bankruptcy, cashing out customers but paying something like $51 million for its actual business; its equity market capitalization was more than $1 billion in April. 

This summer large crypto firms were on sale at pennies on the dollar if you had some ready cash and a tolerance for risk; Bankman-Fried did... Now, it seems, his large crypto firm was on sale at pennies on the dollar, and Zhao has the cash.

Binance: 

As a result of corporate due diligence, as well as the latest news reports regarding mishandled customer funds and alleged US agency investigations, we have decided that we will not pursue the potential acquisition of http://FTX.com.

Is it kosher to discuss CZ's allegation that SBF was utilizing a fractional reserve scheme despite SBF's claims to the contrary, and that this undeclared leverage may have contributed to the current situation?

It seems clear this morning anyone who received FTX-aligned monies is on notice that those monies may be (to make up a term) morally tainted in some fashion. Without attempting to fully delineate moral taint or establish that it exists, I submit that monies generated through fraudulent business practices that caused financial harm to identifiable victims would qualify. And gambling with customer deposits that you had promised not to gamble with would qualify in my book.

In that case, there's an argument that the monies transferred out of the business (including through insiders or their foundations) should be treated as equitably belonging to the victims, as opposed to belonging to anyone who received the transfers without giving reasonable equivalent value. (Although I am using some legal metaphors, I am attempting to ask a moral rather than legal question in this comment.)

I am wondering how the community feels about the argument that -- under some factual scenarios that are looking increasingly likely -- some FTX-aligned monies should be returned to the victims under such a theory, irrespective of whether a clawback can legally happen. My initial reaction is that there are some circumstances under which that would need to happen because the monies were never properly the transferor's to grant away. 

To use a more concrete analogy, suppose that my grandmother gives me a car, and I later learn that it was stolen. Do I have a moral obligation to return the car? I would submit that I have such an obligation in some circumstances and not others.

I think anyone who provided reasonably equivalent value for funds received does not need to worry about taint. Next, I suggest that the taint dissipates if a transferee spends or irrevocably commits the transferred funds in good faith and without actual or constructive knowledge of the moral taint. I am not sure whether I think there is also a requirement that the transferee would not have spent or committed the monies absent the donation. 

Most fundamentally, I submit that there has to be a sufficient causal and temporal nexus between the source of the taint and the specific monies for the monies to be tainted. So it would generally be morally OK to keep donations from (say) Harvey Weinstein, because his crimes were independent of the genesis of any funds he donated. Also, if the monies were clean at the time of transfer, I would submit that the transferor's subsequent actions could not taint them. So if FTX was clean until the end, then any transfers it irrevocably committed to charity prior to the onset of any fraud would generally be untainted in my book. They might cause an optics/PR problem, but that's another story.

All that is to say, however, that there's a good chance there is significant money out there whose origin story is analogous to Grandma stealing a car and giving it to me under circumstances where I should give the car back.

Thanks to Nathan et al for this useful post. It's still pretty unclear what exactly happened, why it happened, what happens next, and what the implications are for FTX, Future Fund, and EA.

It is clear (as of c. 2:45 pm mountain time, Nov 8) that the FTX/Binance situation caused a sharp and dramatic drop in crypto asset prices today (ranging from -10 to -25% for major tokens). 

For anybody heavily invested in crypto (like me), I would just encourage patience, a long-term perspective, and an epistemically humble, wait-and-see attitude (rather than blind panic-selling, or over-optimistic buying-the-dip). Investor psychology means many retail investors over-react to news, and sharp drops tend to be followed by recoveries. 

Also, the confluence of crypto volatility and US election day makes this an especially uncertain, emotional, and worrisome time. 

Overall, the FTX situation in the last couple of days may be one of the momentously negative developments for EA funding that we've ever seen. But, this is a complicated story, it's still unfolding, and nobody seems to quite know what's happening,  so it's worth following new developments, without catastrophizing too hard.

Might be time to update the "funds committed" table in this blog post: https://80000hours.org/2021/07/effective-altruism-growing/#how-many-funds-are-committed-to-effective-altruism

Meta is also down a lot (ergo Dustin ergo Open Phil)

SBF has broke his silence on Twitter.

(continues in a 21 tweet thread)

Charles He @ 2022-11-10T15:52 (+10)

For onlookers:

Basically the tweets promote the narrative that it is a short term liquidity crisis and there is a future for FTX.

As someone who strongly supports SBF, it’s perfectly clear that FTX, and Alameda is in the beyond dire position of insolvency as reported.  This tweet is performative and misleading but is the best narrative the CEO can do, this fact is also is expected and normal at the same time.

David Mathers @ 2022-11-10T17:09 (+6)

Why doesn't lying about this expose him to more legal risk? Feels like the sort of thing that ought to be illegal. Or if it does, why bother? EDIT: To be clear, I don't doubt he is lying. It's just if everyone knows it a lie, and it looks bad in court, why is this the done thing? 

Jason @ 2022-11-10T17:56 (+4)

From the looking bad in court perspective, the CEO of a capsizing corporation has a tough rope to balance on. Because saying nothing, or not even giving the appearance of try to save the customers and the company, poses risks too. That is not to suggest that lying about factual matters is a good idea for any corporate executive, but in some cases a heavy dose of spin might be the least bad path from a legal-risk perspective. And the amount of permissible spin may be higher if ordinary depositors/investors are not in a position to take any actions in reliance on the spin.

David Mathers @ 2022-11-10T18:16 (+2)

So is there some technical way that 'we have enough assets at current market prices to cover all deposits' can be true, whilst not actually meaning very much? 

Greg_Colbourn @ 2022-11-10T18:44 (+3)

Yes, see my comment above.

Greg_Colbourn @ 2022-11-10T18:41 (+2)

"4) FTX International currently has a total market value of assets/collateral higher than client deposits (moves with prices!)." - I think this is in line with the mainstream narrative of the assets (e.g. FTT) being almost completely illiquid - i.e. no way they can sell enough without crashing price to ~zero. So kind of misleading to say it's liquidity when it's really (most likely) insolvency in practical terms.

Charles He @ 2022-11-10T18:48 (+2)

No, not at all. This "sale" already happened. 

Right now, the tokens are "illiquid" in the same sense that "Charles He token" is illiquid, "depending on price".

In theory, FTT at >$20 would support the whole endeavor. Whatever happened was life and death and happened two days ago.

Lukas_Gloor @ 2022-11-10T19:25 (+28)

Whatever happened was life and death and happened two days ago.

I'd say the thing that was life and death for them wasn't so much the price of the token (that was only a trigger) but the bank run that came after the token situation hit the news. Even if the token had stayed at the same price temporarily, no one could seriously expect their stake to be worth "number of coins times price at the time" (or 50% of that, which one source reported they had "conservatively" marked it down to) given the low liquidity  / low historical sales volume of the token, the fact that they had so so much of the supply, and the logic of the token dynamics where the token does well when FTX/Alameda do well, but not when they're forced to liquidate because they're already looking like they're under water. 

So basically, I think it sets up a misleading narrative if we think of this as "if only the price of the token hadn't tanked due to unforeseen events (pressure by Binance)." In reality, the token wasn't worth as much as it showed on their balance sheet, and that was obvious, so it was bad for them that the balance sheet leaked, which doesn't sound good and makes you think "why and how did they get into that situation in the first place if they're supposed to take care of customer assets safely?" 

 

Greg_Colbourn @ 2022-11-10T19:53 (+17)

50% is crazy if true. Even 10% would be generous. Conservative would be 1%, or not counting FTT at all! It's like they didn't countenance the possibility of a bank run, even after giving their arch nemesis a ton of FTT :( (Or maybe they did, and just hoped it would all come good via enough profits or something before it blew up).

Charles He @ 2022-11-10T19:27 (+4)

Yes, as you say, the FTT token wasn't worth anything even before the crash, the FTX/Alameda money to prop it up is what was operative, and is gone now. 

We haven't discussed anything that would contradict the overwhelming evidence that FTX has a gap of $4B or more. 

Low information threads seem undesirable if there are people who are less informed and had very high/trust in SBF, partially due to EA associations.

Lukas_Gloor @ 2022-11-10T19:03 (+7)

They probably have on their balance sheet other illiquid low-circulation coins with inflated market cap where they were early investors or even (partly) coin developers, so it's possible that the claim was technically true at the time Sam stated it. 

Of course,  it's an annoying game to play when you can't assume that people communicate with an intent to convey all relevant information as clearly and comprehensively as possible, so if we have to go to these convoluted interpretations, so much has already been lost. 

Charles He @ 2022-11-10T19:09 (+3)

For Alameda, other "coins" were covered in the link in my first post, it's pretty clear that they aren't worth anything, even if there was no crisis. 

https://dirtybubblemedia.substack.com/p/is-alameda-research-insolvent

This is probably true of any "projects" on FTX that the entities control.

Lukas_Gloor @ 2022-11-10T19:35 (+6)

Yeah but the same is true of FTT under the assumption that FTX/Alameda rely on FTT for emergency liquidity. 

I guess if someone had faith that FTX/Alameda would never sell a lot of it at once, but instead slowly sell over many years while keeping the exchange operating with profits, then FTT could be worth something for buyers.  But on this model it doesn't make sense to use it as collateral, let alone in any relation to backup for customer funds. 

(TBC, we're not 100% what happened, but if FTT was involved in securing customer funds, that's very dumb at best and quite possibly illegal, as discussed by Matt Levine.)

You probably know all of this – I'm just commenting because IMO it's misleading to think of FTT price dropping as "the thing that was life or death for them." (Or maybe it was in a "proximate cause"  kind of way, but the real problem was the reliance on FTT in the first place.) 

Charles He @ 2022-11-10T19:45 (+4)

Yes, I think we're agreed.

it's misleading to think of FTT price dropping as "the thing that was life or death for them." (Or maybe it was in a "proximate cause"  kind of way, but the real problem was the reliance on FTT in the first place.)

It's more like FTT was a quasi peg, they needed to keep it up at $>20. The fight that was life and death was keeping it that high with their resources.

Greg_Colbourn @ 2022-11-10T19:01 (+7)

I interpreted it as him saying that, even with FTT 80% down (and similar for other holdings), they still have enough to cover  customer balances. And I'm saying that would only be true in theory as the price could still go down a lot further (and would if they liquidated all their holdings). According to the  balance sheets, they held something close to the entire marketcap of FTT as based on circulating coins even before the crash. It's unlikely they've sold even a tiny fraction of that.

Charles He @ 2022-11-10T19:11 (+2)

Are you saying you have the balance sheets for FTX? Can you link? 

Unfortunately, I think what you're saying is omitting liabilities, and that makes it very uninformative.

Greg_Colbourn @ 2022-11-10T19:38 (+5)

The ones that were reported by Coindesk and others last week, for which their legitimacy wasn't disputed (although here Caroline claims there is more).

If it was just a liquidity issue, surely you'd think they would've been able to fix it by now. It's quick and easy to sell crypto tokens, even OTC.

Charles He @ 2022-11-10T19:43 (+2)

Those are Alameda balance sheets.

Greg_Colbourn @ 2022-11-10T21:14 (+15)

Fair enough. WSJ story here saying that Alameda owed FTX $10B!

Since it doesn't seem to have been posted here yet: FTX has filed for bankruptcy, and SBF has resigned.

This sounds bad to me in terms of 'was this just some legal bets that didn't pay off, or actually morally/legally fraudulent': https://www.semafor.com/article/11/09/2022/ftx-legal-and-compliance-teams-quit
https://www.bloomberg.com/news/articles/2022-11-09/us-probes-ftx-empire-over-handling-of-client-funds-and-lending#xj4y7vzkg

Anyone with actual finance expertise want to say if this is likely as bad as it sounds?
 

I think people should be very careful about promoting earning to give in light of this. It still seems true that because the capital is much more unequally distributed than income if you're trying to earn to give you should be doing by trying to increase the value of equity you hold in firms rather than working  a high paying job. Wealth also seems to be distributed according to a power law which also pushes towards a strategy of being extremely ambitious if one is earning to give. 

I think it would be very bad if people who otherwise could do high impact direct work switched to earning to give in investment banking, consulting or corporate law as a result of this. EA funding has not declined to the point where there is an immediate crisis where relatively small amounts of money from high paying jobs is needed to keep the EA movement going - Dustin is worth somewhere between 5 and 10 billion, founders pledge has 8.5bn committed (although substantially less than 100% of this will go to the highest impact things.) 

This post is exceptionally useful, especially for people who don't know much about crypto (like me)

Matt Levine has a new article about this.  Quoting from it:

 The problem is that FTX took its customers’ money and traded it for a pile of magic beans, and now the beans are worthless and there’s a huge hole in the balance sheet

Notably, if this is true it seems to possibly be a bit at odds with some of SBF's now-deleted tweets from Monday, in which he said that “FTX has enough to cover all client holdings. We don't invest client assets (even in Treasuries).”

Thank you for writing - seems like a good summary of what I've seen.

This is interesting: https://www.reuters.com/technology/exclusive-behind-ftxs-fall-battling-billionaires-failed-bid-save-crypto-2022-11-10/ 

In particular, here's another hypothesis for why Binance withdrew:

By ditching the deal, Binance had also avoided the regulatory scrutiny that would likely have accompanied the takeover, which Zhao had flagged as a likelihood in a memo to employees that he posted on Twitter.

Financial regulators around the world have issued warnings about Binance for operating without a license or violating money laundering laws. The U.S. Justice Department is investigating Binance for possible money laundering and criminal sanctions violations. Reuters reported last month that Binance had helped Iranian firms trade $8 billion since 2018 despite U.S. sanctions, part of a series of articles this year by the news agency on the exchange's financial crime compliance.

How did Binance have such leverage over FTX?

When FTX in May 2021 applied for a license in Gibraltar for a subsidiary, it had to submit information about its major shareholders, but Binance stonewalled FTX’s requests for help, according to messages and emails between the exchanges seen by Reuters.

Between May and July, FTX lawyers and advisors wrote to Binance at least 20 times for details on Zhao’s sources of wealth, banking relationships, and ownership of Binance, the messages show.

In June 2021, however, an FTX lawyer told Binance’s chief financial officer that Binance wasn’t “engaging with us properly” and they risked “severely disrupting an important project for us.” A Binance legal officer responded to FTX to say she was trying to get a response from Zhao’s personal assistant, but the requested information was “too general” and they may not provide everything.

By July of that year, Bankman-Fried had tired of waiting. He bought back Zhao’s stake in FTX for about $2 billion, the person with direct knowledge of the deal said. Two months later, with Binance no longer involved, Gibraltar’s regulator granted FTX a license.

That sum was paid to Binance, in part, in FTX’s own coin, FTT, Zhao said last Sunday - a holding he would later order Binance to sell, precipitating the crisis at FTX.

I have to say I didn't expect "all remaining assets across ftx empire 'hacked' and apps updated to have malware" as an outcome. 

[this comment references the first version of this post, which has since been edited substantially such that this qualification no longer feels necessary]

Just want to note that my main contribution to this post was listing out questions I wanted answered to inform what EAs or the EA community should do. I have a lot of uncertainty about the structure of what assets belong to whom (compared to previous expectations) and what this implies about the EA funding landscape.

I don't have high confidence in empirical claims that might be made in this post, and I think there should be a more obvious qualifier at the beginning indicating that this was put together quickly with some crowdsourcing (and that it will be updated in response to spotted inaccuracies).

I'm confused why you say

This means SBF has lost control of around ~50% of his resources. It will have damaged the value of FTX US and Alameda as well.

Two things have happened:

1. The value of FTX appears to have gone down (a lot).
2. Some part of FTX is potentially being sold to Binance.

(1) causes Sam to lose control of a lot of his resources, because those resources have essentially evaporated with the value of FTX. But conditional on (1) happening, doesn't (2) just mean that whatever value SBF retains after (1) is converted from equity in (the relevant part of) FTX to cash? "Losing control" implies something bad has happened in addition to the loss of value of FTX. I'm not sure what else that is.

https://twitter.com/AutismCapital/status/1590779299946442753

tl;dr – insider source says many FTX employees etc have lost their life savings; SBF had a history of pitching them to double-down on holding FTT and other assets on the exchange

Bloomberg is estimating the recent events have caused SBF’s net worth to decline 94% from $15.6B to $1B. I think they are suggesting Alameda and FTX have zero value. I hope that is not accurate. In combination with the 75% decline in Meta it would mean a lot less funding for EA causes until new mega donors are recruited.

Bloomberg now estimates that FTX and Alameda are both essentially worth $0, and that SBF is no longer a billionaire. 

His remaining estimated wealth ($991 million) seems to mostly be based on his stake on FTX.us, which AFAICT has not been affected by today's events. [ETA: also Robinhood stock.]

The following tweet is being shared now: https://twitter.com/autismcapital/status/1590551673721991168?s=46&t=q60fxwumlq0Mq8CpGV3bxQ

This is obviously just a random unverified source, but I think it will be worth reflecting on this deeply once this is all said and done. It feeds directly into how EA’s maximizing behaviour can lead to these outcomes. Whether the above is true or not, it will certainly be painted as such by those who have been critical of EA.

Thank you for sharing your thoughts on this. It's such an uncertain time and I want to express my sympathy to you and the FTX's team. 

With all the above discussion,  make me wonder the following things:
- how other EA orgs that were mainly funded by FTX will operate and what are ways to help those that affected severely in this situation?
- how the hiring opportunities may be affected? is there expected a hiring freeze from most EA-orgs? 
- what are the next best strategies when it comes to funding diversity and the future of EA overall

In my view, it's essential that orgs that were involved with FTX funding should communicate clear about their next strategies and be honest about their concerns regardless of the FTX outcome in the upcoming weeks/months. I worry less about the reputation/prestige and care much more about promising projects that were funded that may be put in very struggling financial positions leading to  lot's of harm to both human and non-humans well being. 

This is what Matt Levine said re: why FTX lost money. (archive).

"One question that might be too early to answer is: Why was there a liquidity crunch in the first place? A crypto exchange is a weird sort of business, in many ways more like a brokerage than a traditional exchange. The simplest way to run the business is to take deposits from customers, buy crypto for the customers, keep everything segregated, and make money on commissions. Coinbase Global Inc.’s balance sheets are public, and pretty simple: It has about $101 billion of customer cash and crypto assets, and about $101 billion of offsetting customer liabilities. If the customers asked for their $101 billion back, presumably Coinbase would just give it to them. 1

A more complicated way to do it is to provide leverage to customers: Instead of taking $100 of customer cash to buy $100 worth of Bitcoin, you take $100 of customer cash to buy $200 worth of Bitcoin. A lot of FTX’s business is in perpetual futures, a leveraged product, sometimes levered 20 to 1. If you are an exchange and you are in this sort of business, you will need to come up with the extra $100 to lend to your customer. Presumably that doesn’t come from your equity: You are doing some sort of borrowing, perhaps from other customers, 2 perhaps from outside financing sources, perhaps from your affiliated hedge fund, etc. You will have some customers who owe you money, and others whom you owe money. You will be like a bank. If everyone to whom you owe money demands their money back at once, you will need to get the money back from the ones who owe you money, which might be hard. (You might not have a contractual right to demand the money back right away, or it might be rude and bad for business, or you might have to liquidate them to get the money back and that would blow up the value of your collateral.) In broad strokes this is a reasonable description of what happened to Bear Stearns, a brokerage that financed its customers’ positions. If you are a crypto exchange that provides leverage, then you are probably bank-like enough for a run on the bank.

Another complicated way to do it is that you take your customers’ assets and go invest them in whatever sounds good to you. You’re holding Solana tokens for a customer, you invest them in some yield-farming thing to make some extra cash, if the customer asks for the tokens back you don’t have them, etc. This is more or less what brought down the Celsiuses and Voyagers and BlockFis of the world, but I would not have expected it from FTX. “FTX has enough to cover all client holdings,” Bankman-Fried tweeted yesterday. “We don’t invest client assets (even in treasuries).” 

(I should note that this answer aligns with my ideological biases more than a lot of the other comments in this post, so moderately high uncertainty, can easily be very wrong).

Folks have mentioned the Polymarket question on whether Binance will put out of the FTX deal, but there's a separate question on whether FTX will become insolvent by end of year.

SBF has invested in a lot of start-ups, right? I'm thinking this should give him a decent chance of bouncing back (via one or more of those start-ups making it big) if the worst happens with the current situation.

Disagreevote if you think I should delete the post

On November 10, FTX announced that it was ordered to facilitate Bahamian withdrawals by Bahamian regulators. Well, today, the Securities Commission of the Bahamas claimed that that was a lie. (h/t bruce's Shortform.) 

Crypto exchange FTX lent billions of dollars worth of customer assets to fund risky bets by its affiliated trading firm, Alameda Research, setting the stage for the exchange’s implosion, a person familiar with the matter said.

FTX Chief Executive Sam Bankman-Fried told an investor this week that Alameda owes FTX about $10 billion, the person said. FTX extended loans to Alameda using money that customers had deposited on the exchange for trading purposes, a decision that Mr. Bankman-Fried described as a poor judgment call, according to the person.

All in all, FTX had $16 billion in customer assets, according to the person, so FTX lent more than half of its customer funds to its sister company Alameda.

WSJ

How didn't anyone notice the problems in how FTX backs their money until now? (Read as: Are there more such multi billion dollar mistakes just waiting to be found?)

I wish that I could allow other people to edit this post. Would take out some of my errors and be less time-consuming for me. 

Clearer version control would be nice too. 

Could someone explain why we would expect Alameda to be solvent and have value, if a huge chunk of their assets were collateralized FTT (the story that triggered this)?  They would have been facing many margin calls right? ETA - Statement in post to which this was responsive I think has been removed.  But yeah if anyone thinks Alameda has any value, genuinely  interested in understanding

For anyone tracking this thread: Distill Web Monitor is a handy plugin (Chrome, FF, Opera) that can track web pages for changes.

EDIT: I've made a forum post about it.

Some EAs could be destabilized in their mental health. We should install an emergency network also involving people not currently working as therapists but with previous professional experience. Can someone organize this? I've already reached out to the EA Mental Health Navigator and posted about it in the EA Mental Health slack channel.

This wasn't unforeseeable. Over a month ago I posted a comment about worries I've had for a long time:

https://forum.effectivealtruism.org/posts/YgbpxJmEdFhFGpqci/winners-of-the-ea-criticism-and-red-teaming-contest?commentId=odHG4hhM2FSGiXXFQ

Good explanation here: https://twitter.com/jonwu_/status/1590099676744646656?s=46&t=Oui5JuTdhGbt1Cql2OfAbQ

Alameda Research is going to be worth nothing after today, zero, nada, nyet. I will confidently bet good money that their trading losses on various shitcoins (Solana and ofc FTT itself) are what is responsible for FTX going down (i.e essentially Alameda was using FTX customer deposits as a cheap source of capital). This is of course incredibly unethical and doubtless illegal in every jurisdiction, but hey, some altruism was done along the way?  Of course no one is going to buy Alameda itself because it's almost certainly a giant cesspit of vast liabilities & worthless assets. 

Btw, SBF would never sell in a fire sale to CZ (who he hates!) unless FTX had massive solvency issues, not just a short-term liquidity problem. This thing was valued at 32 billion just a few months ago, if SBF could prove it was all a liquidity problem he could raise the capital to get through this and keep things together IMO. That he can't do so indicates that FTX is almost certainly deeply insolvent, probably as a result of doing some incredibly unethical and illegal things. The lawsuits are going keep everyone busy for a few years, though!

I think I'll update this less often. If you have things you think are important for others to see, then comment them here (even if linking to another comment) and I'll maybe include them when I get round to it.

Is there a lesson here that we didn’t sufficiently focus on asset class as a factor in the patient vs impatient philanthropy debate, and if EA has more crypto money in the future, we should spent it very quickly with a low-ish funding bar (for EA standards)?

There’s probably a weaker version of the same argument to be made with tech stocks as well given Meta’s falling value over the last year.

New Bloomberg story out:

The crisis engulfing Sam Bankman-Fried’s FTX.com is rapidly worsening, with the onetime crypto wunderkind warning of bankruptcy if his firm can’t secure funds to cover a shortfall of as much as $8 billion.

Bankman-Fried informed investors of the gap on Wednesday, shortly before rival exchange Binance abruptly scrapped a takeover offer. He said FTX.com needed $4 billion to remain solvent and is attempting to raise rescue financing in the form of debt, equity, or a combination of the two, according to a person with direct knowledge of the matter.

“I f---ed up,” Bankman-Fried told investors on the call, according to people with knowledge of the conversation. He said he would be “incredibly, unbelievably grateful” if investors could help.

As a FYI for anyone trying to analyze the probabilities of this situation, on "real money" (altough it's crypto money) prediction market Polymarket the odds of the deal continuing are 45% vs. 55% odds of being pulled off from the table as of posting this message. https://polymarket.com/market/will-binance-pull-out-of-their-ftx-deal

The data might be noisy because of some people possibly using the market to hedge their crypto positions but I would still rate this data in the same ballpark of reliability as manifold markets data, most important reason being that Polymarket is popular with crypto people whereas Manifold Markets is popular with EA / rationalist people, who have possibly a very one-sided view on this current FTX trouble.
 

Calm down. It's a complex situation developing rapidly, let's wait and see for what happens as a final outcome.

Is this post making things better? Agreevote for yes, disagreevote for no?

I guess I feel that being up to date and getting the bad stuff out of the way will allow us to process this more healthily. But it may just waste lots of time.

I could stop updating it. 

I wonder how people should talk about this on twitter. Feels like a much more adversarial environment where it's easier for things to go wrong.

"1) Per our Bahamian HQ's regulation and regulators, we have begun to facilitate withdrawals of Bahamian funds. As such, you may have seen some withdrawals processed by FTX recently as we complied with the regulators." - FTX_Official

"FTX Announcement Regarding the Tron Credit Facility: We are pleased to announce that we have reached an agreement with Tron to establish a special facility to allow holders of TRX, BTT, JST, SUN, and HT to swap assets from FTX 1:1 to external wallets." - FTX_Official

This is Matt Levine’s (Bloomberg) take on what’s happening with FTX (copied from a newsletter). I haven’t included the footnotes/links. I thought he explained well how (even absent fraud) fragile financial institutions are. His crypto primer is also very good on the ecosystem around the various currencies etc: https://www.bloomberg.com/features/2022-the-crypto-story/

——————

So how could this happen? I don’t know, but let me speculate a little bit.

Let’s start with Coinbase. Coinbase Global Inc. runs a cryptocurrency exchange. When FTX.com, one of the largest crypto exchanges, was instantaneously vaporized yesterday, Coinbase put out a statement, the gist of which was “don’t worry, we are not going to be instantaneously vaporized.” The part that I want to focus on is this paragraph:

There can’t be a “run on the bank” at Coinbase. As you can review in our publicly filed, audited financial statements, we hold customer assets 1:1. Any institutional lending activity at Coinbase is at the discretion of the customer and backed by collateral. We have no gating for client loan recalls or withdrawals.

The way it works is roughly that you open an account and send dollars to Coinbase, and then you tell Coinbase “I’d like to buy some Bitcoin with those dollars,” and Coinbase buys Bitcoin and holds on to it for you and charges you a fee for that transaction. You can check your account balance, and Coinbase says “you have 0.5 Bitcoin” or whatever. That 0.5 Bitcoin is, in the general case, held by Coinbase; it has possession of the Bitcoin.[1] But it is held in a custody account for you. Coinbase says:

Your funds are your funds, and your crypto is your crypto: Coinbase maintains internal systems, like a bank or a broker. Our fully audited ledger identifies your account, your fiat and crypto holdings, and tracks your account activity in real time. There’s never a situation where customer funds could be confused with corporate assets.

We will never repurpose your funds: We do not lend or take any action with your assets, unless you specifically instruct us to. Many banks and financial institutions use customer funds for commercial purposes including lending and trading, meaning that they often hold only a fraction of their customer assets at any given time. Coinbase always holds customer assets 1:1. This means that funds are available to our customers 24 hours a day, 7 days a week, 365 days of the year.

The analogy is: Imagine a weird sort of bank. You come to the bank with $100 in paper bills, and you deposit it in the bank, and the bank takes your paper bills and sticks them in an envelope with your name on it. Then it sticks the envelope in a vault, and if at any point you ask for your money back, it opens the vault and hands you your envelope. This sounds like a bad business model: The bank needs to pay for real estate and tellers and vaults, and it is not doing anything with your money. But the other weird thing about this bank is that, every day, you come in and say “hey I’d like to exchange my dollars for euros” or “my euros for pounds” or whatever, and each time you do that the bank charges you a dollar. So you have $100, which you exchange for €99, which you exchange for £98, which you exchange for $97, etc.,[2] paying the bank $1 each time. If all of the bank’s customers do this every day, then the bank makes plenty of money to pay for real estate and tellers and vaults and executive bonuses, without doing anything else with your money. It just takes the $100 out of your envelope and replaces it with €99, etc., always keeping exactly the right amount of money (in whatever currency you like that day) in exactly your envelope.[3]

And then if one day every single customer walked into the bank at the same time and said “we would like our money back,” the bank would just hand them all their envelopes. Don’t get me wrong, this would be a catastrophe for the bank: If everyone took their envelopes back, then presumably they would stop changing money at the bank and paying fees, and the bank would stop making money, and it would no longer be able to pay for real estate or tellers or vaults or executive bonuses. It would go out of business in fairly short order. But it would not go out of business that minute. It would actually have enough money to give all the customers their money back, because it kept all the customers’ money in their own envelopes the whole time.

No actual bank works that way. Real banks take deposits but don’t keep the money in envelopes; they lend it out.[4] Most classically, they borrow short to lend long, taking checking deposits that can be withdrawn at any time, and using them to make long-term mortgages. This makes them vulnerable to runs, Diamond-Dybvig, It’s a Wonderful Life, etc., everyone knows all this.

But in theory a cryptocurrency exchange could work that way, and at a high level of generality Coinbase sort of does.[5] Historically — not so much now, but until early this year anyway — cryptocurrencies were volatile and exciting and people were jazzed to trade them a lot, so you could make a lot of money by just charging fees without doing anything else with customer assets. And that is a run-proof business. If everyone takes their money out at once, you have the money.

But then one day a customer comes to you and says “I have $10,000, but I am really bullish on Bitcoin, so I would like to buy $20,000 worth of Bitcoin. Why don’t you lend me $10,000 so I can buy $20,000 of Bitcoin, so I can get more excitement?” This is called a margin loan.

Or — equivalently — a customer comes to you and says “I have $20,000 of Bitcoin in my account, and I need some cash this month. I don’t want to sell my Bitcoin, because I am a true believer and also do not want to realize gains for tax purposes. Could you just lend me $10,000, secured by my $20,000 of Bitcoin? You know I’m good for it: If I don’t pay you back, you can sell my Bitcoin and pay yourself back from the proceeds.”

You might just say “no, that’s dumb, Bitcoin is volatile, buying $10,000 of Bitcoin is plenty of excitement.” (In fact Coinbase shut down margin trading in 2020.) But your competitors probably offer loans, and it is tempting for you to do it too. So you say, sure, fine, I’ll take your $10,000 and put $20,000 of Bitcoin in your account.

But where do you get the money that you are lending to the customer? Well, you have to borrow it too. Ordinarily the way that you will borrow it is by putting up the customer’s Bitcoin as collateral to your lender, just as the customer puts up its Bitcoin as collateral to you. If the customer defaults, you still have to pay your lender (and then you get the Bitcoin back and can sell it to pay off your customer’s liability to you); if you default, the lender sells the Bitcoin.

But who are the lenders? Oh, various possibilities. But one general point is that while some customers will want to borrow dollars to buy Bitcoin, other customers will want to borrow Bitcoin. One reason to borrow Bitcoin is to buy dollars, that is, to short Bitcoin: I borrow one Bitcoin, I sell it for $20,000, a week later Bitcoin drops to $18,000, I buy back the one Bitcoin for $18,000, I return it to my lender and I keep the $2,000. There are variations on this trade (I borrow Bitcoin and sell it for Ethereum, betting on the relative value between the tokens, etc.). It is necessarily a leveraged trade; I can’t short Bitcoin without borrowing it.[6]

If you are a crypto exchange, this is a nice opportunity. You have Customer A who has Bitcoin and wants to borrow dollars, and Customer B who has dollars and wants to borrow Bitcoin. (By “dollars,” for a crypto exchange, I mostly mean “dollar-denominated stablecoins,” though potentially also dollars.) You take some of Customer A’s Bitcoin and lend it to Customer B, and you take some of Customer B’s dollars and lend them to Customer A. Each of them is overcollateralized — you only lend Customer A half the value of her Bitcoin, and you only lend Customer B half the value of his dollars — so you feel pretty safe. And they both pay you interest.

But there are risks. One day Customer A might come in, pay off her dollar loan, and ask to take her Bitcoin back. You don’t have her Bitcoin, or not all of them anyway; some of them are with Customer B. Customer B owes them to you — ultimately you’re good for it — but you don’t have them now. There is a timing problem.

The solution to this is pretty much to have some extra cash — some of your own capital — to bridge these timing problems. Eventually you’ll get the rest of the Bitcoin back from Customer B, but for now you just pay Customer A out of your own Bitcoin stash.

But the timing problem is also connected to a real economic risk. If the price of Bitcoin falls by 90%, Customer B will be thrilled. He will come to you and say “here’s my Bitcoin back, I’d like to withdraw my dollars.” But you don’t have his dollars, or not all of them; half of them are with Customer A. Your dollar loan to Customer A is now underwater: You loaned her 50% of the value of her Bitcoin, but Bitcoin fell by 90%, so she owes you more than her collateral is worth. You call her up and ask her for more money — a “margin call” — but she, sensibly, doesn’t answer the phone.[7] You have to pay Customer B out of your own capital, and you don’t get it back from Customer A. You've just lost money. Actually that’s the best outcome. The worst outcome is that you don’t have enough capital, you go bankrupt, and Customer B does not get his money back.

Everyone knows this, which is why crypto exchanges — and securities broker-dealers, who have the same basic business model — spend most of their time thinking about risk management. Before the price of Bitcoin drops too far, you will be calling up Customer A for more margin, and if she doesn’t answer the phone you will liquidate her position to pay back the loan you made. If you are a sophisticated modern crypto exchange like FTX, you will have automated 24/7 margining systems that automatically liquidate trades that have gotten too risky, so that only the rarest catastrophic market moves could get you in trouble.

But sometimes market moves are catastrophic, and in particular, sometimes securities broker-dealers and crypto exchanges will have “run on the bank” risks. If everyone knows that you are in this situation — that you have a lot of Bitcoin collateral and Bitcoin prices are falling — people will expect you to have to liquidate your Bitcoin collateral, so they will expect Bitcoin prices to fall, so they will sell Bitcoin, which will cause Bitcoin prices to fall, which will cause your long-Bitcoin customers to default, which will cause you to liquidate Bitcoin at lower and lower prices, etc., until you are bankrupt.

Now let’s add one more crypto element. If you are a crypto exchange, you might issue your own crypto token. FTX issues a token called FTT. The attributes of this token are, like, it entitles you to some discounts and stuff, but the main attribute is that FTX periodically uses a portion of its profits to buy back FTT tokens. This makes FTT kind of like stock in FTX: The higher FTX’s profits are, the higher the price of FTT will be.[8] It is not actually stock in FTX — in fact FTX is a company and has stock and venture capitalists bought it, etc. — but it is a lot like stock in FTX. FTT is a bet on FTX’s future profits.

But it is also a crypto token, which means that a customer can come to you and post $100 worth of FTT as collateral and borrow $50 worth of Bitcoin, or dollars, or whatever, against that collateral, just as they would with any other token. Or something; you might set the margin requirements higher or lower, letting customers borrow 25% or 50% or 95% of the value of their FTT token collateral.

If you think of the token as “more or less stock,” and you think of a crypto exchange as a securities broker-dealer, this is completely insane. If you go to an investment bank and say “lend me $1 billion, and I will post $2 billion of your stock as collateral,” you are messing with very dark magic and they will say no.[9] The problem with this is that it is wrong-way risk. (It is also, at least sometimes, illegal.) If people start to worry about the investment bank’s financial health, its stock will go down, which means that its collateral will be less valuable, which means that its financial health will get worse, which means that its stock will go down, etc. It is a death spiral. In general it should not be possible to bankrupt an investment bank by shorting its stock. If one of the bank’s main assets is its own stock — is a leveraged bet on its own stock — then it is easy to bankrupt it by shorting its stock.

The worst case is something like:

You have 100 Customer As who are long Bitcoin on margin: They each have 1 Bitcoin in their accounts and owe you $10,000. You have 100 Customer Bs who are short Bitcoin on margin: They each have $20,000 in their account and owe you 0.5 Bitcoin. You have loaned 50 of the Customer As’ Bitcoins to the Customer Bs, and $1 million of the Customer Bs’ dollars to the Customer As. You keep the other 50 Bitcoins and $1 million as collateral. Your accounts show that you owe clients 100 Bitcoins and $2 million, and that they owe you back 50 Bitcoins and $1 million, and you have 50 Bitcoins and $1 million on hand, so everything balances. You have one Customer C who says “hi I would like to borrow 50 Bitcoins and $1 million, I will secure that loan with 150,000 FTT, each of which is worth $20.” You say “sure, sounds good,” and hand over all your collateral. Now you have 150,000 of FTT, worth $3 million, as collateral (and no Bitcoins or dollars). Your accounts show that you owe clients 100 Bitcoins and $2 million and 150,000 FTT, and they owe you back 100 Bitcoins and $2 million, and you have 150,000 FTT of collateral, so everything balances. But then if the value of FTT drops to zero, you have nothing. You have no Bitcoins to give to the customers to whom you owe Bitcoins, no dollars to give to the customers to whom you owe dollars. You just have to call up Customer C and say “hey we need all those dollars and Bitcoins back.” But Customer C will not want to give you back all those valuable dollars and Bitcoins in exchange for now-worthless FTT. Also the fact that Customer C had all that FTT in the first place is not a great sign. It is an FTT whale, and FTT is now worthless. Has it been borrowing elsewhere against FTT? Are all those debts coming due?

Now let’s add a few more FTX-specific elements. One is that FTX is an exchange for levered traders, offering products like perpetual futures and leveraged tokens that build in margin lending. So whereas the basic model of Coinbase is “they buy Bitcoin for you and put it in an envelope,” the basic model of FTX has to be “they lend you money to buy crypto and then make use of your crypto to get the money.” In financial terms, they have to rehypothecate your collateral; you can’t expect them to just keep it in an envelope if they’re lending you the money to buy it.

The other is that FTX is closely associated with a hedge fund called Alameda Research. Sam Bankman-Fried founded Alameda to do crypto arbitrage and market-making trades, and then he founded FTX to basically have a better exchange for Alameda to trade on. Alameda has lots of FTT, and last week Coindesk reported on its balance sheet; the gist of that report was “wow its balance sheet is mostly FTT”:

The financials make concrete what industry-watchers already suspect: Alameda is big. As of June 30, the company’s assets amounted to $14.6 billion. Its single biggest asset: $3.66 billion of “unlocked FTT.” The third-largest entry on the assets side of the accounting ledger? A $2.16 billion pile of “FTT collateral.”

There are more FTX tokens among its $8 billion of liabilities: $292 million of “locked FTT.” (The liabilities are dominated by $7.4 billion of loans.)

That is not in itself a reason for a run on FTX! It might be a reason for the price of FTT to go down, if you think that Alameda has too much of it and might need to sell it.

The reason for a run on FTX is that you think that Alameda is, in my terminology, Customer C. The reason for a run on FTX is if you think that FTX loaned Alameda a bunch of customer assets and got back FTT in exchange. If that’s the case, then a crash in the price of FTT will destabilize FTX. If you’re worried about that, you should take your money out of FTX before the crash. If everyone is worried about that, they will all take their money out of FTX. But FTX doesn’t have their money; it has FTT, and a loan to Alameda. If they all take their money out, that’s a bank run.

And all of this is self-fulfilling: If you are worried about FTX’s business, then the price of FTT should go down. If the price of FTT goes down, then FTX’s business is riskier, because it has less collateral. If, say, the operator of the biggest crypto exchange gently raises one eyebrow and says “FTT, eh?” that can be enough to topple FTX. FTT goes down, leaving FTX undercapitalized, leading to customer withdrawals, leading to ruin.

Anyway it is still early and confusing but that seems to be the story of FTX. Coindesk reported on Alameda’s FTT exposure, and then Changpeng “CZ” Zhao, the founder of Binance Holdings Ltd., the largest crypto exchange, raised eyebrows by tweeting that Binance would sell its FTT holdings “due to recent revelations.” People worried that this would tank the price of FTT and put pressure on FTX, so they started withdrawing money from FTX. FTX didn’t have the money, and Bankman-Fried started calling around asking for a loan or a bailout. Eventually he called CZ himself, and they announced a non-binding letter of intent for Binance to acquire FTX and make customers whole. Bankman-Fried’s fortune basically vanished, as did his “ emperor aura.” Venture capital investors in FTX — which last raised money at a $32 billion valuation — are probably getting zeroed, the price of FTT collapsed, and now regulators are investigating.

In this description I have drawn on Twitter threads from Jon Wu, Lucas Nuzzi and an anonymous “Wassie Lawyer,” who make arguments along these lines, as well as this Substack post from Byrne Hobart. But the most informed view is probably that of CZ himself, who tweeted this morning:

Two big lessons:

1: Never use a token you created as collateral.

2: Don’t borrow if you run a crypto business. Don't use capital "efficiently". Have a large reserve.

Binance has never used BNB for collateral, and we have never taken on debt.

“Never use a token you created as collateral” suggests, to me, that FTX accepted its FTT token as collateral, probably from Alameda, probably in exchange for borrowing assets that it owes to customers. And that that went wrong in roughly the way I have outlined.

One other point here is that if this is the story, then it is not a liquidity crisis but a solvency one. That is, the problem is not a timing mismatch, in which FTX’s customers asked for their cash back but FTX did not have enough ready cash because it had long-term but money-good loans out. The problem is that FTX took its customers’ money and traded it for a pile of magic beans, and now the beans are worthless and there’s a huge hole in the balance sheet. On that note:

Changpeng Zhao moved fast when Sam Bankman-Fried’s FTX.com was on the brink, offering to take it over and stem any further crypto contagion.

Within hours, he was forced to reconsider.

For starters, Binance executives quickly found themselves staring into a financial black hole -- a gap between liabilities and assets at FTX that’s probably in the billions, and possibly more than $6 billion, according to a person familiar with the matter.

On top of that, US regulators are circling FTX, investigating whether the firm properly handled customer funds, as well as its relationship with other parts of Bankman-Fried’s crypto empire, Bloomberg News reported Wednesday.

It makes for a tricky decision for Zhao, known in the crypto world as CZ: Follow through with rescuing his onetime top rival and shoulder the financial and regulatory burdens, or let FTX crumble and sort through the potential wreckage? Zhao himself admits there was no “master plan” to take over FTX.

His answer, at least for now, is that the financial hole appears too deep. Binance is unlikely to follow through on its takeover of FTX, according to the person familiar, who wasn’t authorized to publicly discuss the matter.

I don't have opinions on any of the specific details, but what I do have is a feeling that darkness has stuck a great blow against us. There's stuff that needs to get done, and recent events have imperiled our ability to do them. I'm scared, but most of all I want to help make up for the loss. Not by trying harder, but by persevering in the things I do with what I have to do them with.

"To save the world, I will start by doing the proper and humble things I know how to do within the confines of my own life."

Happy to add extra markets if you can think of them.

I had no inkling the problems with FTX, but I had was somewhat surprised to see the crypto influence on the EA movement. Even absent fraud crypto currency businesses seemed to be financially risky, and also posing a PR-problem.