“Get your funds out of FTX. This is financial advice,” so says Ran Neuner, who describes himself as a “CNBC Crypto Trader.”
This bold statement follows the leak of FTX’s Q3 earnings, an exchange that suddenly rose from nothing in circa 2019, and now goes around Washington lobbying for crypto regulations.
“Liquidating our FTT is just post-exit risk management, learning from LUNA,” Changpeng Zhao, Binance’s CEO, said before adding:
“We gave support before, but we won’t pretend to make love after divorce. We are not against anyone. But we won’t support people who lobby against other industry players behind their backs.”
He announced Binance has “decided to liquidate any remaining FTT on our books,” which some estimate at half a billion dollars, while Changpeng says Binance “received roughly $2.1 billion” as part of their exit from FTX equity last year.
“If you’re looking to minimize the market impact on your FTT sales, Alameda will happily buy it all from you today at $22!” – said Caroline Ellison, the CEO of Alameda Research, a market maker liquidating on Deribit while also minting Tether.
The leak concerns that Alameda. The document is not yet public, but it reveals out of Alameda’s $14.6 billion in assets, $3.66 billion is ‘unlocked FTT” and $2.16 billion is “FTT collateral.”
FTT is FTX’s token. The exchange buys between $2 million to $5 million worth of these tokens weekly from the exchange’s profits.
The only problem is that FTT’s market cap is only $3 billion, with it currently trading at that $22 offered above. While Alameda has some $5.8 billion worth of FTT.
This led to speculation they’re using FTT as collateral. If FTT’s price falls therefore, they’ll get margin called, leading to a cascade.
However Ellison says “that specific balance sheet is for a subset of our corporate entities, we have > $10b of assets that aren’t reflected there.” In addition “the balance sheet breaks out a few of our biggest long positions; we obviously have hedges that aren’t listed [and] given the tightening in the crypto credit space this year we’ve returned most of our loans by now.”
Considering the situation, you’d expect them to publish the full balance sheet because FTX is currently under the grip of full on panic with Sam Bankman-Fried, its CEO, stating:
“We’ve already processed billions of dollars of deposits/withdrawals today; we’ll keep going. (Taking up anti-spam checks to process more–sorry if you got those. We’re hitting node rate capacity, will keep going.) Also tons of USD <> stablecoin conversions going on.”
There were reports of withdrawals delays from FTX, which Bankman is putting down to ‘node capacity’ with him further stating “FTX has enough to cover all client holdings. We don’t invest client assets (even in treasuries).”
There seems to be a very close relationship between FTX and Alameda however, with the crypto space usually very sensitive to any suggestions of a potential exchange insolvency.
Some are speculating FTX/Alameda is selling Solana, of which it has just over $1 billion, with its price down about 13%.
They have other crypto assets, which mainly revolve around FTX, with the public at this stage left to guess just what is the state of Alameda, how close is their relationship to FTX, how exactly do they affect each other – and thus potentially deposits in FTX – and how much is all of this just “a competitor is trying to go after us with false rumors,” as Bankman claims.
The Bankman team has donated $40 million to both Republicans and Democrats, making them the biggest crypto spender in politics.
Unfortunately Bankman’s ideas about crypto regulations are very different to those of other crypto actors.
“Centralized, regulated digital asset venues–like FTX–are going to end up under various disclosure/transparency regimes, potentially including suitability checks in some cases,” FTX said last month.
Therefore they proposed a “suitability check” for defi as well as licenses for sites that interact with defi, two suggestions that attracted wide criticism and are so out of touch that they’ve moved Changpeng to “divorce.”
Binance has its own BNB chain where they have largely copy pasted many of the defi dapps running on ethereum.
Sam, in effectively joining bankers, is attempting a regulatory attack on crypto which has clearly angered many actors.
Some think cryptos have been under an attempted regulatory attack since at least 2018. Regulators don’t hide it either. The chair of OCC said they have to slowdown crypto adoption.
Numerous regulations have been proposed, including by OSCE which in many ways has nothing to do with crypto.
In dismissing this industry, bankers have claimed that the only difference is that crypto is not as regulated as the fractional reserving banking system.
Sam has effectively seemingly joined them, with this man coming to prominence by kicking out Chef Nomi, a coder that came up with some raw innovation.
So some in the crypto industry want nothing to do with FTX now, especially Changpeng clearly who has been playing, and fairly well, regulatory chess.
Does that mean FTX is insolvent? That is something we don’t know. They have to produce the documents, including audits of both FTX and Alameda.
But it has become clear that FTX has not been a crypto team player during a very sensitive time for the crypto industry, and now they’re paying for it since it is afterall crypto that made them.