FTX and Alameda Research Go Down in Flames — a special episode

Episode 081

A lot has transpired since Sunday night’s recording. I thought it would be best to do a shorter special episode to discuss this and the ramifications on the market moving forward.

News and Links

Bank of England raises interest rates by 75 BPS

Bank of England on Recession Fears

Alameda Balance Sheet

Bitcoin Magazine Opinion on Alameda

Opinion on Alameda Solvency

Mining for Groceries in Lebanon

 

November 10, 2022 Weekly Close (USD)

BTC – 15,877.06

ETH – 1,098.85

ADA – 0.316885

 

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I can be reached by email at mcintosh@genwealthcrypto.com and on twitter at @McIntoshFinTech. My mastodon handle is @mcintosh@podcastindex.social. Looking forward to hearing from you!

Website

https://genwealthcrypto.com

Music Credits

Rock Guitar Intro 07 by TaigaSoundProd

Link: https://filmmusic.io/song/8342-rock-guitar-intro-07

License: https://filmmusic.io/standard-license

Funky Life by WinnieTheMoog

Link: https://filmmusic.io/song/6040-funky-life

License: https://filmmusic.io/standard-license

Transcription

Hey, SatStackers, it’s November the 9th. This is Episode 81 of Generational Wealth of Cryptocurrency. I’m your host, McIntosh. Today’s episode is a special news update in regards to the collapse of FTX. Of course, no one on this podcast is a financial advisor, and all information presented on this podcast is for informational purposes only. Now that we have the legal stuff out of the way, let’s jump on in.

All right, so this is definitely going to be a different episode. I’m going to do a very brief market update, and we are going to jump into the news, which will be about FTX, Binance, all this hoopla. We’ll not be doing supporters tonight, I’ve had some support come in the last few days which I certainly really appreciate, but I want to give them the time that they deserve, frankly, and this is a case where there might be people who skip this episode simply because it’s not at the normal time and so on. So I wanted to make sure that that goes to our regular podcast market update for the week or for the day. We did close at $15,877.06 for Bitcoin, Ethereum at $1098.85, so $1,098.85, and then Ethereum at $31.68, obviously those are all down. Bitcoin is down roughly $5,000, Ethereum is down roughly $500, and ADA is down nine cents or so. Most of this certainly could be pinned to the news that we’ll be discussing tonight with FTX and Binance. This episode I’m going to do very little editing on by the way, I’m just going to apologize, I’m going to get it out as quickly as I can, but I just felt it was too important.

Alright, so I’ve already talked about this a little bit, Sunday’s episode was called is Alameda going to be Celsius 2.0, we talked on the 31st about regulation, and of course back on the 24th we talked about SBF Sam Bankman-Fried’s regulatory proposals that generated quite a stir. So we’ve been kind of discussing in some ways FTX and Sam Bankman-Fried for the last few episodes, I knew that something was going on, of course, just a couple days ago. And then unfortunately yesterday morning very early, the news started breaking really fast. And the prices of crypto of course started dropping. This is across the board. So actually, in addition to the prices that I wanted to give, I wanted to go ahead and point out two other tokens, Solana has taken a deep dive, it is currently at 15.20, it was down I think down into the 12s. And then the other is actually the token that FTX created, it’s kind of their little utility token, and it was the core of all this. If you remember, Sunday, Monday morning when I was talking about they created this token, and then it turns out it’s a very large part of their balance sheets, because frankly, I tweeted out earlier today, if I’m not mistaken, at this point, I don’t well, one of the news items is Sam Bankman-Fried has already declared bankruptcy. So he went from being a multi-billionaire to declaring bankruptcy in the course of a few days.

And I don’t wish ill will on anyone, I want to be very clear about that. But at the same time, to me, it’s becoming very obvious that either FTX and Alameda Research were doing clown world handling of the client’s money, or it was outright fraud. Now, in this country, we believe in guilty and excuse me, innocent until proven guilty. And I don’t want to, the jury’s out on that, so to speak, but it’s a huge mess. It’s very clear. I think they’re saying $6 billion there in the hole. They’re desperately casting about looking for someone to bail them out. Let’s go back in time, just a little bit. Tuesday morning, 10.03 central time, SBF tweeted, I’ve got a few announcements to make. And basically, it’s that they’ve come to an agreement with Binance pending due diligence and things like that. But Binance would be buying FTX.com. And that’s actually important because there’s an FTX.com, which is offshore, essentially. And then there’s an FTX US site. And then of course, Alameda. All right. So that being said, and like eight minutes later or something, maybe five minutes later, five or six minutes later, CZ, the guy who started Binance, the CEO, I don’t know what his title is, but anyways, he tweeted that they’ve made this agreement. Now he actually tweeted in that tweet, he said, it’s a non-binding agreement. And I actually pointed that out when I tweeted about that. By the way, you can follow me on Twitter at McIntosh Fintech. And if you want to get this stuff more in real time, you might want to, because I try and post about this stuff, I can’t always, but I do try. You might want to follow me on Twitter. And I’ll have my Mastodon handle as well in the show notes. I don’t know what it is, the full name offhand, it’s McIntosh at something. I don’t know the rest of it. Anyways, he said, this is not binding. And I thought that was very important. So clearly, Binance had not looked at their books yet. And then before the end of the day, they backed out of it. I don’t have the tweet here that says exactly when, oh, I never even finished up, sorry, the FFT token. I apologize, I’ve got notes that I’m working off of, but honestly, this is not going to be as organized as normal. Okay, well, of course I’m having issues with Chrome. My keyboard doesn’t work with Chrome. So I will have to improvise. All right, the token is the FTT token. And it’s sitting at 228 in value and up until, let’s see. It was at $25 or so up until, it looks like the 8th, no, the 7th, the 7th of November at 20, so late in the afternoon, late at night, sorry, 8 o’clock or so, and I’m not sure what time zone, to be honest. But it started dropping and then of course when this news broke, it dropped significantly. And now it’s sitting at roughly $2.50. It’s been a little lower than that. I think it brushed $2 or so at one point. I see a 214 here on this chart, but I’m not sure what the granularity really is. Regardless, obviously the token itself has taken a deep dive and that’s simply because people started bailing out when they realized that FTX was the primary holder of this token. FTX looked like they were insolvent. FTX has big problems. So that was a big part of it.

Solana is involved because apparently FTX actually, that was one of their bigger holdings. Interestingly, when the report came out, apparently they didn’t really have any Bitcoin holdings, which I thought was interesting. So later in the day, as I said, Binance came out. They’ve now said they’re not doing this deal, blah, blah, blah. I’m not going to speculate on motives. Some people think that this was done as a complete setup to expose FTX and SBF, Sam Bankman-Fried. I’m just going to start calling him SBF just to make it short. That’s certainly possible. I would say, to be honest, I would call CZ, and I don’t necessarily mean this as a, it’s not derogatory. Maybe it’s taken that way, but he’s cold blooded. He’s a cold blooded businessman. So it wouldn’t surprise me if that was the case, but there’s certainly no data to suggest that. What it looks like happened is they made this agreement in theory. They opened up the books. He looked at the books of both Alameda and FTX and said, there’s no way I’m touching this because they owed $6 billion. Everything’s insolvent. Their token is going to zero, as far as I can tell, and Solana may go with it, to be honest, although Solana may recover, I don’t know. But regardless, that’s where we’re at. Now, the market has recovered. Right now, in fact, Bitcoin is at 16,700, Ethereum is approaching 1,200 ADAs at 35 cents. So things have rebounded. We will see where this goes. We’ve certainly got a low. We got it below that June low that everybody kept saying we’re not going to get below. So we’ve already done that. I am of the opinion this is not over. I think tomorrow morning, the CPI data will come out, and I will have published this already. I think they’re estimating 8.1. If it comes in a tenth of a percent above that, the stock market is going to start going down again, and so will crypto, and it will press, I think we will see, 14,000. I’ve been saying this for a while. I still stand by it. I don’t see any reason at this point to change. I may be incorrect, but if you recall, I keep promoting a strategy, you should be DCAing. I did some extra buying today, just in case this is the bottom. You might be wise to do that as well. It’s not financial advice, and it’s certainly your choice. Bitcoin’s not going away. I see no reason at this point that Ethereum is going away, nor ADA. But this activity will set back the crypto market for a long time. When I say crypto, I mean all of the assets. Now a lot of the Bitcoin maximalists are making hay out of this, and maybe they should be. They’re talking about not your keys, not your crypto. That’s something that I’ve said too. We’ve talked extensively about not keeping the majority, at least, of your assets on a centralized platform, whether that’s FTX, Kraken, Coinbase, Binance. I don’t care. You shouldn’t have all your assets on that exchange. I would love to say this is going to flush out all the bad actors, but the reality is I don’t think it will, and this behavior will continue. Now one of the other news items is that the SEC and, I believe, the Justice Department of the United States have announced that they’re going to investigate FTX. Now the SEC in particular, I would say, huh, how? Because FTX.com is not a US-based platform, from what I understand. That’s why they have a separate FTX.us or whatever. I’m going to look that up right now, actually, and of course the site may not even be down. So FTX.us is, earlier today, both Alameda and, so FTX.com simply redirects you to FTX.us. And research brings you to a screen that says, private site. This site is currently private. If you’re the owner or contributor, log in. I wonder what that site is. Probably WordPress. No, it’s Squarespace. Well played, multi-billion dollar company. Oh man. Wow. Like I said, clown world.
All right, so they have a Squarespace site up. I don’t know if that was their old site and they’ve changed the front. It probably was Squarespace. Okay, point is, what’s my point? Again, we’re learning our lesson. We don’t put large amounts of money in sites like this. We don’t. Public storage, your wallet, hardware wallet, even your software wallet is better than keeping the majority of your assets on one of these sites. And I do not care which site it was, all right? So learn that lesson. As far, you know, I don’t know if any of my listeners had any money on FTX. Obviously, FTX did a big marketing promotion here in the United States over the last year. Super Bowl ad. Oh, and one of the casualties of this is going to be apparently Tom Brady and his wife, who I don’t know her name, but they’re getting divorced, which of course is big news in some circles around here. But they did an ad for FTX and actually the majority of their fortune was in FTX and now it’s gone. This was the kind of promotion they were getting, FTX Arena or whatever. Maybe down in Miami, I think FTX is, you know, they spent hundreds of millions of dollars on all this stuff and they should have been safeguarding their clients’ assets.

But like I said, there’s only two ways to look at this. Either it was a complete clown world of a business or it was fraud. And either way, I do believe, to be honest, I believe people are going to go to jail. If they prove fraud, there will be people in jail if they’re U.S. citizens. I actually don’t know where SBF is from. I assume, I believe he’s a U.S. citizen. The legal team quit, compliance and legal, now those people actually would be criminally negligent or at least civilly, what’s criminal and civil, civilly, civilly negligent, I’m not sure, depending on whether it was fraud or just stupidity. So they could be looking at severe issues and I don’t think they’re going to get out of it just because they quit. Oh, and by the way, the CEO of Alameda Research conveniently resigned a few weeks or months ago and then the new one came on who was there in the company, Caroline, she’s not been there very long. So I could see a lot of people getting in a lot of trouble for this. Now that doesn’t help all of the clients whose assets are either frozen or more than likely they will, if they recover anything, just like Celsius, it will be pennies on the dollar.

So what we should learn from this is primarily hold your assets again and I will continue to emphasize this, we will forget this, we will move on, things will happen and I will continue to remind you to do that because it’s super important. Now there may be, if you’re trading or whatever, you may need to keep stuff online but do not keep the majority of your assets online, do not do that and don’t keep it, maybe you have a lot in crypto and maybe you’re trading with a significant amount, $10,000, I might not even keep all that on one platform, I might split that up, because you just don’t know these are not transparent organizations, the blockchain is transparent and it’s very interesting because the blockchain explorer type people, analytics, that’s the word, the blockchain analytics people, they are finding out some very interesting things but the companies are not transparent, they’re opaque and people don’t know until sometimes it’s too late. So just don’t put yourself in, it’s called risk management, okay, you have risk management in trading, you should have risk management in this because it’s just not transparent.

All right, that’s really it, I want to wrap up, it’s going to be a short episode of course but I just wanted to get this out there just to let everybody know what was going on and so we don’t spend all Sunday talking about this. The Generation Wealth Cryptocurrency Podcast is a podcasting 2.0 podcast, it’s actually a value for value podcast with no sponsors and no advertising and I want to emphasize
this, literally today I had something happen and if they were sponsoring my show and forking over lots of money to me, I would not be telling you about this, so listen up. I have talked in the past a lot about the Strike app, it is one of the easiest apps out there to use and I was using it today to buy some Bitcoin, of course, just like I said and I was buying some smaller amounts as it went down, I was trying to catch the bottom basically because that’s just, I can’t help it. Anyways, I noticed on the third buy that, like I’ll do it right now, I’m sure it’s still going up, so I had the app up, Bitcoin right now is showing at 16, 629.99, the price up on my other monitor, which I don’t know where that comes from, is 16, 679, so it’s close, okay, buy, 25 bucks, next, $25, price, 17, 176, huh? And I poked around and I couldn’t find anything, I actually submitted a support ticket and then I saw later, they posted something on Twitter saying, right, there’s a basically, what did they call it? Let me try and find the ticket, the Twitter real quick, I’m almost sure it was on Twitter. And while I’m looking for this, of course, U.S. elections were today, a lot of people I think, maybe myself included, to be honest, thought that the Republicans, for better or for worse, it doesn’t even matter, it’s not a political discussion, but we thought that they were going to take over more of the House and Senate because of the last several years the things have been going on. That really didn’t happen, it’s looking like things are exactly the same. Here’s the message that they put out six hours ago, we’re aware that our BTC provider for the Bitcoin tab is experiencing high volumes and as a result, users are seeing higher spread, so the spread is between the price that’s listed and the price you’re buying. Now I’m buying immediately, at least according to what they’re showing me, I’m not having to wait to have my order filled and yet it’s filling at a higher price. So we apologize, we’re actively working with them to rectify the situation, blah blah blah. So to me, this is a flaw in their program and if they were paying me a thousand bucks an episode, whatever, it could be a lot higher frankly for a large audience, I wouldn’t be talking to you about that. Now I’m not saying you shouldn’t use Strike, but it is certainly something you should be aware of and to be honest, unless I’m out and I have money on Strike now, so I’m going to have to use that, but until they get this fixed, I’ll be using something else to do any major purchases of my Bitcoin. So keep aware, that’s what I’m here for and that’s one of the reasons why I do value for value and I don’t have sponsors or advertisers, because that means I get to tell you all the truth as best I see it, okay? All right, so back to the script, I actually have a script for this, of course.

You can support the podcast in three ways, time, talent, and treasure. If you want to support the podcast and has some time or talent, I am working on chapters, I actually ran into a roadblock with that to be honest, not to get off on this. I’ll talk about that more Sunday, but maybe transcripts would be nice, I could use some help there, things like that. Treasure is just what it sounds like. If you find the content valuable, you can support the podcast by streaming Sats from a Podcasting 2.0 app. Like I said, I won’t be going over support tonight. We’ve had some support this week and I do appreciate it and I want to honor those people next Sunday. If you like the content, I would love it if you would tell your friends about the GWC podcast. Thanks for being here. I do hope this has been helpful and it’s given you something to think about. I would love to hear from you. I’m on Twitter at McIntoshFintech. You can reach me by email at mcintosh@genwealthcrypto.com. Of course, the generational wealth website is at genwealthcrypto.com. And on Mastodon, I have it right here, I just opened up the client. It’s McIntosh, at Macintosh, is I guess what I should say, at podcastindex.social. So it’s the podcastindex.social Mastodon instance, which is the Podcasting 2.0 Mastodon instance. And then of course, I’m McIntosh on there. So even if you’re on another instance, you can still plug that in and use that to follow me or send me messages or whatever. So there you go. Stay humble. Be safe. And I will talk to you all on on Sunday, okay? Bye-bye.

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