FTX’s financial black hole leaves Binance balking at rescue plan (opens in new tab)

How can DD find a hole within a day of announcing? It seems too fast. To me, I assume it's CZ getting FTX to explode and then be the firm everyone comes to without having to acquire them.

Edit: Fair enough, thanks for the input repliers! I thought DD was a much slower event to prepare this information and get legal stuff set up with NDAs etc..

>Does FTX.us have any exposure to FTX.intl?

I'd guess the geniuses at Alameda made sure to accomplish that already.

It's still shocking because aside from anything else, CZ must know that FTX dying is going to be massive blow to the whole industry. Like Lehman and Bear Stern's but with no Fed or Treasury bailout.

Where is our due diligence on Binance? Pride goeth before destruction. I wonder if Binance has even worse financials than FTX.

Healthy companies don't go kaput overnight unless it's 1929 again.

Both of these organizations (FTX and Binance) are/were making billions flipping useless bits and feeding on people's greed. If both of them are gone tomorrow, the world would not even notice. When the FTX dude's face was plastered on every bus stop in San Francisco (in a wildly narcissistic PR attempt I guess?) I was shocked at how idiotic this cheap money wave has become, someone who's enriching themselves by letting people trade one "token" for another is hailed as the next Einstein. Well, turns out he couldn't even scam people properly and somehow has managed to blow through it all.

Also, despite people having deep knowledge of these coins / cryptocurrencies, absolutely zero awareness of timeless financial scams.

Edit: Deleting this comment because way too many people attacking me who have clearly never actually used any decentralized app.

Good luck to you all!

I mean what you're describing is the central core of the grift.

Complex sounding technical mumbo-jumbo delivered with supreme confidence and seeming internal consistency is how you convince the plebs to invest their life savings in various forms of crypto.

0.1% understand the original underlying technology 0.9% understands the applications possible to be built on top of it 99% are following the 1% and writing governmental and financial policy, and voting with their wallets.

I wish I could say we will look back and shake our heads at it like we do today at Tulip Mania, but I suspect we're watching the birth and childhood of a new religion. Crypto isn't going anywhere for the rest of our lives, and just as we have to keep vigilantly fighting against Scientology permeating tax policy, or religion in general always attempting to undermine secular society, Crypto will continue to be a thorn in society for a long time.

Put a pigeon in a box and hook up a lever to give a reward after a random amount of time has passed, and the pigeon will go absolutely fucking insane trying to figure it out.

I once played a very sophisticated online mmporg ... the amount of information I possessed about all the skills and equipments dwarfs that of cryptobros) Let them play)

People memorize the Bible and the Quran.

Mumbo jumbo opaqueness helps to sustain the bubble. You can paint all the technicals of the world on crypto, in reality it is an emotional rollercoaster that hinges on the sociology and demographics of genz

It's either that or Pokemon.

all this Web3 with thousands of different cryptocoins/tokens and DAOs feels like an attempt to intentionally obfuscate finance.

1) A lot of people learned about this stuff to make money with it, which many of them did

2) A lot of people learned about this stuff because it is a very meme-able concept: mathematicians will upend the entire global system of power with... math. The kids who got their lunch money stolen in elementary school really gravitated to it

> ... when there isn’t place in the real world even for the largest one?

Uh, go visit El Salvador. Every MacDonalds, every Starbucks, and tons of local businesses accept "the largest one." That's because bitcoin stands apart, in terms of its real decentralization, and therefore its independence and utility. Give it time, and it will become far more useful than it already is. The dollar may eventually refer not to a specific weight of gold (that's what the term 'dollar' originally meant), but to a specific number of satoshis.

When the feds catch CZ which they inevitably will it will be truly over.

Maybe Tether can print money to save Binance.

Given the amount of people who are willing to put their money into a fairy tale, I guess it will never end, just shift. After all, why should they stop taking if others won’t stop giving?

Coin base?

This would expose them to legal action from the bigger, more sophisticated and deep pocketed entities.

They may be exterritorial to the US. So was Silk Road.

The reason partial deposit insurance works in commercial banks is that the ground rules are set from the start.

> I had a majority of my net worth in FTX as a trader

As a trader myself, this lesson is part of your risk management. I have multiple accounts with amounts that I wouldn't cry if they went to zero. I trade them together, and if AMP decides they hate me because I am too tall, it doesn't change my ability to trade until that issue is resolved.

Edit: flagged??? huh...

The question is if binance has the $$. They're doing the same exact thing FTX did, but using tether instead. They truly might not have the money to plug that hole.

My guess is that binance just wants to take down a competitor. They publicly started the FTX bank run by announcing they were going to dump FTT, after all.

Sorry to hear about your losses. Can I ask, what was the reason you favored FTX for crypto investment?

This would pose a huge legal and regulatory risk for Binance.

There is a reason why no one is acquiring ponzi schemes.

It won't happen. They have nothing to gain from doing that.

This shows exactly why financial regulations helps tbh. If there was a crypto FDIC or SIPC, almost all funds would have been covered

> covering deposits up to $100k

Unless Binance does this as a unilateral act of goodwill, it would be difficult for them to acquire FTX in a way that pays out to customers while stiffing lenders and shareholders.

Tends to be imagined value...

But imagined value that, if you play your cards right, you might be able to convert into real dollars. Leaving someone else with the imagined value instead.

volume is disproportionately in 1:1 USD stablecoins, bitcoin, and ethereum.

you can sort the landing page here by 24H volume for a quick glance, or you can check the exchanges tab for more detail: https://www.coingecko.com/

It is all just magic tokens valued at a 10 to 100 times inflated value of crypto internal leverage.

Pretty much NFT might have been an interesting thing to developed further if it didn't went the way of selling stoned ape jpegs.

There is a 5-10 billion dollar hole in their balance sheet. 5-10 billion has vanished so yes that is the actual money at stake.

DEX market share as a volume was 25% - 33% of spot market during the peak. It might have taken a hit since Terra went down, though.

For some trading pair likes ETH/USD it is actually cheaper to trade on DEXes (Uniswap v3) where you get 0.05% fee as opposite to Coinbase that charges you 0.6%.

The events like FTX should prod the markets more towards DEXes. Also now there are futures DEXes available like dYdX, Perp.fi and others making it possible for more professinal trades to utilise DEXes.

AFAIK faster and cheaper DEXes keep coming out every few months but not on Ethereum; they're either on L2s or faster chains like Avalanche.

You can trade on the XRPL DEX[1] (The oldest DEX) essentially for free* since it went online. The DEX works like a central limit order book which limits the way you can trade. There are also liquidity problems for many currency pairs as well as counter-party risk if you trade/hold IOUs with a counterpart like for example Gatehub USD stable coins (Counter-party here would be Gatehub so if they go bust Gatehub USD is likely going to be stable at zero).

For a more advanced use of the XRPL DEX there is Sologenic[2] which is build on top of the XRPL DEX.

[1] https://xrpl.org/decentralized-exchange.html [2] https://sologenic.org/trade

*Free as in no one earns money from your usage. There is a tiny fee burnt to prevent spam for each offer/transaction. A typical fee is under $0.0001.

I traded my way to 500k from a 7k initial investment and I did not trade even a dollar of that on a cex.

Even leveraged trades are very efficient on a decentralized platform like GMX.

> Is this still the case? Do folks day trade using DEXs for small amounts or are they still limited to longer-term trading due to the overhead?

I'd like an answer to this too.

I've been dollar cost averaging into BTC and ETH since the prices are low. But at the same time every exchange I see has fees that eat a large percentage. I know Coinbase allows you lower fees if you're trading big money each month, but I'm not doing that.

Generally DEX will be more expensive. However big part of DEXes costs, which are gas fees, are a flat fee, so if you move large amounts of money it's fairly cheap as a percentage.

blockspace is plentiful and on every chain that isn't Ethereum mainnet, small amounts are traded, a lot of financial activity occurs on Solana at extremely high volume - with the predictable consensus, security and uptime compromises necessary to do that

it also occurs on Ethereum Layer2's and other EVMs

AFAIK based on the data from coinmarketcap virtually all trading happens on CEX. Someone prove me wrong.

I thought it was just so they could get due diligence info on their chief competitor and then back out.

As far as I know, Binance is doing just fine (for now). The bailout was an attempt to take over a large competitor for pennies on the dollar.

how does assuming billions in your insolvent competitor's liability protect you? what's the upside?

or they can't survive with them...

Prevent contagion in crypto most likely. If FTX is forced to go into liquidation, it's hard to estimate the systemic effect in crypto.

When you are the biggest shop at the fair you wanna keep the festival going as well.

I was thinking the same thing.

This reminds me of 2008, when companies were trying to get "rescued", such as Lehman, but Lehman couldn't make a compelling argument why they were worth acquiring, once the accounting books were opened.

PR

They are the biggest exchange now, they gotta look like they care and tried to help so they can attract all the ones who need a new home

You still dont get crypto dinamics, is not about the tech, is about how much money you can extract from people trusting you

> They killed a competitor by declaring them as insolvent.

Worded like that you make it sound like that's a lie.

CZ didn't declare them insolvent. He just made the fact public.

"Even the largest crypto exchanges are scams" is bad for the crypto space as a whole.

Speculation, but consider that plausible scenario that SBF went nuclear and then CZ retaliated in what will turn into crypto mutually assured destruction.

Nice way to look at a competitor's books.

As Matt Levine put it in his newsletter regarding 2008:

”The survival is not a zero sum games. For banks to survive it is beneficial to other banks to survive as well.”

Their premise is that they are not doing fractional reserves and actually have all user funds available at all times. SAFU is just an additional safeguard and was primarily created to compensate for hacks (it was used one time when Binance was hacked for $50M).

IMO Binance has billions of their own cash reserves (not user funds), based on their activity in the last year (acquision of coinmarketcap for 0.4B, commiting $1B to boost crypto projects and companies etc.. this must be a fraction of their overall worth and in that case, $6B should also not be a huge issue, especially since they can get a lot of goodwill and millions of FTX users).

Binance collects billions of dollars from fees every year and also get money from their external investments (e.g. Binance invested in FTX and sold their shares last year for $2B ($1.5B and $0.5B FTT)).

Your funds are SAFU, if not CZ will personally print even more BNB so he has enough funds, don't worry. Trust him bro.

Good point. That is true for all Stablecoins. The question is, do they have the liquidity?

Right now it is very very profitable for them. They can earn interest rates for free, without a high risk.

Let's make it 100 years.

Huge losses haven't stopped anyone investing in crypto so far.

A winter for sure, but likely shorter than 5 assuming overall economy isn't going to be stuck in a depression. Crypto winters have been getting shorter and shorter thanks to increased awareness and increased participation.

>I have defended Crypto and even dabbled in the industry for a while, but this is shocking to find one of the blue chip names losing client funds.

Entertaining? Absolutely.

Shocking? Not to anyone who’s been paying attention.

There's FTX.intl and FTX.us. They're supposed to be separate. The SEC and the CFTC just started investigating how separate.

FTX.us is either OK or some people are going to jail. Too soon to tell which.

>I have defended Crypto and even dabbled in the industry for a while, but this is shocking to find one of the blue chip names losing client funds.

Steel yourself for future challenges.

Does anybody really find it surprising that a company that engaged in schemes that promised to "monetize" the deposits of clients, at rates 5 to 10 times larger than the current interest rates you can find in traditional vehicles, was a scam down to the core? The owner of said company was even boasting about how his products were PONZI SCHEMES. Anybody that "invested" in those stupid Defi magic beans deserve to lose it all, unfortunately.

We (the public) don't yet know how bad it is. CEO of Coinbase, Brian Armstrong said he was also not interested in an acquisition after a small amount of DD. He said we will likely find out how bad it is eventually.

Binance has already taken on FTX's customers/

I mean there’s goodwill but there’s also the terrible-and-getting-worse crypto industry trend. He might need to keep that cash on hand.

Wtf, why? Binance is not liable for FTX's customers.

6bn$ is a steep price for goodwill.

FTX customers have likely fled (those that can / could withdraw) to Binance already.

I'm not sure they have a choice. Binance is leveraged to the max with tether already; they likely can't afford to pay FTX real-world currency for the purchase. They'd have to offer tether or other vaporcoins as payment, at which point FTX might as well just keep its vaporcoins instead

Not if the liabilities taken on would cause financial stress on FTX with FTX itself is not doing as hot due to the collapse in crypto assets.

Why? Maybe it's a different subset of crypto users who did not want to go with binance in the first place, and are not likely to stay in binance for whatever reasons. And it's not like binance is running out of customers

maybe they'd rather keep $6b on the balance sheet rather than burn it to goodwill that won't keep them solvent?

You might throw a years profit at it to restore confidence in the system and buy up market share. But making losers whole to the tune of 5/6/7/10 years of profits would be a massive red flag ...

Back in the dotcom bust pretty much everyone said “yeah, they knew the risks” and generally didn’t care about the losses.

When the housing bubble collapsed you had millions of people who probably didn’t know the risks (because everyone with a voice was saying housing prices never go down) and politicians cared a whole lot.

I’d say even if the whole crypto craze went bust overnight all you’d get is a collective shrug.

Depends if Alameda goes down. They have billions of debt and we don't know who provided the capital. It could be traditional finance or it could be VTX. We just don't know yet.

Yes. All banks do this. If everyone went to their bank tomorrow and asked for their money back you’d see the same thing.

Noone taking the other side of that short.

Is entirely fallacy/fantasy when people talks about shorting on crypto market.

You can't win shorting actual crashes in unregulated markets, the only way u win shorting in crypto is that you were lucky to guess what a whale/org was doing at the same time so pretty much a russian roulette

Marketmakers are not legit and all the movements are pretty much fabricated, its just not regulated and its obvious

Why is this being downvoted, shorting the book of an entity you are supposed to be bailing out / in talks with has multiple historical precedents. Amaranth and JPM off the top of my head for the last time it happened.

Which counterparty would be willing to take the other side of that trade?

He was trying to get in on the Twitter deal too, for up to $5b. Elon was skeptical.

Michael: Sam Bankman Fried is why I'm calling https://twitter.com/sbf_ftx/status/1514588820641128452 https://www.vox.com/platform/amp/recode/2021/3/20/22335209/s... https://ftx.us

Elon: ??

Elon: I'm backlogged with a mountain of critical work matters. ls this urgent?

Michael: Wants 1-Sb. Serious about partner w/you. Same security you own

Michael: Not urgent unless you want him to fly tomorrow. He has a window tomorrow then he's wed-Friday booked

Michael: Could do $5bn if everything vision lock. Would do the engineering for social media blockchain integration. Founded FTX crypto exchange. Believes in your mission. Major Democratic donor. So thought it was potentially worth an hour tomorrow a la the Orlando meeting and he said he could shake hands on 5 if you like him and I think you will. Can talk when you have more time not urgent but if tomorrow works it could get us $5bn equity in an hour

Elon: Blockchain twitter isn't possible, as the bandwidth and latency requirements cannot be supported by a peer to peer network, unless those "peers" are absolutely gigantic, thus defeating the purpose of a decentralized network.

Elon: ["disliked" "Could do $5bn ..."]

Elon: So long as I don't have to have a laborious blockchain debate

Elon: Strange that Orlando declined

Elon: Please let him know that I would like to talk and understand why he declined

Elon: Does Sam actually have $38 liquid?

Michael: I think Sam has it yes. He actually said up to 10 at one point but in writing he said up to 5. He's into you. And he specifically said the blockchain piece is only if you liked it and not gonna push it. Orlando referred Sams interest to us and will be texting you to speak to say why he (Orlando) declined. We agree orlando needs to call you and explain given everything he said to us and you. Will make that happen We can push Sam to next week but I do believe you will like him. Ultra Genius and doer builder like your formula. Built FTX from scratch after MIT physics. Second to Bloomberg in donations to Biden campaign.

https://danluu.com/elon-twitter-texts/#62

Yes. What happened here is a business took on risk, lost and failed. Let it fail.

Bailouts are bad when the government does it.

Bailouts are good when a private company does it (with money slurped up from sovereign wealth funds and pension plans)

/s

Bailouts ARE a Machiavellian outcome.

Please don't post like this to HN. You may not owe billionaires or former billionaires better, but you owe this community better if you're participating in it.

https://news.ycombinator.com/newsguidelines.html

Assuming 6% returns on his remaining $900 million invested in index funds, he’d be a billionaire again in two years doing nothing.

Not as fun admittedly as gambling, but commas are commas. Wealth is sticky is this comment’s thesis.

You don't think he sold his shares in some of the investment rounds? Adam Neumann of WeWork is still billionaire even though WeWork went bust. These scams won't stop till someone is prosecuted. SBF stated that VTX didn't trade customer assets and that VTX was just a custodian, he committed textbook wire fraud.

Dos commas, Richard

Maybe he cashed out a lot before this?

A lot of people lost a whole lot of money.

Where do you think it went?

> SBF was the “model citizen” to USA regulators

He very much wasn't. Probes had been ongoing for months [1].

[1] https://www.bloomberg.com/news/articles/2022-11-09/us-probes...

The main discussion was at https://news.ycombinator.com/item?id=33533088 but since the bloomberg.com article has more background, I think we can merge those comments hither. Thanks!