from Hacker News

FTX balance sheet, revealed

by parenthesis on 11/12/22, 9:47 PM with 298 comments

  • by neonate on 11/13/22, 6:59 AM

  • by Shank on 11/13/22, 7:37 AM

    The "before this week" column seems to be attempting to draw sympathy by saying "but everything was fine before, seriously!" when in reality it just proved that, even in the best of worlds, they had an extremely optimistic view of the entire crypto ecosystem, including its liquidity.

    I can't believe they seriously held that much of their total value in their own issued token. That's just preposterous. Imagine if JP Morgan Chase's entire value was in JP Morgan Chase stock, and they just reported that as their value in cash. It's like recursive valuation.

  • by celestialcheese on 11/13/22, 7:20 AM

    Incredible.

    To call all those "Less Liquid" tokens not "Illiquid" is a mastery in self-delusion.

    $2.1B SRM $981M SOL

    and then all the shitcoins built on those "technologies" where the tokens are their "shares" in those investments.

    But to call those tokens valuable assumes there's value in MAPS/OXY etc.

    But MAPS has a total market cap of $3.9m today - the forced liquidations in these positions will 100% crush these coins. Even SOL and SRC. Hell - other than their Robinhood position and the fiat and fiat-tokens, there's almost nothing of real value once these liquidations happen.

    My guess is less than $700m recoverable, so if you get an offer for >$0.10/dollar on your deposits from a vulture bankruptcy fund, I'd take it.

  • by SilverBirch on 11/13/22, 1:14 PM

    Using the word "Liquid" in the context of these accounts is... I don't know? Fraudulent? I understand that in the context of real finances things might be illiquid - it might take time to sell your house, or if you're a particularly big holder of stock in a company you founded you might have liquidity problems divesting over time. But it's really just taking the piss describing a lot of this stuff as "illiquid". FTT is a coin that they have made up themselves, which they themselves own the vast majority of, and which only had value in connection to the exchange that they just bankrupted. So no, it isn't "illiquid" its "worthless". It's not just that they'll take a hair cut if they liquidate it quickly, they could never liquidate even a significant portion of this. This whole thing started when CZ tried to liquidate 500m in FTT and the whole of FTX collapsed, they're now claiming their remaining FTT tokens are worth $600m (down from $6Bn). It's just so absurd to suggest you can mark to market like that.

  • by irusensei on 11/13/22, 9:54 AM

    The whole thing that is bugging me is that they made big political donations to both D and R. They use the money they conjured out of thin air and backed politicians with it. They probably backed the politicians who were most friendly to them. Those politicians might have won and that dirty money might have done a difference.

    Does that sound moral to you? I think it’s absolutely terrifying. Every candidate that received that money should have their relation to Scam Bankman-Fraud investigated. It gets worse when you realize his mother and business partner are either related to certain political parties and the SEC chairman.

  • by mudrockbestgirl on 11/13/22, 8:04 AM

    Okay, but... how? How did they manage to lose so much money by running a popular exchange that should bring in tons of fees? Even if they were gambling with part of the deposits, how can they lose 90% of all assets? You'd have to be actively trying to lose money to be this bad...

    Also, where does Alameda fit into the picture?

  • by bagels on 11/13/22, 7:42 AM

    Direct link to the image of sheet itself: https://d1e00ek4ebabms.cloudfront.net/production/7ab64a3b-6c...

  • by jjallen on 11/13/22, 8:18 AM

    The thing that I always wondered about with FTX (and Binance frankly) is how did they get so big so quickly. What did they have that caused so many people to use _their_ exchange. This is still unexplained and was a major red flag. Usually to grow that big takes many years. Just look at Coinbase.

  • by tasubotadas on 11/13/22, 11:09 AM

    I am quite surprised that nobody is talking about VCs (Sequoia) that happily poured money into this.

    What was their plan? Were they blind? Were they hoping to cash out before it crashed?

    Major investors usually get full visibility into the company.

  • by ekpyrotic on 11/13/22, 12:29 PM

    Even these accounts are deceiving.

    The current holdings are valued at today / yesterday's spot rate.

    Given that many of these holdings are in (comparatively) thinly traded alt-coins, as soon as you try to dispose of these levels of coins / tokens, the price will fall as supply overwhelms demand.

    Of course, this is represented by the fact that many of the alt-coins are marked as relatively illiquid -- and SBF has put a lackadaisical disclaimer at the top about the shifting price.

    But the reality is that regardless of how long you wait -- or how much you try to spread the disposals -- you will only ever get a percentage of the current spot rate, given the impact that the sales will always have on the price itself.

    I can't shake the feeling that SBF might say... "Yes, but once we have reassured the market, etc, etc, these alt-coins might recover in value -- and then we can dispose at this level."

    And, of course, the merry-go-round starts again.

  • by jmyeet on 11/13/22, 11:27 AM

    This is wild. My first question was: who is the CFO who signed off on this?

    FTX literally has no CFO [1]. How is this possible for a billion dollar company and billions in client assets? How did the investors not insist on an adult to manage the their investment?

    The CFO, and the credibility they bring to the table based on their track record and reputation, is part of the system that helps prevents situations like this.

    [1]: https://www.ledgerinsights.com/ftx-warning-signs-no-cfo/

  • by grey-area on 11/13/22, 8:33 AM

    FTX likely printed SRM token out of thin air to prop up their balance sheet.

    https://mobile.twitter.com/LucasNuzzi/status/159159590823988...

  • by vasco on 11/13/22, 10:28 AM

    Martin Shkreli (pharma bro) did a livestream on youtube[0] going over it a few days ago. Yes, he is out of jail.

    [0] https://youtu.be/XnwRMaW-Kdc

  • by Marazan on 11/13/22, 7:40 AM

    Im genuinely intrigued by the $2.2 billion in SRM

    The peak market capitalisation of SRM was less than 1.5 billion (according to coinmarketcap.com ) . So how could FTX's holdings every be valued at 2.2 billion?

  • by blue_light_man on 11/13/22, 8:09 AM

    The only lesson I learend from this whole debacle is never trust people and organisations you know from the Internet no matter how famous or humble or good they are. Trust the tech. But never the people. Especially for financial advices.

    Be it Sequoia. Or Yc. PG, Chamath, Mark Cuban ,Balaji or the Collision brothers. Tom Brady or SBF or CZ. Never fucking trust people or organisations.

    They are all here for their financial upsides.

    Only trust the tech. The maths. If you can't do the work you would be fucked by them.

    That's all.

    I am not saying PG did something shady. I am saying even a well regarded figure like him in this community should not be taken for granted unless they back their claims by sold evidence.

  • by thebeastie on 11/13/22, 7:58 AM

    FTX violated ancient banker wisdom: don’t get high on your own supply.

  • by macrolime on 11/13/22, 10:12 AM

    I haven't verified this for veracity, but supposedly a screenshot from tumblr blog of the CEO of Alameda Research

    "this blog endorses double-or-nothing coin flips and high leverage"

    https://pbs.twimg.com/media/FhaKXhRXwAEfvKD?format=jpg&name=...

  • by rippercushions on 11/13/22, 7:26 AM

    What the fresh hell? This isn't even an actual accounting balance sheet. He was trying to convince investors to put billions of dollars of actual money into FTX, and the best he could do is the sketchiest one-page Excel ever, complete with comments like "Hidden, poorly internally labled fiat@ account" (sic) worth 8 billion and warnings about typos! No wonder CZ got cold feet.

  • by guy_c on 11/14/22, 12:36 AM

    Based off the balance sheet FTX may have peaked (September 2021) with more than $100 billion of paper gains in "less liquid" assets.

      Token   Last wks  Last wks  Estimated   Peak     Peak         Peak
           value     price     holding    price    date         value
  FTT     $5.9bn    $24.00       246m      $77.69  09-Sep-2021  $19bn
  SRM     $5.4bn     $0.75     7,240m      $12.50  13-Sep-2021  $90bn
  SOL     $2.2bn    $32.00        70m     $258.78  07-Nov-2021  $18bn
    Just speculation, but once you've "made" $130bn you feel like a genius. You might want to start acting like a hundred billionare. Time to start throwing money around. Especially spending it on anything that helps you realise those gains.

    But FTT/SOL/SRM is not very liquid. So you use your liquid assets (i.e. your customers' USD, USDT, BTC and ETH). People might wonder where you get all this cash. You don't want to admit you are using customer funds and you only have gains on tokens you printed. So pretend you're genius trader and run a highly profitable exchange.

  • by bmitc on 11/13/22, 9:27 AM

    Does he really expect anyone to believe his “poorly labeled internal ... account” story? How can you have $8 BILLION mislabeled? As in, if he transferred or loaned it to Alameda, literally no one was asking: wait, where did this sum of money, so large that it is a massive percentage of our value and could crash the company, come from? Despite all the idiocies that we’re learning about, it is still hard to believe.

    Another thing is, it seems like this spreadsheet was hand-crafted by Sam Bankman-Fried just before their emergency meetings this past week. Why wasn’t this something that already existed for all top executives to see? How was it not just a printable document or report but was instead something he just typed up? Because no, it is not obvious that a balance sheet of a supposedly multi-billion dollar company would contain typos. Typos!? I mean, come on.

    Then again, I have worked with people similar to how Sam Bankman-Fried seems to operate. Not the possible sociopathic tendencies he appears to have but the sort of twitchy smarts he does seem to have. People like that can sometimes think so fast with a lot of confidence that they create this wake of stuff behind them as they work. They “solve” (i.e., move through) problems so fast, that everyone gets lost in the wake and can’t catch up to find all the mistakes left behind or tie the loose ends together. They consider a problem solved if it’s essentially solved but doesn’t have details thought out or if there are possible mistakes that can be “easily” solved in ways not apparent to anyone else. If there’s no one around to slow these types of workers down, it can be complete chaos where you have one person spearheading away through the bushes, while everyone else is getting slapped in the face with the branches snapping back and thorns. At some point everyone gives up trying to follow. Then the person is off on their own where they lose sight of whatever actual problem they were solving and lose track of the bigger picture.

    It is entirely possible that that is a component of what has happened here, coupled with some sociopathy, megalomania, and billions of dollars of funding in Sam Bankman-Fried’s case.

  • by AmericanOP on 11/13/22, 7:33 AM

    My mental model of the blockchain industry is akin to FTXs balance sheet.

    I see an endless string of branded code servicing similar technologies, but where are the customer inputs putting in the billions needed to support the industry? Is blockchain liquidating crypto valuations into developer salaries with a VC subsidy?

  • by celestialcheese on 11/13/22, 7:45 AM

    Good tweet on decoding the illiquid assets

    https://mobile.twitter.com/metavestor/status/159120025903564...

  • by password4321 on 11/13/22, 7:42 AM

    The stories so far (HN items with >100 comments):

    Tuesday 11/08

    129 https://news.ycombinator.com/item?id=33518961 FTX Appears to Have Stopped Processing Withdrawals, On-Chain Data Show (theblock.co)

    747 https://news.ycombinator.com/item?id=33520585 Binance to acquire FTX (bloomberg.com)

    110 https://news.ycombinator.com/item?id=33523274 FTX Token, FTT down by more than 80% in less than 24 hours (ftx.com)

    Wednesday 11/09

    430 https://news.ycombinator.com/item?id=33535161 FTX’s financial black hole leaves Binance balking at rescue plan (bloomberg.com)

    420 https://news.ycombinator.com/item?id=33537821 We will not pursue the potential acquisition of FTX (twitter.com/binance)

    Thursday 11/10

    189 https://news.ycombinator.com/item?id=33541790 Ftx.com Has Probably Collapsed (effectivealtruism.org)

    197 https://news.ycombinator.com/item?id=33547102 The Sam Bankman-Fried empire crumbled. What happened? (mollywhite.net)

    516 https://news.ycombinator.com/item?id=33547863 FTX tapped into customer accounts to fund risky bets, setting up its downfall (wsj.com)

    Friday 11/11

    108 https://news.ycombinator.com/item?id=33558225 FTX Yikes (rekt.news)

    1168 https://news.ycombinator.com/item?id=33561234 FTX to file for U.S. bankruptcy, CEO resigns (reuters.com)

    Saturday 11/12

    800 https://news.ycombinator.com/item?id=33570274 FTX faces potential hack, sees mysterious outflows totaling more than $600M (coindesk.com)

    174 https://news.ycombinator.com/item?id=33571734 FTX investor Sequoia removed its glowing profile of Sam Bankman-Fried (businessinsider.com)

    174 https://news.ycombinator.com/item?id=33575281 FTX held less than $1B in liquid assets against $9B in liabilities (ft.com)

    139 https://news.ycombinator.com/item?id=33577311 FTX hacker identity discovered by Kraken Exchange team? (cryptoslate.com)

    >> https://news.ycombinator.com/item?id=33577437 FTX balance sheet, revealed (ft.com)

    ^^ You are here ^^

  • by pigtailgirl on 11/13/22, 8:03 AM

    "What are President tokens? President tokens are ERC-20 tokens that will be redeemable for either $1 or $0 based on if Trump wins or loses the Presidential election. These markets act as tradeable prediction markets where the market price of TRUMPWIN should be roughly equal to the probability that Trump will win the election and the market price of TRUMPLOSE should be roughly equal to 1 minus that probability. TRUMPWIN and TRUMPLOSE are based on the President 2020 Futures Contracts on FTX."

    jfc...

  • by lysecret on 11/13/22, 7:38 AM

    Wait will the forced liquidation crush a large part of crypto ?

  • by collaborative on 11/13/22, 7:17 AM

    Was he managing funds with a 10% fractional banking policy?

  • by Dowwie on 11/13/22, 10:14 AM

    To what extent were responsible members of the financial industry hired to try to turn FTX into a legitimate financial company? Was everyone a "brilliant outsider", irreverent to hundreds of years of industry wisdom?

  • by w1nst0nsm1th on 11/13/22, 5:37 PM

    There should be a newcomer financial book titled "How to get rich quick if you don't mind being a crook".

    The very first book to read before any other on finance and investment.

    It would be the like of telling your kid "Beware of the wolf before sending her through the wood to pay a visit to Granny"...

  • by World177 on 11/13/22, 11:17 AM

    They definitely lost money with Luna/UST. [1] I wonder if we'll ever find out how much they lost

    [1] https://twitter.com/AlamedaTrabucco/status/15233819532395233...

  • by zajio1am on 11/13/22, 6:22 PM

    Perhaps crypto-exchange could be transparent to third-parties through blockchain(s)? It should not be hard to declare all account numbers, so whole crypto-balance could be online validated.

  • by nullc on 11/13/22, 7:06 PM

    Short bitcoin, long shitcoin... that's been a slow road to insolvency for most of a decade.

  • by kumarvvr on 11/13/22, 7:34 AM

    Unable to open the archived link, any alternative sources for the actual document?

  • by PYTHONDJANGO on 11/13/22, 10:19 AM

    Please post an URL to the excel file, thanks!

  • by TotoHorner on 11/13/22, 7:12 AM

    So... is this guy just a complete sociopath or something?

    Telling everyone what regulations should be (and buying politicans) to ensure consumer protection while simultaneously sifting away 90% of consumer funds?

    How does a person lie that much?

  • by d3vmax on 11/13/22, 12:26 PM

    Remember at the peak how many pro-crypto HN commenters would give all kinds of tech/politics/economic pros of crypto. It was all a sham. Anyone who knows tech and seen the progress from the 90s could smell the shit that is crypto. Unnecessarily difficult than it had to be, to obfuscate the fact it was bullocks through and through.