FTX saga unravels more after the crypto exchange's bankruptcy filing

The bankruptcy filing of crypto exchange FTX on Friday did not stop the chaos surrounding the once prominent and trusted crypto trading venue.

Since the filing that included 135 affiliated companies, millions of dollars in crypto have been stolen from the company, which is facing a shortfall between $6 billion and $10 billion. Bahamian officials are also probing the matter.

As a sheltered innocent, I had never heard of FTX before today, when a friend texted me a link to an ESPN story about the Miami Heat basketball team taking that name off of the arena where they play. It reminded me of how the Houston Astros used to play at Enron Field or Stadium or something like that until Enron disappeared from the face of the earth. A similar cautionary tale of capitalism is currently unfolding.

The scope of this story:

From Friday to Sunday, the global market capitalization for crypto assets is down 3% from $856 billion to $831 billion. Since November 1, it has fallen by 18% from a little over $1 trillion, according to Coinmarketcap.

A hundred billion clams gone poof in a couple of weeks, raising the question of whether that "money" ever existed in the first place.

On Friday night, approximately $663 million in crypto mysteriously flowed out of wallets linked to the now bankrupt exchange.

John Jay Ray III, the new chief restructuring officer and CEO who was appointed less than 24 hours before, said in a statement Saturday morning: “Unauthorized access to certain assets has occurred.”

Of the total outflow, about $477 million is estimated to have been stolen, while the remaining has been moved to cold storage by FTX for safeguarding, according to blockchain analytics firm, Elliptic.

“Process was expedited this evening - to mitigate damage upon observing unauthorized transactions,” FTX US's general counsel, Ryne Miller, said on Twitter.

FTX declined to comment further on the matter.

Willie Sutton evidently has become a computer nerd. And an accomplished sophist:

FTX will deal with the same “big legal question” as crypto lenders Celsius Network and Voyager, Greg Plotko, a legal partner with Crowell & Moring, told Yahoo Finance. That's whether crypto held in customer accounts belongs to the customers themselves or the bankruptcy estate.

I am utterly ignorant about these financial/technocratic issues. but I am by education a lawyer, and I get this point. Creditors want to get paid whatever they are owed and they don't give a fuck from whom.

Yahoo news goes on to describe the dominos to fall:

“There’s also almost certainly massive amounts of criminal fraud that led to this scenario and as a result, we can expect this will be a very messy public trial that will lead to bad publicity and regulatory backlash for the [crypto] industry,” Haseeb Quershi, a managing partner with venture firm, DragonFly Capital, told Yahoo Finance.

Like Quershi's firm Dragonfly, several larger name crypto hedge funds and market makers have assets trapped on FTX, including Galaxy Digital, Multicoin Capital, Jump Trading, Wintermute, and Galois Capital.

"When you have these situations, there are a lot of institutions that want to exit their positions. They don't want to be stuck in a bankruptcy for two years, waiting for payouts," Plotko said. There's already a lot of holes as to where all the money went. Institutions and individuals may want to sell out."

Great turn of phrase "a lot of holes as to where the money went"

I told my friend that I never understand anything i read or hear about crypto, pro or con. It all sounds to me like selling the Brooklyn Bridge over and over again.

I aimed my own amateur satire at this quintessential geek institution a while back:
Submitted by fire with fire on Sat, 05/14/2022 - 1:15pm

Speaking of Sharks

I just put half of my life savings into a can't miss cryptocurrency based on tickets to the Sigfried and Roy show in Las Vegas. There were a finite number of tickets issued over the decades of their spectacular presentations, but an unknown number still exist -- some torn in half at the entrance and others, the pristine tickets, remain somewhere after their purchasers did not attend the performance.

An algorithm projects the "value" of each category and block chain technology will prevent clandestine manipulation of the price.

The cryptocurrency is called the Barnum.

Hard to call them innocent but there are victims already in the FTX saga:

Crypto lender BlockFi has also gone silent since officially announcing a freeze on customer withdrawals Thursday night. Since then, a number of customers have noted their BlockFi credit cards no longer work.

While BlockFi isn't included in the FTX Chapter 11 filing, the firm is expected to be a major creditor after it took an emergency $400 million line of credit from FTX in late June.

As recently as Monday, BlockFi attempted to relaunch its yield product. On Tuesday, COO Flori Marquez announced the firm was "fully operational." BlockFi did not respond to comments on its status through the weekend.