The FTX fallout
The new bankruptcy CEO’s first evaluation of FTX has just been submitted, and it makes for an interesting read; he claims that this is the worst situation he has ever encountered in his career, and he was part of Enron. This thing did not have a financial team, a cash management system, a list of its bank accounts, a list of its personnel, or their contractual obligations. In addition to lending the company’s founder one billion dollars, the business was using corporate funds to purchase apartments in the names of employees working there. In the meantime, the founder direct messaged a Vox reporter this week to admit that he had loaned client funds to his hedge fund while attempting to present the situation as primarily chaos rather than fraud. If you want to know how the phrase “we went into this with the best intentions” works in court, ask Elizabeth Holmes (or ask Brett from Pulp Fiction).
If you build an exchange for trading a thing and then steal or lose the balances of that thing that your customers have in their accounts, this tells us very little or nothing about the item that it is being traded. However, this does not mean that there is not a shift in emotion, as well as a variety of other implications that are cascading from it. This happens in bubbles, but the bubble may be tulips in 1636 or Amazon in 1999. Sometimes it’s tulips, and sometimes it’s Amazon.
