*Everything in this article is simply an opinion.
“Well, let me tell you, investing in the stock market can be a wild ride. Now, don’t get me wrong, it can be incredibly rewarding, but it can also be a bit of a rollercoaster. You see, the market is always changing, and there’s always something new to worry about. But, here’s the thing. You can’t let that get to you. You’ve got to have a plan, and stick to it. The key is to keep a level head and not get caught up in all the noise. You see, the market is going to have its ups and downs, but over the long-term, it’s proven to be a great creator of wealth.”
We are switching up today at Iodine Trading Systems, as finding humor in the turmoil of the financial markets. Instead of talking about forex market fluctuations due to US Treasury yields, the inflation riots in France, or the surprise rally to start 2023, today’s content comes courtesy of Sam Bankman-Fried, SBF for short, and his amazing post detailing FTX’s deplorable actions that resulted in its collapse. His lawyer is ecstatic.
To the surprise of no one, SBF continues to blame Binance for its own collapse, even though Binance liquidated FTX tokens only after due diligence on the firm found a multi-billion dollar hole in its balance sheet. Today, we breakdown some hilarious claims made by SBF in his post titled: “FTX’s Pre Mortem Overview”. (Group Chat Wire Fraud)
The Excel Sheet Makes Another Appearance
The excel sheet that provides accounting for supposedly $100B NAV of assets of Alameda made 7 appearances in this article. But note, everything is “JUST AN ESTIMATE”. Oh, and of the $100B NAV, only 7% is considered liquid, and only 1.8% was on FTX! Incredibly, Alameda has more liabilities on FTX than assets. So wait a minute, SBF claims to have no control of other assets on other platforms and exchanges, but includes those assets in his defense. In addition, he admits 84% of Alameda’s assets were not completely liquid. What is the breakdown of this? How does he determine what is liquid and what is not? I do not think even his attorneys know.
Then, he admits even his current accounting does not account for liquidity, but still attempts to portray his own borrowing in terms of full liquidity:
“Over the course of 2021, Alameda’s Net Asset Value skyrocketed, to roughly $100b marked to market by the end of the year by my model. Even if you ignore assets like SRM that had much larger fully diluted than circulating supplies, I think it was still roughly $50b.”
Wow, big difference buddy. I really have to wonder how much of NAV comes from FTT (FTX’s Token allegedly propped up by self-dealing). You cannot take money, increase the mark to market value of your assets BEYOND THE LIQUIDITY OF THE MARKET, AND BORROW AGAINST IT AS IF IT IS 100% COLLATERALIZED!
He goes on to further admit that right before the crash Alameda had net liquid assets of $8B, but somehow net asset value of $10B. Anyone see the problem here? I have a pet rock that has similar value.
“ FTX International retains significant assets–roughly $8b of assets of varying liquidity as of when Mr. Ray took over.”
Miscomputation of the value of your assets does not entitle you to borrow against its entire value and claim everyone can be made whole. FTT exchange rates against all other assets on the platform will not hold at mark to market valuation. Unlike, lets say, if you had $1B in SP500 futures, you could take a loan at a value of over 20% NAV against it, but not 100% at that scale.
“I have, for instance, offered to contribute nearly all of my personal shares in Robinhood to customers–or 100%, if the Chapter 11 team would honor my D&O legal expense indemnification.”
It is unclear if he is talking about the shares he owns in a personal brokerage account or the ones that he is fighting to steal back from customers that were seized by the DOJ last week. You cannot liquidate your own customers of their collateral, lie about it, and pretend you do not know what you are doing. While we do not claim that he did this, there are allegations in line with that statement, and numerous financial experts
“Alameda was in theory exposed to an extreme market crash–but it would take something like a 94% crash to bankrupt it.”
You crashed 96%, and you waited until you crashed 96% to state this. If one know a tail risk event can cause this, one should de-leverage to prevent possibilities of this from happening.
“There were billions of dollars of funding offers when Mr. Ray took over, and more than $4b that came in after. If FTX had been given a few weeks to raise the necessary liquidity, I believe it would have been able to make customers substantially whole.”
On a final note, we find it hard to believe that investors would be willing to close on a deal where the SEC and CFTC are mulling civil suits against the investment and the founder is under house arrest. Even CZ was smart enough not to get arrested.
Well, for now. 2023 should be full of surprises!