What is to be made of former FTX boss Sam Bankman-Fried’s bizarre string of recent Twitter posts?
After individually spelling out W H A T H A P P E N E D over the course of a day, he reminded us, in all-caps, that whatever subtext could be hidden in his cryptic posts was “NOT LEGAL ADVICE. NOT FINANCIAL ADVICE. THIS IS ALL AS I REMEMBER, BUT MY MEMORY MIGHT BE FAULTY IN PARTS”.
If we’re running on the assumption that his account has not been hacked, the options are… Well I have no idea.
10) [NOT LEGAL ADVICE. NOT FINANCIAL ADVICE. THIS IS ALL AS I REMEMBER IT, BUT MY MEMORY MIGHT BE FAULTY IN PARTS.]We did get a more coherent statement in the past few hours when SBF Tweeted: “I'll get to what happened. But for now, let's talk about where we are today.”— SBF (@SBF_FTX) November 15, 2022
Unfortunately, there was no follow up with anything more concrete, but as for the latest in the FTX news cycle, here’s what we’ve learned:
Frontrunning
SBF’s venture fund Alameda Research may have been frontrunning FTX listings, according to a Wall Street Journal report citing an analysis of public blockchain data from analytics firm Argus.
Frontrunning is an illegal insider trading practice of buying a financial instrument ahead of a public listing.
In this instance, Alameda apparently held $60mln worth of 18 different tokens that were eventually listed on FTX.
“What we see is they’ve basically almost always in the month leading up to it bought into a position that they previously didn’t,” Argus co-founder Omar Amjad told the Wall Street Journal, adding: “It’s quite clear there’s something in the market telling them they should be buying things that they previously hadn’t.”
Frontrunning can incur lengthy prison sentences.
One million creditors
FTX has over one million individual creditors, according to its rushed bankruptcy filing filed on Monday evening.
FTX in contact with financial regulators and had appointed five new independent directors at each of its main companies including Alameda Research, according to the Delaware filings.
The new leadership is in contact with “the US Attorney’s Office, the US Securities and Exchange Commission, the Commodity Futures Trading Commission, and dozens of federal, state and international regulatory agencies”, say the documents.
A leaked spreadsheet shows that FTX held $900mn in assets against $9bn of liabilities.
Contagion
SBF’s downfall has hit more than just his own companies.
Lending platform BlockFi, previously bailed out by FTX, has paused withdrawals, while a number of high-profile private equity firms are watching their investments circle the drain.
Most recently, Ikigai Fund head Travis Kling disclosed that he had “a large majority of the hedge fund’s total assets on FTX”.
Unfortunately, I have some pretty bad news to share. Last week Ikigai was caught up in the FTX collapse. We had a large majority of the hedge fund’s total assets on FTX. By the time we went to withdraw Monday mrng, we got very little out. We’re now stuck alongside everyone else.Cardano founder Charles Hoskinson warned of more contagion to come in a recent YouTube video.— Travis Kling (@Travis_Kling) November 14, 2022
“Crypto didn’t fail, people failed,” said Hoskinson. There are undoubtedly more revelations to come.