SBK's Letter to FTX Employees is Quite Hilarious...

LionDeNittany

Well-Known Member
May 29, 2001
47,117
22,827
1
DFW, TX
I mean it truly doesn't get any better than this. The big question is, how on earth did this guy ever get to this point? He's clearly a zero.

My main takeaways are this:

1. Yes SBK, if you got more investor money the Ponzi scheme would have kept going. More investor money means you could have used that money to pay other depositors.

2. SBK clearly is a sociopath. He talks about how sorry he is, but he clearly feels he didn't do anything wrong. Basically blames the market and small oversights.

3. This one is a doozy: "nor did I realize the magnitude of the risk posed by a hyper-correlated crash" Is this guy some kind of idiot? Hyper-correlation describes the entire crypto market.

4. "And none of this changes the fact that this all sucks for you guys, and it’s not your fault, and I’m really sorry about that" This guy, who speaks like this, was presenting alongside Fed Governors.

LdN

Hi all—

I feel deeply sorry about what happened. I regret what happened to all of you. And I regret what happened to customers. You gave everything you could for FTX, and stood by the company—and me.

I didn’t mean for any of this to happen, and I would give anything to be able to go back and do things over again. You were my family. I’ve lost that, and our old home is an empty warehouse of monitors. When I turn around, there’s no one left to talk to. I disappointed all of you, and when things broke down I failed to communicate. I froze up in the face of pressure and leaks and the Binance LOI and said nothing. I lost track of the most important things in the commotion of company growth. I care deeply about you all, and you were my family, and I’m sorry.

I was CEO, and so it was my duty to make sure that, ultimately, the right things happened at FTX. I wish that I had been more careful.

I want to give you a better description of what happened—one I should have written out as best I understood it much earlier.

Piecing things together recently, making approximations—I don’t have full data access right now to get precise answers—and marking everything to market, regardless of liquidity, I believe that the events that led to the breakdown this month included:

1) A crash in markets this spring that led to a roughly 50% reduction in the value of collateral;

a. ~$60b collateral, ~$2b liabilities -> ~$30b collateral, ~$2b liabilities

2) Most of the credit in the industry drying up at once;

a. ~$25b collateral, ~$8b liabilities

3) A concentrated, hyper-correlated crash in November that led to another roughly 50% reduction in the value of collateral over a very short period of time, during which there was very little market bid-side liquidity;

a. ~$17b collateral, ~8b liabilities

4) A run on the bank triggered by the same attacks in November;

a. ~$9b collateral

5) As we frantically put everything together, it became clear that the position was larger than its display on admin/users, because of old fiat deposits before FTX had bank accounts:

a. ~$9b collateral, ~$8b liabilities

I never intended this to happen. I did not realize the full extent of the margin position, nor did I realize the magnitude of the risk posed by a hyper-correlated crash. The loans and secondary sales were generally used to reinvest in the business—including buying out Binance—and not for large amounts of personal consumption.

I deeply regret my oversight failure. In retrospect, I wish that we had done many many things differently. To name a few:

a) being substantially more skeptical of large margin positions

b) examining stress test scenarios involving hyper-correlated crashes and simultaneous runs on the bank

c) being more careful about the fiat processes on FTX

d) having a continuous monitor of total deliverable assets, total customer positions, and other core risk metrics

e) Putting in more controls around margin management.

And none of this changes the fact that this all sucks for you guys, and it’s not your fault, and I’m really sorry about that. I’m going to do what I can to make it up to you guys—and to the customers—even if that takes the rest of my life. But I’m worried that even then I won’t be able to.

I also want to acknowledge those of you who gave me what I now believe to be the right advice about pathways forward for FTX following the crash. You were right, of course: I believe that a month earlier FTX had been a thriving, profitable, innovative business. Which means that FTX still had value, and that value could have gone towards helping to make everyone more whole. We likely could have raised significant funding; potential interest in billions of dollars of funding came in roughly eight minutes after I signed the Chapter 11 docs. Between those funds, the billions of dollars of collateral the company still held, and the interest we’d received from other parties, I think that we probably could have returned large value to customers and saved the business.

There would have had to be changes, of course: way more transparency, and way more controls in place, including oversight of myself. But FTX was something really special, and you all helped make it that. Nothing that happened was your fault. We had to make very hard calls very quickly. I have been in that position before, and should have known that when shitty things happen to us, we all tend to make irrational decisions. An extreme amount of coordinated pressure came, out of desperation, to file for bankruptcy for all of FTX—even entities that were solvent—and despite other jurisdictions’ claims. I understand that pressure and empathize with it; a lot of people had been thrust into challenging circumstances that generally were not their fault. I reluctantly gave in to that pressure, even though I should have known better; I wish I had listened to those of you who saw and still see value in the platform, which was and is my belief as well.

Maybe there still is a chance to save the company. I believe that there are billions of dollars of genuine interest from new investors that could go to making customers whole. But I can’t promise you that anything will happen, because it’s not my choice. In the meantime, I’m excited to see some positive steps being taken, like LedgerX being turned back on.

I’m incredibly thankful for all that you guys have done for FTX over the years, and I’ll never forget that.

—SBF
 

LionDeNittany

Well-Known Member
May 29, 2001
47,117
22,827
1
DFW, TX
Not sure if anyone saw this. Good listen. He and sbf were before congress I believe earlier this year. If you get a chance to watch some of that you’ll have a good feeling for this guy and sbf.


CME is so corrupt and tied to government this isn't surprising.

This guy was unhappy FTX was taking their spot as a government favorite.
 

ChiTownLion

Well-Known Member
May 29, 2001
32,722
40,383
1
Not sure if anyone saw this. Good listen. He and sbf were before congress I believe earlier this year. If you get a chance to watch some of that you’ll have a good feeling for this guy and sbf.


CME is so corrupt and tied to government this isn't surprising.

This guy was unhappy FTX was taking their spot as a government favorite.
Terry Duffy did some pretty great things with CME Group.
 

ChiTownLion

Well-Known Member
May 29, 2001
32,722
40,383
1

rumble_lion

Well-Known Member
Aug 7, 2011
23,637
5,794
1
I mean it truly doesn't get any better than this. The big question is, how on earth did this guy ever get to this point? He's clearly a zero.

My main takeaways are this:

1. Yes SBK, if you got more investor money the Ponzi scheme would have kept going. More investor money means you could have used that money to pay other depositors.

2. SBK clearly is a sociopath. He talks about how sorry he is, but he clearly feels he didn't do anything wrong. Basically blames the market and small oversights.

3. This one is a doozy: "nor did I realize the magnitude of the risk posed by a hyper-correlated crash" Is this guy some kind of idiot? Hyper-correlation describes the entire crypto market.

4. "And none of this changes the fact that this all sucks for you guys, and it’s not your fault, and I’m really sorry about that" This guy, who speaks like this, was presenting alongside Fed Governors.

LdN

Hi all—

I feel deeply sorry about what happened. I regret what happened to all of you. And I regret what happened to customers. You gave everything you could for FTX, and stood by the company—and me.

I didn’t mean for any of this to happen, and I would give anything to be able to go back and do things over again. You were my family. I’ve lost that, and our old home is an empty warehouse of monitors. When I turn around, there’s no one left to talk to. I disappointed all of you, and when things broke down I failed to communicate. I froze up in the face of pressure and leaks and the Binance LOI and said nothing. I lost track of the most important things in the commotion of company growth. I care deeply about you all, and you were my family, and I’m sorry.

I was CEO, and so it was my duty to make sure that, ultimately, the right things happened at FTX. I wish that I had been more careful.

I want to give you a better description of what happened—one I should have written out as best I understood it much earlier.

Piecing things together recently, making approximations—I don’t have full data access right now to get precise answers—and marking everything to market, regardless of liquidity, I believe that the events that led to the breakdown this month included:

1) A crash in markets this spring that led to a roughly 50% reduction in the value of collateral;

a. ~$60b collateral, ~$2b liabilities -> ~$30b collateral, ~$2b liabilities

2) Most of the credit in the industry drying up at once;

a. ~$25b collateral, ~$8b liabilities

3) A concentrated, hyper-correlated crash in November that led to another roughly 50% reduction in the value of collateral over a very short period of time, during which there was very little market bid-side liquidity;

a. ~$17b collateral, ~8b liabilities

4) A run on the bank triggered by the same attacks in November;

a. ~$9b collateral

5) As we frantically put everything together, it became clear that the position was larger than its display on admin/users, because of old fiat deposits before FTX had bank accounts:

a. ~$9b collateral, ~$8b liabilities

I never intended this to happen. I did not realize the full extent of the margin position, nor did I realize the magnitude of the risk posed by a hyper-correlated crash. The loans and secondary sales were generally used to reinvest in the business—including buying out Binance—and not for large amounts of personal consumption.

I deeply regret my oversight failure. In retrospect, I wish that we had done many many things differently. To name a few:

a) being substantially more skeptical of large margin positions

b) examining stress test scenarios involving hyper-correlated crashes and simultaneous runs on the bank

c) being more careful about the fiat processes on FTX

d) having a continuous monitor of total deliverable assets, total customer positions, and other core risk metrics

e) Putting in more controls around margin management.

And none of this changes the fact that this all sucks for you guys, and it’s not your fault, and I’m really sorry about that. I’m going to do what I can to make it up to you guys—and to the customers—even if that takes the rest of my life. But I’m worried that even then I won’t be able to.

I also want to acknowledge those of you who gave me what I now believe to be the right advice about pathways forward for FTX following the crash. You were right, of course: I believe that a month earlier FTX had been a thriving, profitable, innovative business. Which means that FTX still had value, and that value could have gone towards helping to make everyone more whole. We likely could have raised significant funding; potential interest in billions of dollars of funding came in roughly eight minutes after I signed the Chapter 11 docs. Between those funds, the billions of dollars of collateral the company still held, and the interest we’d received from other parties, I think that we probably could have returned large value to customers and saved the business.

There would have had to be changes, of course: way more transparency, and way more controls in place, including oversight of myself. But FTX was something really special, and you all helped make it that. Nothing that happened was your fault. We had to make very hard calls very quickly. I have been in that position before, and should have known that when shitty things happen to us, we all tend to make irrational decisions. An extreme amount of coordinated pressure came, out of desperation, to file for bankruptcy for all of FTX—even entities that were solvent—and despite other jurisdictions’ claims. I understand that pressure and empathize with it; a lot of people had been thrust into challenging circumstances that generally were not their fault. I reluctantly gave in to that pressure, even though I should have known better; I wish I had listened to those of you who saw and still see value in the platform, which was and is my belief as well.

Maybe there still is a chance to save the company. I believe that there are billions of dollars of genuine interest from new investors that could go to making customers whole. But I can’t promise you that anything will happen, because it’s not my choice. In the meantime, I’m excited to see some positive steps being taken, like LedgerX being turned back on.

I’m incredibly thankful for all that you guys have done for FTX over the years, and I’ll never forget that.

—SBF

He did an interview 6 months ago explaining how the crypto market works. This guy wasn't hiding anything.

 
  • Like
Reactions: The Spin Meister

rumble_lion

Well-Known Member
Aug 7, 2011
23,637
5,794
1
This is effectively how most internet conpanies got started during the 2000s.

LdN

It's not the same thing at all. I'm sure there were internet startups that were frauds, but most were not. It's not the same thing to try to create a company that does something and failing vs. just creating something that has no use or fundamental value.
 
  • Like
Reactions: PSUEngineer89

LionDeNittany

Well-Known Member
May 29, 2001
47,117
22,827
1
DFW, TX
It's not the same thing at all. I'm sure there were internet startups that were frauds, but most were not. It's not the same thing to try to create a company that does something and failing vs. just creating something that has no use or fundamental value.

Were you alive during the internet boom and bust?

There were 1000s of companies which were never going to be successful
 

PSUEngineer89

Well-Known Member
Aug 14, 2021
6,944
11,976
1
You're wrong. His business was an exchange. Like many brokerages, they took stupid and too much risk.

Most internet companies were mere ideas. Not even companies or business plans.

LdN
Could be.

I understood they needed “new investment” to pay off “existing investments”
 

LionDeNittany

Well-Known Member
May 29, 2001
47,117
22,827
1
DFW, TX
Could be.

I understood they needed “new investment” to pay off “existing investments”

The video was him talking about how new coins are created and build value. And, basically one of the services FTX provides.

What he said is that simply by him investing, people then will invest.

Not too far off from why Uggs pays Kim K
 

rumble_lion

Well-Known Member
Aug 7, 2011
23,637
5,794
1
The video was him talking about how new coins are created and build value. And, basically one of the services FTX provides.

What he said is that simply by him investing, people then will invest.

Not too far off from why Uggs pays Kim K

The video was him talking about how new coins are created and build value.

How do new coins "build value"?

Not too far off from why Uggs pays Kim K

Yeah, but Uggs are a real product. It's not unusual for people to buy shoes to wear on their feet.
 
  • Like
Reactions: NJPSU

LionDeNittany

Well-Known Member
May 29, 2001
47,117
22,827
1
DFW, TX
The video was him talking about how new coins are created and build value.

How do new coins "build value"?

Not too far off from why Uggs pays Kim K

Yeah, but Uggs are a real product. It's not unusual for people to buy shoes to wear on their feet.

Shoes are a product. Uggs is a brand which is not a product.

My comments were over your head.
 
  • Like
Reactions: bourbon n blues

Obliviax

Well-Known Member
Gold Member
Aug 21, 2001
110,638
62,626
1
Yep, this is early. I just hold three tokens I think will payoff long term. Much of this staking, shorts, and longs is extremely risky . I stay away.
Agreed. The value and utility of crypto are pretty solid. In the early days, we are in, it is still very volatile. The challenge with crypto is that it is not backed by any nation or nations (for the most part). So it isn't pegged to anything. The dollar is backed by the USA, for example. The value of crypto is that it is NOT backed by the USA or any other nation. By that I mean that countries can't screw it up. It is a two edged sword: they can't regulate it and they can't screw it up. In the USA, banking has been uber stable. This isn't true in India, Russia, Argentina...Hell, it isn't true in Canada after Trudeau reached into people's bank accounts and froze them. (yet, today, is supporting China protests...go figure).

Crypto will find its place and stabilize. But people bought through these companies on a wish and promise. They were horribly mismanaged and perhaps, criminally so. Over the long run, conservatism always wins.
 
  • Like
Reactions: LionDeNittany

bourbon n blues

Well-Known Member
Nov 20, 2019
25,847
30,648
1
Hmmm, did BlockFi have a product or a brand? Because they just filed for Chapter 11 bankruptcy.
Go back and see how many dot com and other tech start ups failed.
Even successful businesses can, I enjoyed Chi Chis for example:
You really don't have a point. Early investing is extremely risky and and because of that most miss those opportunities .
You're arguing with a guy who bought ethereum for app $3. The current price is $1262.02 at this moment . I'm betting he bought more the $30 worth but if that's all he spent he has $12,620.20.
Most would take that ROI in 5-7 years. He also runs a successful business from what I understand . I'll listen to him on all matters before I even think of taking you seriously.
 

bourbon n blues

Well-Known Member
Nov 20, 2019
25,847
30,648
1
I don't think it's technically a Ponzi scheme , but it's a good point. They did run an exchange and it's possible that people bought crypto and moved off site. However if you bought their coin, it makes sense.
But if you had other assets there he just stole your money. But I'm quibbling , so I think the name fits well enough.
 

Obliviax

Well-Known Member
Gold Member
Aug 21, 2001
110,638
62,626
1
Go back and see how many dot com and other tech start ups failed.
Even successful businesses can, I enjoyed Chi Chis for example:
You really don't have a point. Early investing is extremely risky and and because of that most miss those opportunities .
You're arguing with a guy who bought ethereum for app $3. The current price is $1262.02 at this moment . I'm betting he bought more the $30 worth but if that's all he spent he has $12,620.20.
Most would take that ROI in 5-7 years. He also runs a successful business from what I understand . I'll listen to him on all matters before I even think of taking you seriously.
Yeah...his problem isn't that he bought it, it is that he a) spent lavishly off of its value and b) lent it. When the top blew off, he was way over extended. He spent, what, $30m on democrats? Of course, that may be paying off in that the politicos and media are protecting him.
 
  • Like
Reactions: bourbon n blues

bourbon n blues

Well-Known Member
Nov 20, 2019
25,847
30,648
1
Yeah...his problem isn't that he bought it, it is that he a) spent lavishly off of its value and b) lent it. When the top blew off, he was way over extended. He spent, what, $30m on democrats? Of course, that may be paying off in that the politicos and media are protecting him.
I think it all was a scam and he lacked business sense, sort of. He was trying to cozy up to politicians obviously .
Crypto does appeal to various personalities , one type is a boomer who missed the tech boom Lolol. It's early and if you guess will , maybe a little educated guessing , you'll have a huge pay off.
 

Obliviax

Well-Known Member
Gold Member
Aug 21, 2001
110,638
62,626
1
I think it all was a scam and he lacked business sense, sort of. He was trying to cozy up to politicians obviously .
Crypto does appeal to various personalities , one type is a boomer who missed the tech boom Lolol. It's early and if you guess will , maybe a little educated guessing , you'll have a huge pay off.
A lot goes with being young. If it is too good to be true, it probably isn't true. Right now, there is a LOT of wealth xfer as hard-working boomers cycle out and a lot of under-30s have cash. Many are from large life insurance policies that didn't exist in the last generation. Kids these days, as always really, think they are smarter than the previous generation. We had our woodstocks and kent states. They have their BLMs and rages.

It all feeds the adage: if you are under 30 and not a democrat you have no heart. If you are over 40 and not a republican, you have no brain. Kids believe the BS that Obama and Biden spew. I ask them how their lives improved under Obama. Are they better off financially? clearly not. Has global warming subsided? No. Are we out of foreign wars? No. Are race relations better? they are worse. So was the investment worth it? The answer is clearly no.

As you get older, if you are smart, you realize the fools gold being peddled by democrats and seek to self-govern. The GOP is full of idiots and demigods but in the end, they are for smaller govt and lower taxes. They give you a better chance to self-govern.
 

bourbon n blues

Well-Known Member
Nov 20, 2019
25,847
30,648
1
A lot goes with being young. If it is too good to be true, it probably isn't true. Right now, there is a LOT of wealth xfer as hard-working boomers cycle out and a lot of under-30s have cash. Many are from large life insurance policies that didn't exist in the last generation. Kids these days, as always really, think they are smarter than the previous generation. We had our woodstocks and kent states. They have their BLMs and rages.

It all feeds the adage: if you are under 30 and not a democrat you have no heart. If you are over 40 and not a republican, you have no brain. Kids believe the BS that Obama and Biden spew. I ask them how their lives improved under Obama. Are they better off financially? clearly not. Has global warming subsided? No. Are we out of foreign wars? No. Are race relations better? they are worse. So was the investment worth it? The answer is clearly no.

As you get older, if you are smart, you realize the fools gold being peddled by democrats and seek to self-govern. The GOP is full of idiots and demigods but in the end, they are for smaller govt and lower taxes. They give you a better chance to self-govern.
I was a Republican at age 12, seriously. But my dad and mom are/were practical people. Dad grew up on a farm and has a wealth of practical knowledge . You can be emotional on the farm. There's not a whole lot of bigger and better overall ( tech aside), you plant at times , harvest , butcher etc.
Crypto offers incredible ROI if you guess/speculate well early on. But what you said still applies.
I ask people what a project does? How large is the market cap coin wise? What is the price action?
Azero for example is a layer one solution and processes extremely fast. I clocked transfers from an exchange to a secure wallet in 30 seconds to 45 seconds.
Ethereum based transfers often take 10-15 minutes. Bitcoin can take a bit longer.
Azero was app 11 cents at its ico. It immediately opened at around 70 cents and is now around 90. It went from app 70 to 3.09 in a few months then fell back.
It's similar to solana, which is now 13.55, of course that's down from app 260.00. But it ran from 50 some cents . If you got in early you made 27x. However if you jumped ship near the high you were 400-500+ x up.
That's why a speculated on this . It won't take much for me to 2x my money. 10x is pretty easy , and a major run makes serious money.
 
  • Like
Reactions: Obliviax

bourbon n blues

Well-Known Member
Nov 20, 2019
25,847
30,648
1
A lot goes with being young. If it is too good to be true, it probably isn't true. Right now, there is a LOT of wealth xfer as hard-working boomers cycle out and a lot of under-30s have cash. Many are from large life insurance policies that didn't exist in the last generation. Kids these days, as always really, think they are smarter than the previous generation. We had our woodstocks and kent states. They have their BLMs and rages.

It all feeds the adage: if you are under 30 and not a democrat you have no heart. If you are over 40 and not a republican, you have no brain. Kids believe the BS that Obama and Biden spew. I ask them how their lives improved under Obama. Are they better off financially? clearly not. Has global warming subsided? No. Are we out of foreign wars? No. Are race relations better? they are worse. So was the investment worth it? The answer is clearly no.

As you get older, if you are smart, you realize the fools gold being peddled by democrats and seek to self-govern. The GOP is full of idiots and demigods but in the end, they are for smaller govt and lower taxes. They give you a better chance to self-govern.
Another thing , I suggest looking at things under a power/control filter. The young buy the Democrat bs easier as you said, however those in charge exploit them to enrich themselves .
 
  • Like
Reactions: Obliviax

rumble_lion

Well-Known Member
Aug 7, 2011
23,637
5,794
1
I don't think it's technically a Ponzi scheme , but it's a good point. They did run an exchange and it's possible that people bought crypto and moved off site. However if you bought their coin, it makes sense.
But if you had other assets there he just stole your money. But I'm quibbling , so I think the name fits well enough.


 

Latest posts