Former Spartan Group partner reveals the truth about FTX: Unacceptable to the distorted report of the New York Times

Original title: "Former Spartan Group Partner Angrily Writes a Long Article: All the Truth About FTX"

Original Author: Jason Choi

Original Compilation: Moni, Odaily Planet Daily

In response to an SBF "washing the ground" published by The New York Times today, former Spartan Group partner and senior encryption practitioner Jason Choi shared everything he knew as a witness in dozens of tweets on social media. He expressed that he could not accept the distorted report of the New York Times. He knew SBF before the birth of FTX   The rise and fall of FTX, so I hope to tell everyone what happened.

This article was translated by Odaily Planet Daily:

The story of Alameda and FTX can be summed up in one sentence: SBF is highly gambling. Virtually every major decision they make has to do with using more leverage — deceptive fundraising, financial engineering, and ultimately, outright fraud.

From November 2018 to January 2019, the then small hedge fund  Alameda Research   began to raise funds from investors, promising "High returns without risk". Presumably (as far as I know) they have $5M in equity but are trying to borrow $200M at 15% APR to engage in future market making.

July 2019 is the time for the launch of the FTX plan. In August 2019, they announced the completion of a $8 million seed round of financing, with several funds participating. (Note from Odaily Planet Daily: Proof of Capital, Consensus Lab, FBG, Galois Capita, etc. participated in this round of financing.) In an investor memo, "Alameda & FTX" was marked as risky because SBF Take care of both companies at the same time. Sources told me that FTX was launched because Alameda was difficult to finance at the time, so FTX may just be a "by-product" to facilitate Alameda's financing.

In the early days, it was almost an "open secret" that Alameda had an FTX-specific API key that allowed access to transactions faster than other users. Around September 2019, Alameda allegedly attempted to attack the Binance futures platform, but was thwarted, which may have been the beginning of a feud between Binance and FTX.

As FTX continues to grow, their appetite for capital is getting bigger and bigger. During the period, they created a decentralized trading platform  Serum  on the  Solana   chain. Afterwards, FTX began to participate in multiple Serum/Solana ecological projects, such as FIDA, MAPS, Oxygen  Protocol, etc., and these projects launched Tokens in a short period of time.

According to sources, Serum is actually operated by FTX employees. Although some Serum ecosystem projects are advertised as third-party projects, they are actually It is incubated/operated internally.

Why does FTX do this? In fact, at that time (winter 2020) something changed within Alameda/FTX, Alameda abandoned the Delta neutral strategy as their advantage was eroded and had to start expanding exposure with a lot of leverage. Serum etc. Token Assets are likely to be used as collateral to achieve the aforementioned leverage, and liquidity transactions and prices can easily be manipulated by Alameda and FTX and used to fill their balance sheets.

As an example - let's say Alameda trades $2M at a "fully diluted valuation" of $10M ( Token Price * to be issued Token total) to fund one and a half incubation projects.

FTX subsequently listed the Token , but only the total Token With 1% of 1% on the market, Alameda could prop up the price with a few million dollars to create a "fake" fully diluted valuation, say $1 billion. All of a sudden, $2 million on *paper* becomes $200 million.

By doing this, Alameda creates the illusion of a large and diversified balance sheet that they can then borrow to fund their "directed bets" . In fact, someone had already discovered this problem at that time, but they were bullied and threatened, and SBF himself kept silent about it.

All in all, Alameda quickly created hundreds of millions of dollars in false liquidity and equity value, as the outflowing FTX balance sheet shows, but even so, relatively Still pales in comparison to FTT.

Serum and FTT may be the only ones that can be used as collateral on FTX Token , which is likely the reason for the Alameda/FTX multibillion-dollar breach: Alameda pledged to borrow money against illiquid collateral to finance it, and as the market fell this year, those deposits were chased, resulting in FTX user funds being stolen (or They use it to fight fires).

This means that FTX’s liquid reserves may be lower than user deposits. Of course, if there is enough time, this loophole is likely to be controllable, but CZ disclosed This fact led to a run on FTX.

With this all brewing behind the scenes, SBF is aggressively pushing for mainstream legitimacy and building a regulatory moat... ensuring FTX and FTT equity value can be Discrimination. In the process, SBF had to step up publicity and promotion efforts, so we saw that FTX announced that it would name the NBA Miami Heat stadium with US$135 million, and SBF also became the second largest donor of US President Biden, and even wanted to participate In Elon Musk's acquisition of Twitter.

When the time came to January 2022, several rounds of financing transactions pushed up the valuation of FTX to 32 billion US dollars, attracting Sequoia Capital , Temasek , Paradigm  Participated in the vote. In this context, SBF is also trying to promote policy transformation. Don’t forget that SBF’s parents are both Stanford law professors and have close ties to the Democratic Party of the United States.

In October 2022, FTX proposed a regulatory draft "Digital Asset Industry Standard", if the draft is passed, FTX will benefit a lot. (It should be noted that Sam Trabucco, co-CEO of Alameda, left suddenly in August 2022. At that time, he did not receive much attention, but the water behind it was actually very deep.)

A month later, FTX bid for Voyager, why they did it, in fact, it is likely to bail out a large number of people who hold FTT to prevent them from dumping FTT.

The SBF at the time was very aggressive, and even laughed at that he could come and go in and out of Washington at will, but Zhao Changpeng couldn't, but he later deleted the relevant tweets.

Soon, Coindesk published an article about Alameda's balance sheet, stating that it has $14.6 billion in assets A large portion of it was issued by the FTX team itself - the sharks smell blood.

On November 6, 2022, Changpeng Zhao announced the liquidation of all FTT assets held by Binance , which were worth as much as $584 million at the time. Ironically, Caroline, the remaining co-CEO of Alameda at the time, announced that she would buy FTT from Changpeng Zhao at a price of $22. The market reacted in panic. As of November 7, 2022, according to  Nansen   data, approximately $450 million worth of stablecoins have left FTX within 7 days - and a run has begun.

Shortly after, SBF publicly stated that FTX does not invest client assets and has sufficient funds to cover all withdrawals, but he later deleted the tweet. However, while withdrawals were frozen, Alameda was still able to withdraw funds from the exchange. When asked why, Caroline quibbled that it was FTX US, again self-defeating, but made people realize that the parent company FTX must have liquidity problems.

On November 8, 2022, FTX will freeze withdrawals. On November 9, FTX announced a possible acquisition by Binance. On November 10, Binance announced that it was abandoning the acquisition.

Shortly after, FTX seemed to resume withdrawals (Odaily Planet Daily note: a small amount of assets were detected to flow out of its wallet at the time), but some people speculated that insiders were Cash out and mix their withdrawals with other Bahamian users. On November 11, 2022, Justin Sun announced the launch of a cooperative arrangement that will allow some users of FTX to withdraw funds on Tron through assets related to the project.

So far, FTX officials and SBF have never answered questions about Bahamas withdrawals and whether insiders cashed out.

Withdrawals finally suspended after the bankruptcy declaration, yet hundreds of millions have already flowed out of FTX.

November 14, 2022 After a brief silence, the SBF began to mock the public with "Letter Tweets" (What Happened). Crypto investor @ercwl revealed that SBF is likely using these tweets to fool bots designed to detect deleted tweets, but this is currently unconfirmed and unlikely.

According to inside sources from FTX, only 4-5 senior executives know the real situation of FTX, these people are: SBF, Caroline Ellison, Gary Wang, Ramnik Arora, Constance Wang, Nishad Singh, and the average employee is almost completely unaware.

There are many more interesting facts - such as SBF's so-called "stimulant addiction", "office orgies" - but with those who try to understand the truth Unrelated, but maybe the NYT would really like the gossip.

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