i've been reading the many "conspiracy theories", i.e. minority narratives, re SBF/FTX/AR, and there are some interesting takes for sure.
i am rarely one to pour cold water on a good minority narrative, but here are some things i see people overlooking.
1 of n
i am rarely one to pour cold water on a good minority narrative, but here are some things i see people overlooking.
1 of n
first, consider that alameda research (ar) was founded in sept 2017 during the 2017 cc bull market.
the 2017 market was mostly junk assets, so ar cut their teeth as a market maker (mm) for junk assets. this is code for pumping (and dumping) and creating a mirage of liquidity.
the 2017 market was mostly junk assets, so ar cut their teeth as a market maker (mm) for junk assets. this is code for pumping (and dumping) and creating a mirage of liquidity.
in a bull market, it is commonplace for poor investors to come off looking like geniuses because all anyone sees is gains, not what generated them.
repeatedly doing mm and pumping and dumping (pnd) junk assets is very good money provided you *dump* on retail.
repeatedly doing mm and pumping and dumping (pnd) junk assets is very good money provided you *dump* on retail.
so after doing this for about 1-2 years, ar has established a track record for successful mm/pnd operations.
with this track record, sbf can go to investors to raise capital for ftx, which was founded in may 2019.
why would sbf open an exchange though?
with this track record, sbf can go to investors to raise capital for ftx, which was founded in may 2019.
why would sbf open an exchange though?
from the perspective of a mm, having your own centralized exchange (cex) facilitates 2 things: streamlining pnd operations and access to customer assets.
this means ar could pay less in trading fees, frontrun, and conceal their activities via ftx.
this means ar could pay less in trading fees, frontrun, and conceal their activities via ftx.
ar would be the single largest customer of ftx, providing "liquidity" and making it easier to sell ftx as an investment.
customer assets allowed ftx to leverage up with their existing ar pnd operations via loans to ftx and (illegal?) transfers of funds to ar.
customer assets allowed ftx to leverage up with their existing ar pnd operations via loans to ftx and (illegal?) transfers of funds to ar.
sbf and his crew made a very serious error with their aggregate pnd operation, which is to always *complete the dump*.
ftx and ar clearly accumulated a balance sheet of illiquid junk by merit of not following through on the dumping leg of the pnd.
ftx and ar clearly accumulated a balance sheet of illiquid junk by merit of not following through on the dumping leg of the pnd.
why would they not complete all their dumps?
since their ability to get loans and customer deposits depended on a track record of success, any failed pnd op would undermine that track record, so they chose to accumulate assets they couldn't successfully dump.
since their ability to get loans and customer deposits depended on a track record of success, any failed pnd op would undermine that track record, so they chose to accumulate assets they couldn't successfully dump.
career short seller, @AlderLaneEggs, made some excellent points about sbf/ar/ftx in a hedgeye interview a couple months back
after some reflection, i believe i can explain some of the (good) questions he raises.
https://twitter.com/AlderLaneEggs/status/1590515053903908864?s=20&t=sy35ybcIZ8pBFmf-nsICNQ
after some reflection, i believe i can explain some of the (good) questions he raises.
why does sbf have no provenance / mentor?
almost everyone who runs a cex in the cc domain has no mentor. the space is legitimately emergent and i am myself an example.
per my prior points above, ftx is an extension of ar being a pnd shop, and ftx optimizes ar pnds.
almost everyone who runs a cex in the cc domain has no mentor. the space is legitimately emergent and i am myself an example.
per my prior points above, ftx is an extension of ar being a pnd shop, and ftx optimizes ar pnds.
where did the capital come from?
ar appears to have bootstrapped during the 2017 bull run, where they likely made repeated successful pnds.
how ar got its funding is still a good question, but it is not as if ftx was funded in a vacuum. ftx is an extension/continuation of ar.
ar appears to have bootstrapped during the 2017 bull run, where they likely made repeated successful pnds.
how ar got its funding is still a good question, but it is not as if ftx was funded in a vacuum. ftx is an extension/continuation of ar.
why use jurisdictions HK and BS?
anecdotally, HK is super lax with money laundering and has a large CN presence. BS also has a substantial CN presence.
keeping entities offshore makes it harder to seize/freeze assets, particularly if you're doing something illegal.
anecdotally, HK is super lax with money laundering and has a large CN presence. BS also has a substantial CN presence.
keeping entities offshore makes it harder to seize/freeze assets, particularly if you're doing something illegal.
while i love a good minority narrative, a lot of what i see with sbf/ar/ftx can be explained by normal means.
despite marc lacking the extra domain knowledge i have re ccs, he was able to ascertain that ftx was a good short via other means.
despite marc lacking the extra domain knowledge i have re ccs, he was able to ascertain that ftx was a good short via other means.
that ftx continued to operate with such an illiquid balance sheet suggests they were attempting to hold out until the next bull market, where they could dump some of their illiquid junk on retail and shore up their balance sheet.
while ftx pushed the envelope with misappropriating customer assets, it is commonplace for large fiat and cc cexes to loan out customer assets for shorts.
i expect that if you asked most asset holders if it is ok to loan their assets out to someone shorting, they would object.
i expect that if you asked most asset holders if it is ok to loan their assets out to someone shorting, they would object.
cexes loaning customer assets out for shorts is only possible when the exchange has custody of those assets.
these loans often cut directly against the interests of the customers who own the assets, creating misaligned incentives.
these loans often cut directly against the interests of the customers who own the assets, creating misaligned incentives.
the only ethical path forward is decentralized exchanges (dex) because of this incentive misalignment.
exchanges should **never** take custody of any assets and instead simply facilitate trades by routing messages between counterparties.
exchanges should **never** take custody of any assets and instead simply facilitate trades by routing messages between counterparties.
this is why i proposed #DCRDEX 4 years ago and worked with #Decred developers to build it.
self-custody occurs via atomic swaps, orders cannot be frontrun, and there is no pointless appcoin involved.
blog.decred.org/2018/06/05/A-N…
self-custody occurs via atomic swaps, orders cannot be frontrun, and there is no pointless appcoin involved.
blog.decred.org/2018/06/05/A-N…
DCRDEX has been in operation for over 2 years and never had a major problem.
contact us if you want to get a market going at chat.decred.org
the revolution will not be custodial.
this is why i #Decred
contact us if you want to get a market going at chat.decred.org
the revolution will not be custodial.
this is why i #Decred
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