FTX Collapsing: Biggest Disaster in Crypto?

Wow, so how do I even start this video? Because I kind of feel like we are experiencing one of the biggest crypto catastrophes ever. And normally when people say that, that's an understatement, but I actually think that what we're seeing now is going to change the history of crypto. So in the past 24 hours, obviously crypto prices have fallen dramatically, right? We've seen essentially Bitcoin taking a 10% dive, Ethereum taking a 15% dive right now. But even more than that, we have a lot more kind of information into what is happening at FTX. This could be one of the biggest crypto exchange collapses. If the deal with Binance does not go through, things might not be very good. And the smoking gun here is this tweet here, rather the lack of a tweet, a deleted tweet here. Essentially, Sam Beckman-Fried, the CEO of FTX, he deleted a tweet in which he said that they don't invest clients' assets ever. So by deleting that, that's almost like an admission that they do invest client funds and that we shouldn't be worried. On top of this, CZ, the CEO of Binance, is also adding a little bit to the speculation here that there's two big lessons. Never use a token created as collateral and don't borrow if you run a crypto business. This tweet has a huge amount of implications that we're going to describe and talk about in this video as to kind of where user funds in FTX are and what kind of happened to it. And there's that uncertainty going on as to, will CZ from Binance even continue to buy FTX exchange if that deal will go through. Now, this also goes beyond FTX, right? Because it's not just user funds that are on the FTX exchange. A lot of cryptocurrency projects and funds were using this as one of their major exchanges to store their coins and to store their funds. So this can have a huge impact across the entire industry because right now what we're talking about, maybe billions of dollars which cannot be withdrawn and we don't know if it can be saved. So it does look a little bit grim right now, but I do have to remind everyone that, of course, crypto itself is decentralized. Exchanges are our centralized points of failure. And at the end of the day, we're working towards a decentralized future and we definitely don't need disasters like this happening soon. So, and guys, of course, before we get started here, everything is my opinion, not financial advice. And I'll be covering this more as events unfold and as we find everything else. So if you are interested in following about what's happening, make sure you click that subscribe button. It will keep you up to date for sure. So first and foremost, let's just start off with what I think is most important. So this tweet I discussed is the most important tweet of the past 24 hours, in my opinion. Basically, by Sam deleting a tweet that says FTX has enough to cover all client holdings and that they don't invest client assets in treasuries. This is an admission pretty much of guilt that, yeah, he lied. He flat out lied to the community. He's tried to delete that. But at this current point, not only does Twitter remember, but also CNBC remembers that too, because it was actually literally featured on TV. So I'm not sure how he's going to get out of that one. Also, there is a letter that Sam Beckman-Fried has sent to investors of his exchange that has been circulating out in public. And in the letter, he pretty much ends with saying, I'm sorry, I didn't do better. And I'm going to do what I can to protect consumer customer assets and your investment. Now, this letter I should find quite damning because, yet again, he could have taken opportunities to reassert that he wasn't lying, that client funds were never used, etc. He didn't do that here. Right. And on top of that, by saying that he's going to try to try, he's going to do what he can to protect consumer assets. That's actually quite scary because, yet again, it feels like he doesn't have much confidence here. If you're thinking about it, like, you know, usually with these, you know, letters and political speak, you kind of hype things up, right? Like, you know, we heard like phrases like funds are safe, or where funds, you know, CZ tells people that funds are safe and everything covered. Don't worry about it. He's not really saying, hey, don't worry about it. Things are safe. Don't worry. We got this covered. Yeah, I'll do what I can. That's not very confident. So, yeah, there hasn't been any more communication. I mean, in his letter, he explains that, you know, he's gone a bit silent and he wishes he can tell us more details. So it could be the case that lawyers are getting in telling him, you know what? Don't post, right? Start deleting your tweet. Now, the next question is like, how did this all happen? I mean, what was Sam doing with our money? Right? I was like trying to tell my mom that and she was like shocked. She's like, I don't know what's happening. Why? What's with this Binance and FTX thing? What's happening? You know, you know, like, why are we losing money? So let's try to figure out what happened and I'm going to show you guys the kind of the latest and what I believe may be the most realistic picture of what could have happened to user funds. At this point, it's it's still speculation, I would say. But let's take a look. And I actually believe that this may be one of the strongest cases for what actually happened, especially now that we know we cannot trust Sam Bankman-Fried. We're pretty much left to our own detective work to figure out what happened until maybe three, four years later, you know, regulators figure out for us. But here's the deal. So essentially what was happening and to explain this, you have to understand that the FTX exchange is very closely related to their sister entity, which is Alameda Research. So these two entities, even though on paper, they're not very closely related, it turns out that it might be a lot closer than we thought. And here's what Lucas Nuzi thinks what's happened. He thinks that Alameda blew up in quarter two of this year, along with three hours capital. It only survived because it was able to secure funding from FTX using collateral off the 172 million FTT that was guaranteed to invest four months later. So this is interesting. So what collapsed was not FTX exchange and user funds were not being used at this point. But what collapsed was Alameda Research. And because this is an entity that was created by SAM, what could have happened is that SAM used money from FTX to bail them out. So what they found was they found a transaction of FTT that a huge movement of FTT that happened occurred on September the 28th, where at that point over 8.6 billion US dollars worth of FTT was moved on chain. And this kind of funny business could signify that Sam moved FTT, like could have bought FTT from Alameda Research and used user funds to pay for it. We also have a previous tweet at around this time. So this is also on September the 28th that he was rotating a few FTX wallets today. He's saying, yeah, don't be calm. We're moving funds periodically. This is completely normal. But yet again, now that we know that SAM is deleting tweets, can we trust him on that? Right. This came really much at the same time as this movement of FTT. So essentially, summary of what happened is that it could be the case that Sam used user funds, used our money to buy FTT from Alameda Research in order to save them. All right. That's insane. That means that instead of our money, instead of user money being on FTX and kept as US dollars, it could be the case that he bought FTT with it. Now, we all know what happened to FTT, right? The value of FTT is now pretty much at four dollars. So it's not twenty two dollars. It's four dollars right now. So yeah, that's that. That could be where it went. Yikes. So if that is the case, there might be a chunk of money missing, user deposits missing, which is why Sam was so fast to find CZ for a bailout. Right. If you look at the other piece of information that we have here, which is that CZ was pretty much telling the community, the community that Sam didn't have that Sam wasn't looking for an OTC deal. He was here for a hasty sale of his company, which is of the FTX exchange, which was kind of valued at upwards of 30 billion dollars. Now, I think one of the biggest problems here that I see and what why I'm not too happy about this event, to be honest, is that what Sam was selling, what made FTX special was the fact that FTX was a regulated exchange. It relied on truth, right? It relied on the founders telling the truth at all times in order to appease regulators. And that was their competitive advantage. Now, the fact that if he's retracting tweets now that he's not defending himself, now that it could be the case that he lied to us, flat out lied to us, that destroys a lot of FTX's reputation. I mean, just in a snap of a finger like that, it could be the case that, yeah, he's no longer valuable. And anything that Sam touches before, if he cannot be trusted, is also going to be under a lot of heavy scrutiny as well here. So I think that's the most dangerous part of everything here. It's because the FTX exchange relies so much on his reputation and regulatory clarity that if he was found to be using user funds, then there's not going to be any trust at all whatsoever. Now, there could be a little bit of good news as well. So it's not all gloom and doom. I mean, it's not all over. I feel like, you know, when you're reading Twitter, it's very easy to get trapped in. Oh my God, it's over. But there is a little bit of good news here. So recently, the state investor for Singapore, Tamasic, has been said to be engaging with Binance to help with the bailout of FTX. That could be a possibility. So, yeah, like at the end of the day, I think we still have to remember that FTX still does have value. You know, they were recently evaluated at higher than $30 billion. So it could be the case that they can figure out a plan. So we'll still have to see, keep ourselves updated here. It's still ongoing. I don't really want to spread too much fear. I think for me, it's been a pretty devastating day, to be honest. You know, the fact that, you know, finding out you were lied to kind of almost betrayed by Sam. I mean, that's pretty much taken at this current point. I would love to hear what you guys think as well. I mean, I think it went through multiple phases of emotion at this current point. So I want to see where everyone is at as well. And what you guys think about what is going on. Keep up to date. I'm going to do more videos like this to keep you guys updated. So, yeah, we'll see you next one. We'll see you next one.