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Bitcoin The Almighty Buck

FTX Owes Money To More Than a Million People, Court Filing Suggests (vice.com) 91

Posted by BeauHD from the liquidity-crisis dept.
The embattled and now bankrupt cryptocurrency exchange FTX may owe more than a million people money, according to a Tuesday court filing (PDF). Motherboard reports: "The events that have befallen FTX over the past week are unprecedented. Barely more than a week ago, FTX, led by its co-founder Sam Bankman-Fried, was regarded as one of the most respected and innovative companies in the crypto industry," the filing notes. "FTX faced a severe liquidity crisis that necessitated the filing of these [bankruptcy] cases on an emergency basis last Friday. Questions arose about Mr. Bankman-Fried's leadership and the handling of FTX's complex array of assets and businesses under his direction."

The filing goes on to state that, originally, it was thought that there were "over one hundred thousand creditors in these Chapter 11 Cases." It then states that, "in fact, there could be more than one million creditors," meaning that FTX could owe money to more than a million people, the vast majority of whom are customers and former customers. The filing is an attempt to consolidate and simplify the bankruptcy process; as noted in an earlier filing, FTX operated a highly complex corporate structure with dozens of companies, each of which filed for bankruptcy separately last week. The fate of customers' money is still up-in-the-air as FTX halted withdrawals last week. According to the Wall Street Journal, FTX founder Sam Bankman-Fried thinks he can raise enough money to make users whole. "Mr. Bankman-Fried, alongside a few remaining employees, spent the past weekend calling around in search of commitments from investors to plug a shortfall of up to $8 billion in the hopes of repaying FTX's customers," WSJ reports. "The efforts to cover that shortfall have so far been unsuccessful."
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FTX Owes Money To More Than a Million People, Court Filing Suggests More

FTX Owes Money To More Than a Million People, Court Filing Suggests

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  • Seriously? (Score:4, Funny)

    by hdyoung ( 5182939 ) on Tuesday November 15, 2022 @09:27PM (#63054587)
    Millions of idiots err I mean people actually put real $$$$ into crypto? Or is this a situation where a bunch of people people bought dogecoins with catecoins? In which case, FTX can just “discover” a trillion dollars worth of newly-minted whatever-cryptocoin-they-sell and “pay” people back. At this point it’s basically just a cell in a spreadsheet somewhere.

    • is this a situation where a bunch of people people bought dogecoins with catecoins? In which case, FTX can just “discover” a trillion dollars worth of newly-minted whatever-cryptocoin-they-sell and “pay” people back.

      I think the problem is that many people want dollars. If not for that they could probably continue to mint animalcoins forever.

    • FTX was not crypto, it was considered a representative vehicle like USDT.

      What SBF did is basically what Enron and BoA and other banks did, they continued taking customers money out of the system, invested it, lost it and then hoped for a bailout before anyone noticed.

      • FTX is/was the exchange. FTT was their blockchain token.

      • Well then, if Tether is run like FTC, then it could crash in the exact same way. Tether claims to have a full dollar of value backing up each USDT. It would be a gross understatement for me to say that I'm skeptical. There is literally no crypto outfit that I would trust with my hard-earned cash.

        • Re: (Score:1)

          by guruevi ( 827432 )

          Yes, it could be, but there have been no signs of Tether using the cash deposited like FTX did.

          I wouldn't trust a central exchange either with all my decentralized currency, same reason I don't trust the bank/government to do it.

          • It's turning out that many "decentralized" systems are, in fact, controlled by a single crypto bro that plans to empty out all the accounts late one night and flee to some country that doesn't honor extradition treaties.

            Even if you can find a system that's truly decentralized, it's vulnerable to a single bad line of code. Some criminal or hostile country discovers it and exploits it, and the system crashes or your $$$$ vanishes in a puff of smoke. At that point, your options are a) pound sand or b) gra

    • Re: (Score:2, Insightful)

      by nonBORG ( 5254161 )
      He is the biggest sorry 2nd biggest democratic donor 2020 and 2022. He had investments from Ukraine. Some sort of feedback loop for tax dollars here. Tax dollars go to Ukraine, get invested in FTX then donated to democrats. Suddenly they are pushing through a huge amount of money to Ukraine today, maybe they need to get the next pipeline working now to get your tax dollars hard at work.
      • Sorry man but you are f'n nuts like your buddy Crackhead Mike
        • So instead of disputing anything I said you call me nuts? So are you saying he was not a democratic donor? Or that he did not get massive money from Ukraine? What is your point here, it seems like when I see 2 + 2 and write = 4 you start calling me nuts. First of all you don't have to agree with the = 4 part but you can simply say "looks bad but needs to be proven." or however you want to word it but no I am not nuts to see that the money loop here is very very damming to democrats. Did I mention their seco
          • No, your sig and adoration of a treasonous pillow guy makes you nuts.
            • Thank you for showing your argument is name calling which is what even the intelligent can fall into when they have no actual case to make (or are lazy.)
    • He wants to get more Ponzi fules to bail out earlier Ponzi fules. Sorry dude, that is still a Ponzi and it is illegal.

    • Re: (Score:2)

      by AmiMoJo ( 196126 )

      Millions of idiots err I mean people actually put real $$$$ into crypto?

      Maybe not. Some of them could have been scammers themselves. Selling NFTs, ill-gotten gains from ransomware, coins mined with stolen electricity, rug-pulls, all kinds of ways to get crypto currency without spending real money.

    • Re: (Score:2)

      by dbialac ( 320955 )
      Yep. Who actually thought this was anything other than a pyramid scheme? I guess drug dealers and murder for hire people, bit crypto is shown to not actually be the anonymous currency they were hoping for because there were other holes.
  • Searching for investors to pay off bankruptcy debts? LOL What investor would invest in this? this "investment" isn't going into something that will make back the initial investment and more, it's money going straight to the pockets of all those that FTX screwed over

    • Re: (Score:3)

      by Entrope ( 68843 )

      I believe the phrase you are looking for is the greater fool [wikipedia.org].

      Or maybe the saying: "Fool me once, shame on you. Fool me twice, you can't get fooled again [goodreads.com]."

    • It is possible that he is used to easy money from investors and thought it would be no issue. Also possible that he has info on people and thought he might use it as leverage. A lot of money laundering through a crypto exchange and a lot of rich people doing it. Leverage the wrong people could be an issue of course.

    • Re: (Score:2)

      by DarkOx ( 621550 )

      That was my question - about the only thing I can come up with is some other crypto-whales or people with big exposure *might* see a bailout of FTX as a way to preserve the value of their own assets.

      If the story out there is hey one of the biggest most legitimate looking exchanges turned out to be a fraud all the way up and down; and now that the balance sheet is out there, I don't see how anyone can claim these guys were ever serious about anything other than seeing how much they bilk investors and clients

  • If FTX sold these people crypto and the price of it has crashed, then that means they should have plenty of cash to pay these people off since the crypto is now worth less than it was purchased for, unless they played stupid games and reinvested that money into more crypto and their shit crashed too. What im suspecting. This is why you NEVER store crypto in an exchange. Store it in your own crypto wallet, as soon as you buy it transfer it out to your wallet. Least then when the exchange you bought it from g

    • Re: Why you never store erypto in an exchange. (Score:4, Interesting)

      by guruevi ( 827432 ) on Tuesday November 15, 2022 @11:25PM (#63054763)

      Slashdot here isnâ(TM)t giving the full story. This was not a cryptocurrency but rather a real-money token, like USDT.

      Basically you banked your dollars while you were trading your cryptocurrencies, the token would represent that you had money to trade.

      However what Bankman-Fried did is then take that money and used it to invest in his girlfriends investment company, he also used it to become the biggest Biden campaign contributor after Soros. Likewise invested heavily ($40M) into the most recent election for Democrats across the board.

      Biden rewarded that legal bribery with the aid to Ukraine package which FTX was contracted by the Ukraine finance ministry to transfer the funds which he subsequently laundered into more cash for himself.

      When the US economy crashed, people started asking questions about the seemingly unlimited liquidity Bankman-Fried had at hand and the very limited investigations and oversight from the government agencies, which were instead targeting FTX competitors like Coinbase and Binance.

      Binance found out and leaked information about the investment firm ties, and turned the tables by basically triggering a run on the bank and FTX had nothing to show for it and within hours had to declare bankruptcy.

      • That's a separate issue wherein SBF invested the backing collateral behind FTT and didn't have enough to cover a full liquidation event (provoked by Binance selling off a huge amount of FTT in order to facilitate a takeover of the FTX exchange).

        What this story seems to be saying is that people who had other assets on FTX for regular trading are now having problems withdrawing their assets MT. Gox style.

        • I want to amend this by saying that FTT wasn't actually a stablecoin, but was rather an exchange utility coin ala BNB. So it wasn't so much a collateral issue, since utiltiy tokens have no backing collateral. Binance just tanked the market by dumping a bunch of FTX on the market all at once, spooking other FTX HODLers and convincing them to do the same. Classic dump.

  • It walks like a bank, and quacks like a bank (Score:5, Insightful)

    by khchung ( 462899 ) on Tuesday November 15, 2022 @09:51PM (#63054645) Journal

    How stupid one have to be to still think it is NOT a bank without regulation?

    Only in the US can you open a bank "but on the internet!", call it something else, and NOT get regulated as a bank. The US regulators are all asleep on the wheel.

    • Re: (Score:2)

      by tekram ( 8023518 )
      It is not so much they were asleep as they wanted to tax a growing revenue stream to the fullest and if they regulated or outlawed it as in China, the whole revenue stream goes away. Everyone wanted a cut.

    • Re: (Score:2)

      by AmiMoJo ( 196126 )

      They thought it was too big to fail. "Everyone" was putting money into FTX, millions of users, surely that couldn't just go away overnight and leave everyone with nothing???

      People will do all sorts of stuff if they see lots of other people doing it.

      • Re: (Score:2)

        by dbialac ( 320955 )
        Pyramid schemes do tend to do that. It's just a matter of time until the rest of the pyramids that are cypto collapse.
    • It is NOT a bank or anything like a bank. Stop confusing the morons. In a bank, deposits are covered by FDIC insurance (to a point). Dollars run through a bank are backed by a national currency. Banks distribute legal currency from the Federal Reserve. If you look at any denomination of dollar and it is printed with “legal tender”, defined as “coins or banknotes that must be accepted if offered in payment of a debt” - note that they MUST be accepted. If a fool wants to accept c

    • Crypto exchanges like FTX are not "The First National Bank of Crypto" or some such thing (they are not LABELLED as banks). They did not have brick-and-mortar buildings with tellers and vaults (they do not LOOK like banks). They have not identified themselves to the federal government as banks and been subjected to banking regulations and placed FDIC notices on their glass windows and paperwork (they do not ACT like banks).

      Sorry,but US Regulators (most of whom I believe to be loathsome) were most definitely

  • Better headline: (Score:4, Insightful)

    by fredrated ( 639554 ) on Tuesday November 15, 2022 @10:11PM (#63054677) Journal

    "More than a million idiots scammed by FTX".

  • They're trying to break even. (Score:4, Funny)

    by Mal-2 ( 675116 ) on Tuesday November 15, 2022 @10:13PM (#63054681) Homepage Journal

    As an old Andy Capp strip had him say, "Breaking even is when you owe money to as many people as you don't owe money".

  • DNC Money Laundering Operation (Score:1, Informative)

    by Anonymous Coward

    Seriously.

    Does anyone doubt it at this point?

    At least anyone SANE?

  • what sort of fucked up investor would lend $8 billion to someone so fundamentally financially irresponsible?

    • Re: (Score:1, Funny)

      by Anonymous Coward

      what sort of fucked up investor would lend $8 billion to someone so fundamentally financially irresponsible?

      Well, how about Biden or Ukraine?

  • Sorry millions of people - you seem to have missed the point on how this works.

    You give money to the Ponzi scheme, they take your money, and give it to a very few, who bray about how awesome the cryptoworld is, making you think you are on to a sure thing, and your money is gone.

    I'm sure they are appreciative though.

    • Re: (Score:2)

      by cfalcon ( 779563 )

      When past ponzi schemes have crashed- such as Bernie Madoff- did you say it was about people who "take your money, and give it to a very few, who bray about how awesome the financeworld is"? Like did you extend the ponzi scheme to the entirety of the zone?

      Like nothing about this is a criticism about, say, Bitcoin. There's nothing fundamentally new about a scheming bastard getting great press and fooling people into a Ponzi scheme, after all.

      • When past ponzi schemes have crashed- such as Bernie Madoff- did you say it was about people who "take your money, and give it to a very few, who bray about how awesome the financeworld is"? Like did you extend the ponzi scheme to the entirety of the zone?

        It is pretty much that. With coin being a worldwide thing.

        Now that being said, it isn't identical. A few people early on did well. But https://time.com/6110392/bitco... [time.com] most of it was concentrated in a few people. And while new people were "investing" guess who was profiting? So a lot of this collapse is the results of taking the money and running. Now that is really simplified, but there ya go.

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