Inside the Frantic Texts Exchanged by Crypto Executives as FTX Collapsed (msn.com) 36
The day before FTX filed for bankruptcy, founder Sam Bankman-Fried received an "alarmed" text message from Binance CEO Changpeng Zhao, reports the New York Times:
Mr. Zhao was concerned that Mr. Bankman-Fried was orchestrating crypto trades that could send the industry into a meltdown. "Stop now, don't cause more damage," Mr. Zhao wrote in a group chat with Mr. Bankman-Fried and other crypto executives on Nov. 10. "The more damage you do now, the more jail time." FTX and its sister hedge fund, Alameda Research, had just collapsed after a run on deposits exposed an $8 billion hole in the exchange's accounts. The implosion unleashed a crypto crisis, as firms with ties to FTX teetered on the brink of bankruptcy, calling the future of the entire industry into question.
The series of about a dozen group texts between Mr. Zhao and Mr. Bankman-Fried on Nov. 10, which were obtained by The New York Times, show that key crypto leaders feared that the situation could get even worse. And their frantic communications offer a rare glimpse into the unusual way business is conducted behind the scenes in the industry, with at least three top officials from rival companies exchanging messages in a group chat on the encrypted messaging app Signal. The texts also show that industry leaders were acutely aware that the actions of a single firm or fluctuations in the value of one virtual currency could destabilize the whole industry. The exchanges became increasingly tense as Mr. Bankman-Fried and Mr. Zhao traded barbs.
Earlier that week, Mr. Zhao had agreed to buy FTX and save the exchange, before backing out of the deal. In the Nov. 10 texts, he appeared certain that FTX would not survive, and concerned that it could bring the rest of the industry down with it.... In the Nov. 10 texts, Mr. Zhao specifically accused Mr. Bankman-Fried of using his hedge fund to drive down the price of Tether, a so-called stablecoin whose price is designed to remain at $1. According to messages seen by The Times and people familiar with the matter, the group chat included several other prominent crypto executives, including Jesse Powell, a founder of the crypto exchange Kraken, and Paolo Ardoino, the chief technology officer of Tether, the company that issues the stablecoin of the same name.
Tether is a linchpin of crypto trading worldwide, commonly used by digital asset enthusiasts to conduct transactions. Industry insiders have long feared that if Tether's price fell, it would cause a domino effect that might bring the industry to its knees. (Tether ultimately did not end up losing its $1 peg.)
30-year-old Bankman-Fried told the Times that Mr. Zhao's claims were "absurd.... Trades of that size would not make a material impact on Tether's pricing, and to my knowledge neither myself nor Alameda has ever attempted to intentionally depeg Tether or any other stablecoins... I have made a number of mistakes over the past year but this is not one of them."
A spokeswoman for Tether told the Times they'd "demonstrated its resilience to attacks," adding that FTX's actions "don't reflect the ethos and commitment of an entire industry."
The series of about a dozen group texts between Mr. Zhao and Mr. Bankman-Fried on Nov. 10, which were obtained by The New York Times, show that key crypto leaders feared that the situation could get even worse. And their frantic communications offer a rare glimpse into the unusual way business is conducted behind the scenes in the industry, with at least three top officials from rival companies exchanging messages in a group chat on the encrypted messaging app Signal. The texts also show that industry leaders were acutely aware that the actions of a single firm or fluctuations in the value of one virtual currency could destabilize the whole industry. The exchanges became increasingly tense as Mr. Bankman-Fried and Mr. Zhao traded barbs.
Earlier that week, Mr. Zhao had agreed to buy FTX and save the exchange, before backing out of the deal. In the Nov. 10 texts, he appeared certain that FTX would not survive, and concerned that it could bring the rest of the industry down with it.... In the Nov. 10 texts, Mr. Zhao specifically accused Mr. Bankman-Fried of using his hedge fund to drive down the price of Tether, a so-called stablecoin whose price is designed to remain at $1. According to messages seen by The Times and people familiar with the matter, the group chat included several other prominent crypto executives, including Jesse Powell, a founder of the crypto exchange Kraken, and Paolo Ardoino, the chief technology officer of Tether, the company that issues the stablecoin of the same name.
Tether is a linchpin of crypto trading worldwide, commonly used by digital asset enthusiasts to conduct transactions. Industry insiders have long feared that if Tether's price fell, it would cause a domino effect that might bring the industry to its knees. (Tether ultimately did not end up losing its $1 peg.)
30-year-old Bankman-Fried told the Times that Mr. Zhao's claims were "absurd.... Trades of that size would not make a material impact on Tether's pricing, and to my knowledge neither myself nor Alameda has ever attempted to intentionally depeg Tether or any other stablecoins... I have made a number of mistakes over the past year but this is not one of them."
A spokeswoman for Tether told the Times they'd "demonstrated its resilience to attacks," adding that FTX's actions "don't reflect the ethos and commitment of an entire industry."
"Bring down the industry" (Score:5, Insightful)
Re:"Bring down the industry" (Score:5, Funny)
"he appeared ... concerned that it could bring the rest of the industry down with it" - this is exactly what needs to happen.
The epitaph will read: "... and nothing of value was lost."
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Have always been skeptical of cryptos susceptibility to fraud and hacking abuse.
It's not "susceptible" to fraud. That's what it's for.
What Fucking Ethos? (Score:5, Insightful)
Jesus Christ, by this point in the collapse of crypto, someone still talks about the ethos of the industry? Whatever the intentions, the ethos has come to be little more than bilking one group of investors to pay a small group of scammers. The Cryptobros are now revealed for what they always were; con artists.
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I'm shocked, shocked I say that cypto bros are digital grifters! /s
Re: What Fucking Ethos? (Score:5, Insightful)
The fact that so much of the "industry" almost immediately flocked to centralized resources like OpenSea, FTX, MetaMask etc etc shows that the vast majority of people in the crypto space were not in it for whatever the "ethos" described but saw it as an easy money oppurtunity.
Yes there are probably a very small minority of "true believers" out there but the industry as a whole jumped in both feet first into scam after scam and centralized systems that facilitated them while the supposed noble goals quickly fell to the wayside.
It's not unreasonable to think that over 90% of the poeple involved at the top end of the crypto industries are just in it for the cash.
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Unfortunately, without the centralized exchanges digital "coins" would lose mot of their utility.
Perhaps a decentralized currency would be the ideal (though the history of gold makes me doubt it), but the current implementations of digital "coins" don't represent that, because the "value" isn't inherent in the token. With the current implementation, the value only exists when an exchange is either happening or being contemplated.
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Nope. The reason for centralization is that crapcoins do not work without centralization. They are just far, far too slow and transactions are far, far too expensive. The whole idea is fundamentally broken once you move beyond "toy" size.
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Not true. (Score:2)
Accomplices in that group chat (Score:1)
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Genuinely curious. What aspects are good, in your opinion?
Re: Accomplices in that group chat (Score:2)
Well if everything is bad obviously nothing is good isn't it?
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Indeed. The whole thing does not work outside of crime, money laundering and defrauding "investors".
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People want stability, so no matter how decentralized your intentions were, and how you started out, some players will last longer than others. The bigger ones eat the small ones. Centralization is ALWAYS the end game and you CAN'T ESCAPE IT.
Cartel? (Score:5, Interesting)
So all of the crypto bigwigs hang in the same chat and coordinate their actions. As if this whole thing wasn't a scam already.
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Yeah, those sorts of communications are evidence of collusion, price fixing, and conspiracy, all things that are considered illegal in normal marketplaces.
Organized crime? (Score:5, Insightful)
The texts also show that industry leaders were acutely aware that the actions of a single firm or fluctuations in the value of one virtual currency could destabilize the whole industry.
Isn't the market supposed to be a free market? If the market requires the collusion of main players to keep it profitable for their benefit doesn't it imply the whole thing is an organized conspiracy?
Isn't that kind of illegal and stuff?
Sure seems like it (Score:2)
If the market requires the collusion of main players to keep it profitable for their benefit doesn't it imply the whole thing is an organized conspiracy?
That's the main takeaway I had as well. It almost doesn't matter what this round of texting said...
If he could throw up a group chat for this issue so easily, it seems like the group of them had communicated in the past, over Signal, without anyone able to monitor them...
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Isn't that kind of illegal and stuff?
Sure. Collusion like that lands you in prison.
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Isn't the market supposed to be a free market?
Not in an extreme sense, no. The government not only can, but must get in and regulate in order to keep the market functional, in some cases, which makes it not entirely free. For example, the American government pays farmers to abstain from growing food (and let their land sit fallow), to avoid creating an oversupply that in turn creates a price crash and a whole cascade of economic upheaval that leaves people without food.
This business of paying farmers to n
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Isn't the market supposed to be a free market.
I infer that you are quoting the claims if of the crypto-libertarian types back at them, rather an expressing an actual belief in the "free market" slogan.
And yes, they were just bullshitting.
The term "free market" used as a cudgel by the libertarian right, which many billionaires belong to, is not something that has ever been observed to work in the wild - all markets require regulation to keep them honest and fair.
If the market requires the collusion of main players to keep it profitable for their benefit doesn't it imply the whole thing is an organized conspiracy?
Isn't that kind of illegal and stuff?
It is in the U.S. It is called a cartel.
a win for the establishment (Score:2)
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That seems highly doubtful. All they had to do was watch the show. And that will have been obvious to them.
"The more damage you do now, the more jail time." (Score:4, Insightful)
Hopefully, more true words were never spoken.
Also this gem: "the actions of a single firm or fluctuations in the value of one virtual currency could destabilize the whole industry". I mean, if that is the case, things are already unstable, because all a single crapcoin or crapcoincompany can do is deliver a trigger. Not that anybody sane ever thought there was anything "stable" with crapcoins.
Say It: Cartel (Score:2)
with at least three top officials from rival companies exchanging messages in a group chat on the encrypted messaging app Signal. The texts also show that industry leaders were acutely aware that the actions of a single firm or fluctuations in the value of one virtual currency could destabilize the whole industry
This sort of market rigging collusion by supposed competitors is known as a "cartel" and is illegal in the U.S.
And this guy is doing a press tour rn (Score:1)