FTX: Wall Street could cover the liquidity problem, but not its bankruptcy

It seems that Sam Bankman-Fried has never heard of the record options of the blockchain. In a long Twitter thread, the fallen cryptocurrency tycoon blamed a typing error for the collapse of his FTX exchange on Thursday. That looks strange.

SBF tweeted that he mistakenly believed that FTX customers had plenty of liquidity at the beginning of this week to facilitate withdrawals. It was not aware of the leverage within the FTX system. He couldn't have done it wrong. FTX account holder in panic was prevented from lifting their assets this week.

SBF insists that FTX is currently illiquid but not insolent. This means that his asset exceeds that of the liabilities. He strives for a financial injection of several billion dollars to close any liquidity gaps. For some, it may seem absurd to give FTX a leash at the moment. Not to mention the highest opaque processes, serious regulatory and legal risks are increasing.

But there could be a template to take such a risk. The shares of Coinbase, the listed crypto exchange, fell by 80 percent in price this year, since the crypto trade volume has decreased significantly. But it clearly lists its customer assets and liabilities and cash. In addition, it does not expressly or tacitly give customer funds, which FTX apparently did.

remember the financial crisis. JPMorgan bought Bear Stearns. Barclays recorded it with Lehman Brothers. Mistakes were made. The private equity company TPG invested $ 1 billion in Washington Mutual, just a few months before it went down the Bach in 2008. Wall Street has many specialized funds and strategic buyers who enter into panic situations.

This week the Sequoia risk capital power package wrote down its $ 214 million investment in FTX to zero. However, the titanium from the Silicon Valley also found that FTX generated an operating profit of $ 250 million in 2021. It is not clear how much of it comes from fees and commissions compared to volatile trading gains. However, the former could be the basis of a restructured FTX.

During the financial crisis, necessary takeovers under strict legal and regulatory regulations that monitor the process. Nothing is so essential in cryptocurrency.

The immediate task is to uncover the relationships between the FTX customer accounts and the obvious lending to Alameda Research, the SBF trade company. His stupidity probably caused this week run on FTX. SBF should better find all the recordings he can find.