Castles Made of Sand Dollars: SBF, FTX, and other Three

By Bitcoin Časopis - prije 1 godinu - Vrijeme čitanja: 17 minute
Čet, 8. decembar 2022. 1:19

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Castles Made of Sand Dollars: SBF, FTX, and other Three Letter Agents

How stablecoins and the unstable con, Sam Bankman-Fried, built a corrupt castle of sand and how it all washed out.

Priča o Bitcoin has certainly had its fair share of nefarious characters, criminal activity, bad haircuts and worse wardrobes, and yet our anti-hero du jour has seemed to outdo them all. Sam Bankman-Fried, better known by the three letter acronym SBF, burst onto the scene at the peak of the 2017 bubble, founding Alameda Research that September, just four years after graduating from an internship into a full-time position at one of the world’s largest market makers, Jane Street Capital.

SBF is the son of Stanford Law professor and founder of left-wing super PAC Mind The Gap, Barbara Fried, and Stanford professor Joseph Bankman, an expert on tax shelter laws and government regulation. At the start of 2018, SBF had struck digital gold while taking advantage of the arbitrage opportunity presenting itself between a higher demand for bitcoin in the Asian market, colloquially known as the “kimchi premium”. By the end of the year, and after amassing a considerable fortune from this high-volume bitcoin/dollar spread, he officially moved to Hong Kong, formally founding the derivatives exchange FTX in the following spring.

The Bitcoin network that SBF rode from rags to riches and back again was partially launched in direct response to the fiat money experiment rearing its ugly head in the subprime mortgage, real estate and eurodollar crises that culminated into what is now known as the Great Financial Crisis of 2007 to 2009.

“??EThe Times 03/Jan/2009 Chancellor on brink of second bailout for banks%”

- Satoshi Nakamoto, January 3, 2009

This now infamous inscription in the genesis block made clear the inappropriate fractional reserve banking and predatory loan fiascos of our regulated banking industry was to be put to rest once and for all by this emergent monetary protocol; a completely transparent and decentralized ledger would de-incentivize fraud and prevent obfuscation of illicit activity. A new competitor to the dollar arose from the ashes of the meltdown, and with it, a new standard for financial fairness, complete with predictable issuance, controlled once and for all by the people for the people. Yet in any system made with good intentions, criminals like SBF and his bought-and-paid-for political and media allies manage to find a way to hurt innocent people for the advantage of an unknown few. Like most intriguing stories of fraudulent financial crimes, this one starts in the Bahamas, and ends with a tidal wave of asset liquidations and broken homes.

"Ako mislite da su Bahami uništili vaš globalni poreski sistem, imate prilično užasan globalni poreski sistem."

- Steven Dean, Summer 2020 [1]

Lansiranje Stablecoina, CBDC utrka do dna

Bahami izgledaju dovoljno bezazleno, a ipak postoji duga historija izbjegavanja poreza u SAD-u, zajedno sa krijumčarima rumom tokom ere zabrane. Nastavljajući ovu tradiciju, karipski bankarski centri, uključujući Bahame i Kajmanska ostrva, od avgusta 2022. godine, bili su četvrti najveći strani vlasnici trezorskih hartija od vrednosti, iza samo Japana, Kine i Velike Britanije. Ubrzo nakon osnivanja, FTX je u potpunosti iskoristio eru slobodnog novca koja je započela s krahom 2008. i koju su održavale niske do nulte kamatne stope koje je donijela Trumpova administracija.

These rate cuts were started by the Trump-nominated and Biden-renominated Jerome Powell and were further exacerbated by both of their administrations’ COVID responses. An unprecedented pumping of all things dollar denominated occurred, with real estate, stock indexes, bitcoin and a whole bunch of unregistered securities known as altcoins reaching new highs across the board. In June 2019, one month after the founding of FTX, Facebook’s Mark Zuckerberg announced Libra, a digital currency based on a basket of international currencies; a novel take on stablecoins. This launched the stablecoin and CBDC race in earnest, and coincidentally enough, the Central Bank of the Bahamas became the first such institution to announce its own CBDC, the sand dollar, in October 2020. The sand dollar itself was pegged to the Bahamian dollar, which is itself pegged to the United States dollar, and thus with its government-sanctioned launch, the birth of the first central bank-issued stablecoin dollar came to be on the sandy beaches of SBF’s new home.

"What is the reserve currency of the crypto economy going to be? Right now it's unambiguously the USD. And interestingly it's USD whether or not you're looking at the American crypto economy."

- Sam Bankman-Fried, November 5, 2021

Dok je američka vlada glumila strah od sistemskog rizika u to vrijeme, kineska vlada je shvatila da je projekat Libra beskorisna dolarizacija valuta G7 za koje se priča da će biti uključene u njenu korpu. Metaverse-ovo preuzimanje Plaza sporazuma iz 1985. godine, ovaj plan koordiniranog centralnog bankarstva proširio bi korisnike mreže u USD širom najveće internetske mreže, ubrzan velikom brzinom dostupnom u centraliziranim digitalnim plaćanjima i globaliziran prirodom Facebook korisničke baze bez granica. .

The digital yuan was trialed in April 2021 with great haste in reaction to this development, and by the Winter Olympics 2022, had launched for foreign attendees in Beijing. Not to be outdone by these new-look, same-shit fiat cryptocurrencies, Bitcoin made its own financial history when President Nayib Bukele of El Salvador took to the stage at Bitcoin 2021 to announce the legal tender aspirations of his small but dollarized nation. On March 9, 2022 President Joe Biden signed Executive Order #14067–”Ensuring Responsible Development of Digital Assets”, which included aspirations for mitigation of financial risks in digital asset markets, as well as a clause stating that within 210 days, the attorney general, in consultation with the secretary of the treasury and the chairman of the Federal Reserve, must provide a formal proposal for a government-issued CBDC.

By this point, the Bitcoin financial system had been utterly and properly dollar-ified, with billions of dollars in liquidity of dollar-denominated trading pairs making up the lion’s share of market activity. The same can be said for the Ethereum network, which has seen its compliance-driven perversion by non-native assets taking the wheel from its token Ether, as stablecoin and other dollar derivatives now uphold the majority of economic weight of the system. Both stablecoin giants Circle, issuer of USDC, and Tether came out in support of the merge, further ossifying their stake in the now-nearly-70%-OFAC-compliant blockchain. [2] As of this article’s writing, over 15.5 million ether are currently staked without active withdrawals in the Ethereum 2.0 beacon chain, worth nearly $18 billion dollars.[3] Fortunately for Bitcoin, the consensus weight of its system is not manipulated by user stake, and thus the Bitcoin market has been seemingly unaffected – negatively anyway – by this decade-long development. At least until scammer Do Kwon and his ponzi-scheme Luna wreaked havoc on investors at the start of May of 2022.

„[Kripto je] očigledno ozbiljan... želite da to uradite kako treba u regulatornom prostoru.”

- President Bill Clinton, April 27, 2022 (Allegedly) [4]

Zaraza se širi

Only a few weeks after SBF hosted a keynote with former U.K. Prime Minister Tony Blair and President Bill Clinton at the FTX-organized Crypto Bahamas conference, one of the largest-ever over-the-counter bitcoin purchases was announced by the LUNA team.

Terraform Labs and the non-profit Luna Foundation Guard, two entities headed by Do Kwon, had begun a campaign to purchase bitcoin as a reserve asset in the event that their algorithmic stablecoin, UST, deviated from its $1 peg. Shortly before their collapse, the plan had ballooned to the lofty goal of stacking over $10 billion in the hardest known digital commodity known to man. This purchase was financed with Three Arrows Capital, or 3AC, and was facilitated by cryptocurrency broker Genesis.

"Terra's remarkable growth has continuously reshaped crypto markets over the last two years”, said Joshua Lim, head of derivatives at Genesis. “Genesis is excited to be a liquidity partner to the Terra ecosystem, connecting it to a broader audience of institutional market participants."

Sa bitcoin reserves of Luna Foundation Guard totalling 80,394 BTC, valued at over $3.1 billion on May 5, 2022, this purchase placed LFG among the top-10 bitcoin holders in the world. [5] But only for a moment, for while it might feel like a lifetime ago, what happened next should look awfully familiar; the peg was attacked, the recently-purchased bitcoin fortune was liquidated, Binance, led by CEO Changpeng Zhao (CZ), aptly halted all trading on LUNA and UST pairs – with notable exceptions to their own stablecoin BUSD – and Kwon seemingly fled to outside of U.S. jurisdiction to Asia. [6]

Thus begins our first of many repeatable points of inquiry; where exactly did this bitcoin go? According to an audit released in November 2022, over 33,000 bitcoin were transferred to Binance on May 10, 2022, and sold along with other assets while failing to defend the peg. [7] The same day the nearly $1 billion dollars worth of bitcoin pogoditi Binance’s order books, bitcoin’s USD price broke below $30,000, falling from $40,000 just a week before.

13. maja, SBF je kupio 7.6% udela u Robinhoodu, platformi za trgovanje koja je bila pod kontrolom zbog zaustavljanja trgovanja tokom fijaska GameStop početkom 2021. Bloomberg je izvestio da je oko 40% prihoda Robinhooda došlo direktno od prodaje narudžbi klijenata kompanijama kao što su kao Two Sigma Securities i Citadel Securities. [8] Citadel je kažnjen sa 700,000 dolara u julu 2020. zbog predhodnih trgovanja izvršenih po nalozima kupaca, a u septembru te iste godine, američka Komisija za vrijednosne papire (SEC) ispitala je i samog Robinhooda zbog nepropisnog informiranja klijenata o prodaji dionica. poznatim visokofrekventnim trgovačkim firmama.

Prethodno, u decembru 2020., Robinhood je pristao da plati 65 miliona dolara za namirenje optužbi za ponovljena pogrešna prikazivanja zbog neotkrivanja svojih potvrda o uplatama od navedenih trgovačkih firmi. [9] Kada je novoimenovana ministrica financija Janet Yellen obavijestila novoizabranog predsjednika Joea Bidena o ovom sukobu interesa u februaru 2021., ona je sama morala dobiti etičko odricanje zbog toga što je primila najmanje 700,000 dolara honorara za govornike od Citadel LLC-a godine prije. [10] SBF je otkrio ovu kupovinu putem podnesenog obrasca Priloga 13-D kod SEC-a, koja je koštala 648.3 milijarde dolara i dala mu 2.8% glasačke moći u njihovoj dvostrukoj strukturi dionica, pod entitetom Emergent Fidelity Technologies; ime za koje se kaže da se generira nasumično. [11]

“13. jula, Coinbase Exchange će objediniti knjige naloga USD i USDC. Kao dio procesa objedinjavanja, USDC knjige naloga će se spojiti u knjige naloga USD kako bi se stvorilo bolje, neprimetnije iskustvo trgovanja s dubljom likvidnošću za USD i USDC.”

- Coinbase Exchange Twitter, June 29, 2022 [12]

Circle, entitet koji stoji iza sve više korišćenog USDC stabilnog coina, ranije je proširio svoju međunarodnu ponudu sa podružnicom sa sjedištem na Bermudskim ostrvima sa najavom od 22. jula 2019. [13] Ovaj entitet, podneseno u skladu sa Zakonom o digitalnoj imovini iz 2018. ( “DABA”) znači da je Circle bio prvi veliki emitent stabilnih coin-a koji je dobio klasu F („puna”) DABA licencu koja je pokrivala njihov rad na skrbništvu, platnim uslugama, razmjeni, trgovanju i više finansijskih usluga u domenu digitalne imovine. Drugi bankarski partneri Circlea, Signet, Signature Bank i Silvergate Capital, dali su zajmove u USD Celsiusu, Voyageru, Block Fi, Three Arrows Capital i Alameda Research. Do trenutka pisanja ovog članka, svi su podnijeli zahtjeve za bankrot. Dvije njihove druge poslovne podružnice, Galaxy Digital i Genesis, također su prijavile ogromne gubitke u kolapsu FTX-a, uz glasine o daljnjim efektima zaraze. Coinbase, berza kojom se javno trguje pod oznakom $COIN, objavila je u svom pismu dioničarima za drugo tromjesečje 2. da je skoro jedna trećina ukupnog prihoda izvedena iz kamata na dionice denominirane u USD, uključujući veliku USDC poziciju:

“Prihod od kamata iznosio je 33 miliona dolara, što je povećanje od 211% u odnosu na Q1. Povećanje je prvenstveno uzrokovano našim aktivnostima USDC-a, kao i višim kamatnim stopama jer generišemo kamatu na skrbničke fondove fiat klijenata… na kraju Q2, imali smo 6.2 milijarde dolara ukupnih resursa u USD. Osim toga, imali smo 428 miliona dolara kripto imovine.” [14]

Kada je pismo objavljeno krajem avgusta 2022. godine, kamata na USDC holdinge za 12 mjeseci bila je do 4.7%, dok su jednomjesečni prinosi bili čak 4%. Do 16. novembra 2022. prinosi USDC-a su pali na 0% u svim vremenskim okvirima.[15]

“1) Binance converts USDC --> BUSD, and we see the change in supplies. Thus begins the Second Great Stablecoin War.”

- @SBF, October 23, 2022 [16]

Septembra 4, 2022, Binance announced that it would be auto-converting all USDC, USDP and TUSD, three major dollar stablecoins, into its self-issued BUSD, effective in just 25 days. [17] This led to continued concerns about Binance’s solvency with the preceding few months, especially July 2022, seeing the largest known outflows of bitcoin in the exchange’s history, eclipsing even March 2020’s black swan bottom.

Dana 11. oktobra, 216 dana nakon Bajdenove izvršne naredbe s gore spomenutom klauzulom od 210 dana, BNY Mellon, najveća svjetska skrbnička banka s preko 43 biliona dolara u knjigama, i slučajno, čuvar Circleovih rezervi koje podržavaju USDC, objavila je pokretanje svog program za čuvanje digitalne imovine. [18] Uključena s više od 20% svjetske imovine koja se može investirati, banka koju je osnovao prvi sekretar trezora, Alexander Hamilton, također je navedena kao partner u FedNow pilotu. [19]

Despite these institutional developments, a continued bear market weighed heavily on the now-plummeting bitcoin price. Paradoxically, more and more Bitcoin hash rate poured onto the network. These concurrent movements saw Bitcoin’s hash price plummet to an all-time low, spurring a massive liquidation of bitcoin liabilities off mining operators books. On October 26, Core Scientific, then the largest Bitcoin mining operation in the world, filed for bankruptcy with millions of dollars in debt liabilities, thousands of ASICs, and yet in their filings, held only 24 bitcoin total when the circus came to town. [20] Where exactly did all this bitcoin go? On that same day, barely two weeks before the FTX collapse, Binance saw its largest single day outflow, with 71,579 coins, totalling over $1.1 billion in dollar terms. [21] This pushed net outflows to nearly 95,000 coins from the world’s largest exchange since just that July. Again, where exactly did all this bitcoin go? The very next day, October 27, 2022, SBF appeared on The Big Whale and announced future plans for FTX to launch its very own stablecoin. [22]

Više pijeska nego dolara

“CIA i Mossad i pedo elita vode neku vrstu ucjene trgovine ljudima iz Portorika i karipskih ostrva. Smestiće mi laptop koji je podmetnula moja bivša devojka koja je bila špijun. Mučit će me do smrti.”

- Nikolai Muchgian, October 28, 2022 [23]

Dana 24. oktobra 2022. godine, MakerDAO je odobrio prijedlog zajednice za čuvanje skoro 1.6 milijardi USDC-a s Coinbase Prime-om. [24] Četiri dana kasnije, Nikolai Muchigan, suosnivač MakerDAO-a i izumitelj Rai-a, DAI-fork stabilnog coin-a, objavio je na Tviteru da je njegov život u opasnosti zbog lanca ucjenjivanja karipskih ostrva, koji navodno podržavaju izraelski i američki obavještajci . Tri dana kasnije, na Noć vještica, 29-godišnji koder Muchigan pronađen je mrtav, utopivši se u moru kod plaže Condado u Portoriku. [25]

Two days later, on November 2, 2022, CoinDesk reporter Ian Allison released findings that over a third of all assets – around $5.8 billion of $14.6 billion – on the balance sheet of SBF’s Alameda Research was intrinsically, and soon to be fatally, linked to FTX’s exchange token FTT. A “bank” run commenced, and after three days of nearly $6 billion in withdrawals, FTX was left with literally one single bitcoin. Where exactly did all this bitcoin go? The next day in an interview with Fortune, Coinbase founder and CEO Brian Armstrong made note that USDC will become the de facto central bank digital currency in the U.S. [26]

“Kreatori politike u SAD-u će postaviti okvir koji treba slijediti tako da će privatno tržište zapravo kreirati rješenja, a USD coin je u stvarnom brzom usponu... regulatorno okruženje je jedno od najvećih otključavanja na koje idemo imati u smislu rasta ove industrije i možda čak i podizanja cijena da se vrate u pravom smjeru”

- Brian Armstrong, November 3, 2022

On November 6, CZ announced Binance would liquidate a remaining portion of FTT it had acquired from exiting FTX’s equity, having received around $2.1 billion in BUSD and FTT. Minutes after his announcement, Caroline Ellison, SBF’s partner and the CEO of Alameda Research, offered to purchase the tokens at $22 each, in an over-the-counter fashion. [27] By November 8, CZ and SBF had a phone call and seemingly came to a tentative deal for acquisition, reserving the right to back out of the deal at any time, while interestingly also leaving both U.S.-based proprietary exchanges, Binance.us and FTX.us, outside the scope of the deal.

“Things have come full circle, and FTX.com’s first, and last, investors are the same: we have come to an agreement on a strategic transaction with Binance for FTX.com (pending DD etc)”, SBF tweeted. [28]

Kasnije te večeri, FTX je zvanično suspendovao sva povlačenja sredstava. Kao dio uslova nabavke, SBF je bio primoran da otvori FTX knjige i pokaže dno džepova; videvši više peska nego dolara, CZ je odustao od dogovora. Nekoliko važnih izjava dato je u otprilike 48 sati koje su dovele do ove iznenadne kataklizme, uključujući i užasno tihu američku Komisija za vrijednosne papire i berzu.

“Liquidating our FTT is just post-exit risk management, learning from LUNA. We gave support before, but we won't pretend to make love after divorce. We are not against anyone. But we won't support people who lobby against other industry players behind their backs. Onwards.”

- CZ, November 6, 2022 [29]

Dana 7. novembra 2022. SEC je službeno proglasio LBRY, ili Library Coin, neregistrovanom sigurnosnom ponudom, postavljajući razarajući presedan na cijelom proširenom tržištu kriptovaluta. [30] U Okružnom sudu Sjedinjenih Država za Distrikt New Hampshire, memorandum i nalog glase: “Komisija za vrijednosne papire (SEC) tvrdi da je LBRY, Inc. ponudio i prodao neregistrovane vrijednosne papire kršeći Odjeljak 5 Hartija od vrijednosti Act of 1933”, čin kolokvijalno poznat kao The Howey Test.

Zbog toga što je LBRY rezervisao pre-miniranje od skoro 400 miliona LBC tokena, i saznanja da je kompanija do sada potrošila otprilike polovinu svog prethodno rudarskog LBC-a, SEC je utvrdila zajedničko preduzeće u potpunosti sa nedostatkom otkrivanja i pravilnog arhiviranja svojih sada navodna ponuda sigurnosti putem potrebnih kanala u SEC-u kojim predsjedava Gary Gensler. Implikacije ove prijave izazvale su šokove u industriji unaprijed miniranih tokena, uključujući berze koje navode ove tokene kao i entitete koji stoje iza njihovog izdavanja. Pogodno je da je sljedeći dan bio 8. novembar, izbori na sredini mandata u Sjedinjenim Državama, s ravnotežom Senata i Predstavničkog doma – a možda i regulatornom putanjom industrije digitalne imovine – ponovo u igri.

Pretraživanje FTX-a na FEC.gov donosi 456 pojedinačnih doprinosa kampanji od SBF-a, izvršnog direktora Ryana Salamea i drugih. [31] Salameov doprinos ukupno iznosi preko 14 miliona dolara za kandidate iz GOP-a, dok je SBF-ov “efikasni altruizam” doprinio preko 20 miliona dolara u donacijama političarima DNC-a. Budući da je bio drugi vodeći donator Bajdenove kampanje, do trenutka kada su se pojavili konačni rezultati izborne noći, SBF-ov bankovni fond je konačno sustigao njegov moral i on se našao gotovo u potpunosti u bankrotu.

By November 9, the day after the elections, SBF had reportedly lost 94% of his net worth, down to $1 billion from more than $15 billion, leaving him with the largest single-day loss by a person according to the Bloomberg Billionaire Index. [32] Early in the morning of November 10, SBF took to Twitter to explain what happened, writing “I'm sorry. That's the biggest thing. I fucked up, and should have done better”, before making a specific note that “THIS IS ALL ABOUT FTX INTERNATIONAL, THE NON-US EXCHANGE. FTX US USERS ARE FINE!” [33]

Poglavlje 11

“The administration [...] has consistently maintained that without proper oversight, cryptocurrencies risk harming everyday Americans…The most recent news further underscores these concerns and highlights why prudent regulation of cryptocurrencies is indeed needed.”

- White House Press Secretary Karine Jean-Pierre, November 10, 2022 [34]

Jedanaestog dana jedanaestog mjeseca, FTX i Alameda Research su službeno podnijeli zahtjev za zaštitu od stečaja po poglavlju 11, a SBF je odstupio s mjesta izvršnog direktora. Osim toga, 130 povezanih kompanija povezanih ili povezanih s FTX-om također je pokrenulo dobrovoljne postupke prema Poglavlju 11. [35] Plima je nestala i gotovo svi uključeni su uhvaćeni kako plivaju goli, dok je gotovo beskrajni plimni talas likvidacija u dolarima napravio brz rad SBF-ovog karipskog carstva.

Dok su prvi dolar CBDC-a možda počeli na Bahamima, monsun nadolazeće regulacije i zaraze Drugog velikog rata stabilnih kovanica daleko je od kraja. Dolar, koji je od septembra pao 10% na 35-godišnji DXY maksimum, traži nove načine za inovacije i daljnju dolarizaciju tržišta širom svijeta.

On November 15, just four days after the SBF tsunami crashed to shore, BNY Mellon, as well as a dozen or so other banking institutions, announced the start of a twelve-week digital dollar pilot program with the Federal Reserve Bank of New York. [36] On the very same day, BlockFi announced plans for bankruptcy filings, only five months after taking a $250 million loan from FTX, and Circle announced users would now be able to settle payments by accepting Apple Pay. [37,38] With a significant 43% discount now showing on the highly-regulated Grayscale Bitcoin Trust, further community requests for proof of reserves are growing around Genesis and Grayscale, both owned by the Digital Currency Group, and even their custodian, Coinbase Custody. [39,40] As of this writing, these requests have so far been denied for security reasons.

Iako se čini da jaše na talasu revolucije digitalne imovine u procvatu, prikupljajući kako slavne ličnosti tako i političke saveznike, ispostavilo se da se SBF utopio u dugovima i pogrešnom raspodjelom kapitala među glasnim, mejnstrim pohvalama. Kasnije tog mjeseca, 30. novembra, SBF je trebao lično da se pojavi na događaju New York Timesa, sponzoriranog od strane Accenture, zajedno sa sekretarom Yellen, izvršnim direktorom Meta Markom Zuckerbergom, predsjednikom Ukrajine Volodimirom Zelenskim, izvršnim direktorom BlackRocka Larryjem Finkom, izvršnim direktorom TikToka Shou Chewom, bivši potpredsjednik Michael Pence, izvršni direktor Amazona Andy Jassy, suosnivač i izvršni direktor Netflixa Reed Hastings, gradonačelnik New Yorka Eric Adams i drugi; ulaznice za događaj bile su navedene po cijeni od 2,499 dolara po učesniku.[41] Intervju između SBF-a i Andrewa Rossa Sorkina prenošen je kao što je oglašeno, iako su obje strane snimale na daljinu.

Bitcoin tends to be a ballast of truth, bringing all sorts of ballooning fraud rushing to the surface. FTX and Alameda Research will take their place amongst the seemingly too-big-to-sink players that ended up doing just that. They will certainly not be the last. However the following weeks, months, and years play out, it is clear that SBF was but a small fish in an ocean-sized, dollarized pond. And as he quickly found out, there is always a bigger fish.

“U nekom trenutku bih mogao imati više da kažem o određenom sparing partneru, da tako kažem. Ali znate, staklene kuće. Dakle, za sada, sve što ću reći je: dobro odigrano; ti si pobijedio." [42]

– Sam Bankman-Fried, 10. novembra 2022