FTX’s financial black hole leaves Binance balking at rescue plan

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A newer thread now has the top of the stack:<p><i>We will not pursue the potential acquisition of FTX</i> - <a href="https:&#x2F;&#x2F;news.ycombinator.com&#x2F;item?id=33537821" rel="nofollow">https:&#x2F;&#x2F;news.ycombinator.com&#x2F;item?id=33537821</a> - Nov 2022 (15 comments)

So due diligence showed how big a hole FTX is in. No surprise. As I said yesterday, about 50% of announce M&amp;A deals fall through. This deal looked unlikely to succeed. If FTX was out of cash but had a lot of money tied up in things that are slow to sell, like factories or real estate, a merger would make sense. But this is crypto. No big tangible assets. If FTX is well into negative territory, there&#x27;s no hope.<p>Next stop for FTX is bankruptcy.<p>Does FTX.us have any exposure to FTX.intl? They&#x27;re not supposed to. But do they? The SEC and CFTC are now investigating to find out.[1] Bloomberg: &quot;US financial regulators are investigating whether beleaguered crypto-exchange FTX.com properly handled customer funds, as well as its relationship with other parts of Sam Bankman-Fried’s crypto empire...&quot; In other crypto collapses, we&#x27;ve seen &quot;assets&quot; that were actually loans to affiliated parties. Loans that became worthless.<p>At FTX&#x27;s web site, &quot;<a href="https:&#x2F;&#x2F;ftx.com&#x2F;intl" rel="nofollow">https:&#x2F;&#x2F;ftx.com&#x2F;intl</a>&quot;, there is no mention of any problems. Typical.<p>[1] <a href="https:&#x2F;&#x2F;www.bloomberg.com&#x2F;news&#x2F;articles&#x2F;2022-11-09&#x2F;us-probes-ftx-empire-over-handling-of-client-funds-and-lending" rel="nofollow">https:&#x2F;&#x2F;www.bloomberg.com&#x2F;news&#x2F;articles&#x2F;2022-11-09&#x2F;us-probes...</a>

Whenever news like these are discussed here in HN I get flabbergasted by the amount of technical mumbo-jumbo you guys are able to throw around in the comments. It is genuinely impressive how much deep technical knowledge you have about this. I wonder if there is really no other place you could apply this? Like, what is the point of having all this deep technical knowledge about two hundred different fake coins (and their complex economic-engineering interplay) when there isn’t place in the real world even for the largest one?

So not long ago FTX was going to save Celsius, then balked. Now Binance was going to save FTX, then balked. When Binance needs saving, is that the end, or is there another turtle under these three turtles?

The only likely outcome I can see is binance taking on just a part of the rumoured $6bn hole. For example covering deposits up to $100k (or whatever number)<p>Earns goodwill and users while the size of the bill is smaller.<p>Not sure how it would work from a legal standpoint but unfortunately 6 billion is too much (and I had a majority of my net worth in FTX as a trader)

When numbers in billions of $ are mentioned with regards to these crypto exchanges, is there really that much actual money at stake or is that the imagined value of all the magic tokens that are supposedly traded on these exchanges?

Question from someone who hasn&#x27;t been involved in crypto since baby was born in 2021:<p>We all know that this can happen to centralized exchanges and using a DEX will protect your assets (the ones that don&#x27;t go to $0 on their own like LUNA and FTT).<p>In the past, trading was always much more expensive due to the blockchain overhead compared to trading on a CEX, not to mention liquidity problems with smaller alts and DEXs.<p>Is this still the case? Do folks day trade using DEXs for small amounts or are they still limited to longer-term trading due to the overhead?

I&#x27;m just a fly on the wall with all the crypto drama but i thought Binance bailing out FTX was mainly to protect Binance and not just good will. I guess Binance figures they can survive without them.

Why would they even consider taking them over? They killed a competitor by declaring them as insolvent. The damage has been done. The user funds SBF siphoned out of FTX aren&#x27;t coming back and doubt CZ is going to refund them out of pocket IF they take them over. The tech behind FTX is probably the same or worse than what Binance has. Customer acquisition happens anyway as the people still wanting to stay active in crypto will probably go to Binance.

Obviously. The only reason for them sending that tweet yesterday is if they were never seriously considering going through with the deal in the first place.

No surprise to me, we are talking about a hole of probably over $6b. That&#x27;s a lot of money for an exchange whose reputation has now been destroyed.

My understanding is that Binance can step in as a potential savior because Binance is safe themselves and the company doesn&#x27;t fear a liquidity crisis themselves. But, their whole premise of consumer confidence is based off of SAFU[1] which seems to hold quite a bit of their own BNB coin[2].<p>Maybe I&#x27;m missing something but isn&#x27;t Binance just insuring funds... with their own coins? (ie. what Alameda basically did with FTT tokens)<p>1. Couldn&#x27;t Binance be subject to the same rundown FTX just experienced? &#x2F; How could Binance realistically rescue FTX at all?<p>2. Was this offer ever serious?<p>[1] <a href="https:&#x2F;&#x2F;academy.binance.com&#x2F;en&#x2F;glossary&#x2F;secure-asset-fund-for-users" rel="nofollow">https:&#x2F;&#x2F;academy.binance.com&#x2F;en&#x2F;glossary&#x2F;secure-asset-fund-fo...</a><p>[2] <a href="https:&#x2F;&#x2F;bscscan.com&#x2F;address&#x2F;0x4B16c5dE96EB2117bBE5fd171E4d203624B014aa" rel="nofollow">https:&#x2F;&#x2F;bscscan.com&#x2F;address&#x2F;0x4B16c5dE96EB2117bBE5fd171E4d20...</a>

I assume interest rate climate and losses will start an outflow of money from crypto. I wonder how Tether will handle this. They seemed too big to fail but this is looking serious.

This would like result in a 5 year &quot;nuclear winter&quot; for crypto VC FYI.

Say I buy some Bitcoin or ETH and send it to FTX.<p>Do we now know that:<p>A) FTX were not segregating those client funds;<p>B) They were speculating with them after SBF said “not even invested in treasuries”;<p>C) Seperately, they were leveraging up FTT on their balance sheet.<p>FTT price fall seems to be the catalyst, but this shouldn’t impact segregated client funds unless they are also being used in funky ways, right?<p>Surely one of the above is bad enough, but all 3 is an astounding abuse of trust no?<p>I have defended Crypto and even dabbled in the industry for a while, but this is shocking to find one of the blue chip names losing client funds.

This would (probably) be a mistake on CZ&#x27;s part. Taking on FTX&#x27;s customers would undoubtedly bring him more goodwill than letting its customers go down with the ship.

background on the FTX leadership here <a href="https:&#x2F;&#x2F;www.youtube.com&#x2F;watch?v=VbDiWXFxqr8&amp;t=2144s" rel="nofollow">https:&#x2F;&#x2F;www.youtube.com&#x2F;watch?v=VbDiWXFxqr8&amp;t=2144s</a>

This is good news. The obvious suspicion was that Binance would bail out FTX to cover for the fact that Binance aren’t truly solvent themselves- in exactly the same way FTX did with other crypto projects earlier this year. We all know at this point FTX was underwater, so Binance stepping to take a big loss on it would’ve been a strong red flag.

Makes sense, FTX are crumbling now and will move to Binance regardless

Probably good for Binance they&#x27;re not taking on those toxic books but impact on overall crypto market could be severe.

What are the risks for generalized financial contagion in the traditional sector? I understand that crypto has been a way for wealthy individuals to hide funds from taxation, so if a bunch of wealthy dweebs lose their shirts I don&#x27;t particularly care. On the other hand, I don&#x27;t want to see this sparking another housing crisis or currency&#x2F;FX crisis.

Brian Armstrong low key based in that interview: &quot;We aren&#x27;t engaged in complex financial arrangements with counterparties... that we own&quot;

This is like strapping yourself to a boat anchor as the boat sinks.

How does this happen? Were they just stealing funds?

Translation: CZ (Binance CEO) has had enough time to liquidate volatile assets and set up shorts.

Interesting to see how heavily Sam Bankman-Fried dontated in the recent midterm elections in the USA. He might run out of runway before those investments pay off.<p><a href="https:&#x2F;&#x2F;www.washingtonpost.com&#x2F;politics&#x2F;interactive&#x2F;2022&#x2F;top-election-donors-2022&#x2F;" rel="nofollow">https:&#x2F;&#x2F;www.washingtonpost.com&#x2F;politics&#x2F;interactive&#x2F;2022&#x2F;top...</a>

Reminder, what we <i>like</i> about crypto is no bailouts<p>Just pure Machiavellian outcomes

best move now is for coinbase to pick up the rest of FTX US operations

SBF is no longer a member of the three-comma club. I can finally rest.

SBF was the “model citizen” to USA regulators. It’s hilarious how some USA loved this known ponzi schemer while actively fighting legitimate projects like LBRY.

Oops, should have checked new.<p>There&#x27;s a previous submission from a different source: <a href="https:&#x2F;&#x2F;news.ycombinator.com&#x2F;item?id=33535015" rel="nofollow">https:&#x2F;&#x2F;news.ycombinator.com&#x2F;item?id=33535015</a>