Thread
A quick FAQ:
Q: What actually was FTX? and why did it collapse?
A: A scam. because it was a scam.
Q: What actually was FTX? and why did it collapse?
A: A scam. because it was a scam.
Q: But if it was such an obvious scam, why did so many serious investors (like famous VC firm Sequoia Capital) get suckered into it?
A: Because the longer ponzi schemes go without collapsing, the more serious people are tempted into convincing themselves it's not a scam.
A: Because the longer ponzi schemes go without collapsing, the more serious people are tempted into convincing themselves it's not a scam.
Q: But why does the media, even now, treat FTX as a serious company that just had a "liquidity crunch" instead of a scam?
A: Because the longer ponzi schemes go without collapsing, the more serious people in the media are tempted into convincing themselves it's not a scam.
A: Because the longer ponzi schemes go without collapsing, the more serious people in the media are tempted into convincing themselves it's not a scam.
Q: But I want details, I want to know what FTX's actual business model, how did it actually earn money?
A: Yes, yes, but that's a tedious question. If it weren't a scam, I could simply cite mainstream media stories that would explain this. I can't. Because it's a scam.
A: Yes, yes, but that's a tedious question. If it weren't a scam, I could simply cite mainstream media stories that would explain this. I can't. Because it's a scam.
When Enron collapsed, new stories in the mainstream media will full of descriptions of exactly how it fraudulently did power trading.
With FTX's collapse, mainstream media can't explain it.
With FTX's collapse, mainstream media can't explain it.
Ok, to not jerk you around, I'll try to give a serious answer -- it was a 'derivatives' trading platform. In other words, you could "short Bitcoin", among other things.
The problem is there is no way to "short Bitcoin" that isn't a scam.
The problem is there is no way to "short Bitcoin" that isn't a scam.
With tethercoins, ERC-20 tradeable tokens, smart contracts, and other technobabble, I can make it look less and less like a scam. The more you understand these things, the less it looks like a scam.
To be fair, while FTX itself completely collapsed, its token FTT has not -- because it truly exists as its own smart contract, tradeable on the blockchain, without a central authority. 
On the other hand, it appears that FTX insiders have exploited this to empty all the customer accounts and steal all the remaining assets.
www.coindesk.com/business/2022/11/12/ftx-crypto-wallets-see-mysterious-late-night-outflows-totalling-...
www.coindesk.com/business/2022/11/12/ftx-crypto-wallets-see-mysterious-late-night-outflows-totalling-...
To be fair, FTX talked a good game, about what made it better than the past (scam) derivatives trading platforms.
For example, in past platforms, sometimes hackers would break in, and steal money from SOME of the accounts.
For example, in past platforms, sometimes hackers would break in, and steal money from SOME of the accounts.
The platforms responded by "socializing" the losses, evenly distributing the losses across all the accounts, so that everyone lost 10% instead of a small number of accounts losing 100%.
Of course, what really happened is that the accounts that get hacked are those belonging to the founders and friends. By being in control and deciding to "social losses" they effectively just stole money from customer accounts.
So anyway, FTX promised to not do this. So people though they were great, that they were finally a trustworthy platform for things like "shorting bitcoin".
But you can't short Bitcoin. It's STILL a scam.
But you can't short Bitcoin. It's STILL a scam.
Among the ways you can identify "scams" is the promise of continual "burn" of its tokens. This is the process where you keep destroying some of your own coins/tokens to make the remainder more valuable.
Everybody that does such a "burn" is a scam.
It sounds like it's not a scam, because it sounds like stock buybacks.
But it's the opposite. Stocks have real value (the stream of future profits), tokens don't. The only value a token has is the ponzi effect of some greater fool.
It sounds like it's not a scam, because it sounds like stock buybacks.
But it's the opposite. Stocks have real value (the stream of future profits), tokens don't. The only value a token has is the ponzi effect of some greater fool.
The entire edifice of the crypto scam space is built on plausible analogies with real-world finance, with phrases like "liquidity" crunch, that ignore the fundamental differences that it's actually nothing like this -- that it's just a scam.
A liquidity is when you need cash now, but you can't sell the stock for a reasonable price, but the stock has real value, because it will continue to produce dividends in the future.
With FTX, it's not a liquidity crunch, because the underlying tokens have no actual value.
With FTX, it's not a liquidity crunch, because the underlying tokens have no actual value.
With FTX, "liquidity crunch" means "I can't find a fool now that'll pay what I believe fools will pay in the future for my ponzi tokens".
With normal finance, "liquidity crunch" means "I can't find an investor now for what the future dividend stream will pay out".
With normal finance, "liquidity crunch" means "I can't find an investor now for what the future dividend stream will pay out".
(Yes, yes, I've heard of your cynical views that all finance and the stock market are just ponzi schemes, too. And it's not completely unjustified. But real investments deliver returns not based upon finding a greater fool to buy them, but rent and dividends.)
I was too categorical with the "can't short Bitcoin".
I meant, "can't short Bitcoin on the blockchain with smart contracts responsible for enforcement".
You can short anything, including Bitcoin, the old stodgy Wall Street way, for things like real dollars.
I meant, "can't short Bitcoin on the blockchain with smart contracts responsible for enforcement".
You can short anything, including Bitcoin, the old stodgy Wall Street way, for things like real dollars.
