TLDR Crypto 2022-11-14

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Alameda CEO Caroline Ellison, Sam Bankman-Fried, and two other FTX executives were aware of the decision to send FTX customer funds to Alameda. FTX used customer money to help Alameda meet its liabilities. The companies have filed for bankruptcy and Bankman-Fried has resigned. It could be a long time before bankruptcy proceedings are over and customers are able to recover any of their funds, if any.

FTX is initiating bankruptcy proceedings in the US. CEO Sam Bankman-Fried has resigned from his position. Alameda Research is part of the bankruptcy protection and it reportedly owes FTX roughly $10 billion. Until recently, Bankman-Fried was hailed as a white knight in the crypto industry.

FTX has enabled withdrawals for Bahamian customers, resulting in some interesting withdrawal strategies. Bahamian users are listing NFTs on FTX at wildly marked-up prices. The crypto used to purchase these NFTs is withdrawn and sent to non-Bahamian users' choice of address. FTX's NFT marketplace processed around $20 million in volume within 24 hours of the exchange re-enabling withdrawals.

DeFi developers are rushing to create a new version of Serum that can be governed without FTX's influence. Many DeFi protocols across Solana started unplugging from the on-chain crypto exchange on Saturday as they didn't know whether FTX still controlled the exchange. FTX continues to hold the program update authority keys for the exchange. Many users are concerned that the hackers who recently accessed FTX's funds may also have access to Serum's keys.

Automated Market Makers are capital inefficient, but they are not bad for stableswaps and long-tail DAOs wanting to own their liquidity. Oracle-based exchanges are not scalable and not part of the DeFi vision. Central Limit Order Book exchanges are the only real long-term solution for efficient on-chain price discovery, but they require huge throughput that isn't easily feasible yet.

When Sam Bankman-Fried says that FTX has a lot of asset value on the books, he is saying that the value of the tokens that the exchange owns is larger than the exchange's liabilities. However, the exchange couldn't liquidate its tokens at those prices if it wanted to. The true realizable value of these assets is much lower. It is very difficult to try to realize the value of an illiquid asset.

FTX held $900 million in liquid assets against $9 billion of liabilities the day before it declared bankruptcy. The largest portion of these liquid assets was $470 million of Robinhood shares. FTX customers will likely face steep losses on the assets they held on the exchange. Sam Bankman-Fried has been racing to raise emergency funding but has been unable to persuade investors.

Sam Bankman-Fried, Gary Wang, and Nishad Singh are currently being detained by Bahamian authorities. The three, along with Caroline Ellison, were looking for ways to flee to Dubai, a country without any extradition treaties to the US. Ellison is currently in Hong Kong. A 'trusted source' has witnessed Bankman-Fried 'in a locked space' with authorities in a luxury resort.

FTX's liquidation engine internalizes liquidated positions rather than dumping them on the market during rapid market movements and a vast majority of these internalized positions likely flowed to Alameda.

More than $600 million was siphoned from FTX's wallets hours after the exchange filed for bankruptcy.

AAX has suspended activity for up to 10 days due to a scheduled upgrade delayed by turbulent markets.

The CEO admitted that the exchange sent a $400 million transaction to the wrong type of account on another exchange.

Tether was undercollateralized in November 2022 and its cryptocurrency and investment holdings have declined in value.

A lack of clarity around FTX's current situation has caused BlockFi to pause client withdrawals.