Meet Queen Caroline and Other Characters in the Stunning Collapse of FTX – Mish Talk

Inside Sam Bankman-Fried’s Doomed FTX Empire

The Wall Street Journal takes a look inside Sam Bankman-Fried’s Doomed FTX Empire

That’s a free link. Here are a few snips.

The emerging picture of what went wrong suggests the crypto empire was a mess almost from the start, with few boundaries, financial or personal.

From its earliest days, the firm was an unruly agglomeration of corporate entities, customer assets and Mr. Bankman-Fried himself, according to court papers, showed company balance sheets to bankers and interviews with employees and investors. No one could say exactly what belonged to whom. Prosecutors are now investigating its collapse.

Corporate money was used to buy real estate, but records were not kept. There wasn’t even a roster of employees, to say nothing of the terms of their employment. Bankruptcy filings say one entity’s outstanding loans include at least $1 billion to Mr. Bankman-Fried personally and $543 million to a top lieutenant.

The lives of the people who ran FTX and its related companies were similarly blurred. Ten of them lived and worked together in a $30 million penthouse at an upscale resort in the Bahamas. The hours were punishing, and the lines between work and play were hard to discern. Romantic relationships among Mr. Bankman-Fried’s upper echelon were common, as was the use of stimulants, according to former employees.

“Nothing like regular amphetamine use to make you appreciate how dumb a lot of normal, non-medicated human experience is,” Ms. Ellison once tweeted. A lawyer for Ms. Ellison declined to comment.

To the outside world, Mr. Bankman-Fried was the mayor of cryptoland, the man charged with convincing lawmakers, investors and enthusiasts that he’d built a new kind of finance. He urged Congress and regulators to approve his model for crypto trading. On Twitter, he admonished competitors for practices he called unsafe.

FTX and Alameda, the trading firm, extended hundreds of millions of dollars in credit to prop up one struggling lender, BlockFi, and made an unsuccessful bid to keep lender Voyager Digital out of bankruptcy.

Mr. Bankman-Fried’s heroics drew comparisons to John Pierpont Morgan’s private bailouts that helped end the Panic of 1907.

What’s an FTT Worth?

Humans have ascribed value to objects for eons. A dollar bill is just a piece of paper, after all. But its value comes from traditions and agreements, laws and practices formed over hundreds of years. Cryptocurrencies compress that into the stroke of a key: Make a cryptographic token with some code, give it a name, and get someone to believe it’s worth $10. If you hold a hundred thousand of these tokens, you now have an asset worth a million dollars—in theory.

Alameda holds the lion’s share of FTT in existence. Before it collapsed, Alameda had marked the value of its FTT at $5.5 billion, according to the document. [Mish Comment: Now it’s about $8 billion in the hole.]

After a stint in Hong Kong, Mr. Bankman-Fried and FTX made their home in the Bahamas, moving in 2021 to take advantage of the island country’s crypto-friendly regulatory regime.

On the archipelago’s New Providence island, an 80-square-mile oasis that feels like a small club to its financial elite, FTX landed with a splash, according to people on the island. The company rapidly acquired high-end real estate.

The Bahamian prime minister, Philip Davis, hoped FTX would help center his country as a nexus of the crypto world, he said in several public speeches. When given the chance to buy FTX equity earlier this year, one Bahamian FTX worker said employees spent thousands of dollars each on shares.

FTX hired a Bahamian security firm to guard FTX headquarters shortly before the collapse. After the news, the majority of non-local FTX employees left the island. The security guards said they found themselves protecting nearly vacant buildings.

Before the company collapsed, FTX staffers frequented Island Brothers, an upscale French bistro a stone’s throw from the company’s headquarters, restaurant employees said. The owner got to know Mr. Bankman-Fried’s father, Stanford tax-law scholar Joseph Bankman, during his visits to Nassau to spend time with his son.

Last week, FTX’s downfall brought Mr. Bankman to Island Brothers in a somber mood. After a few pleasantries, the restaurant owner said, Mr. Bankman broke down in tears.

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