Worse Than Enron
“From compromised systems integrity and faulty regulatory oversight abroad, to the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals, this situation is unprecedented.”
Former Enron restructuring CEO John Ray III has taken over FTX. His early takes on the state of the defunct crypto exchange are… illuminating.
unacceptable practices
zero accounting
lavish personal perks
unsecured systems
When addressing the financial statements he and his team are reviewing, Ray asserted that he has no confidence in the financial information.
“I do not have confidence in it and the information,” he wrote. He said company payments were authorized “through an online ‘chat’ platform where a disparate group of supervisors approved disbursements by responding with personalized emojis”.—The Guardian
Based on what we’re hearing…
FTX was a mess.
If people wanted to buy bitcoin or other crypto as a long term store of value and used FTX to do it, unbeknownst to them, they were in the least capable of hands.
The situation has made me want to place a heavier emphasis on bitcoin fundamentals, the differences between bitcoin and “crypto,” and basics about how to use bitcoin.
You’ll see more posts along these lines moving forward.
Start with this:
Now…
Back to FTX.
If you want… You can read a list of all 134 of FTX’s “firms” or “(shell?) companies” in the above Blockworks tweet.
FTX looks to have been:
a Ponzi
an inside job
a centralized failure
a result of no due diligence
this cycle’s peak-ICO moment
I’ve already said that “FTX Isn’t New.” Plenty of centralized exchanges, lending platforms, and cryptocurrency projects have blown up in the last decade.
Read this for more:
I didn’t even get into the 2017-2018 initial coin offering craze that took over crypto markets last cycle. During that time, investment poured into crypto projects with little to no merit, some of which were outright scams or pump and dump schemes.
Many of these projects, like with the history most altcoins, claimed to improve upon bitcoin’s value propositions. Scammers and naive founders took advantage of newer entrants’ desires to “find the next bitcoin” or “100x crypto investment.”
Every crypto market cycle has a narrative that defines it.
2012-2016
“Bitcoin’s only used by…”
coders
criminals
drug dealers
2016-2020
“I’m here to fix bitcoin.”
rise of altcoins
ICO boom and bust
“crypto” space explodes
2020-present
“I’m here for the yield.”
financialization of crypto
crypto lending bubble
and NFTs!
A common thread every market cycle is that newer entrants to the space and less serious bitcoiners get distracted or willingly turn away from bitcoin.