Giving them the benefit of doubt, this is not a contradiction. The statement means that they have enough illiquid assets to cover the withdrawal that they are working on converting into liquidity.
FTX/Alameda holds tons of illiquid FTT tokens that they cannot sell and which Binance was dumping. Thus, they might have not technically lied. But they were still wrong from the accounting perspective - they surely understood that FTT token cannot be used to cover gaps in large scale.
It was the question that matters "how fast you can process user withdrawals and with what risk"
Sam owns 8% of Robin Hood that is worth around ~$1B - he could sell that and cover some of the gap. But what we do not know yet is the size of the gap in time and space. FTX had $6B withdrawals pending on Tuesday.
> Sam owns 8% of Robin Hood that is worth around ~$1B - he could sell that and cover some of the gap.
Not knowing too much about this space have you ever seen anything like this happen? A CEO using their personal wealth to cover their customers funds seems unlikely.
That can't happen directly (I think).
Mingling breaks the limited liability mantle.
He will have to buy equity or other product from FTX to infuse with cash. And if it is going bankrupt he has to stop running it to preserve the liability "shield" -- details of course depend on the country/state of organization/incorporation. I know nothing about the Bahamas.
Example: Elon for instance infused his own cash into Tesla, when it was going bankrupt. But he practically bought equity to my understanding.
Covering customer accounts is different, in a financial firm. I do not know what tools the Bahamas give to FTX. This is all uncharted territory. (Also there is legal exposure to other countries.)
This isn’t a thing, limited liability (which is the fundamental principle that distinguishes corporations from partnerships) prevents this. The only way would be if SBF was charged with defrauding FTX
But they're meant to store the customer assets in a cold wallet. They're not meant to invest them in illiquid assets that would need to be liquidated to give people their money. If it's not a contradiction, it's an intentionally misleading statement to avoid admitting they let Alameda Research invest the money when the entities are supposed to be completely separated.
In that scenario they could point to some of the wallets to help calm the fears the money isn't available. Or they could approach a number of different lenders who would be comfortable lending at high interest rates if the money is there but slow to access. They only sell if we're in the non-charitable case.
I thought FTX Alemeda (the trading side) invested into their own token, which is tanking thus causing problems.
Alemeda has like $14b assets and $8b in liabilities. But of that $14b, $5b are in their own token (FTT) which is kinda?? worth nothing at this very moment. So now the assets and liabilities are more equally matched, but less margin for shifting values of tokens.
I don’t know, but the derivative of their assets looks scary the last 24hr.
Illiquid just means that you can't cash it in quickly.
Cash is 100% liquid while a house is illiquid you might have millions US$ parked there but only if you manage to sell it, then you convert it into liquid cash.
Liquidity is a measure of how easy it'd be to trade a thing for another thing you want.
Agreed, but in this case these tokens have suddenly become 'illiquid' because they have just become worthless. It seems that here the term 'illiquid' is being used as a euphemism.
It was the question that matters "how fast you can process user withdrawals and with what risk"
Sam owns 8% of Robin Hood that is worth around ~$1B - he could sell that and cover some of the gap. But what we do not know yet is the size of the gap in time and space. FTX had $6B withdrawals pending on Tuesday.