[akelly]

> Where did all the money go?

One theory is that the crypto quant funds figured out how to exploit the Alameda FTX market maker starting in 2020-2021 to take tons of money from Alameda. But FTX couldn't just turn off the Alameda market maker because most of the FTX trading volume, and therefore FTX revenue, was these crypto quant funds taking money from Alameda. So if they turned off the Alameda money spigot then their revenue would drop off a cliff and they wouldn't be able to raise more money from Sequoia or the UAE. And the value of FTT was tied to the trading volume and was a huge portion of their assets, so if volume fell they would be insolvent.

Basically they turned customer deposits into revenue at pennies on the dollar.

[lend000]

This doesn't make much sense to me. I think the problem is that arbitrage just dried up (as it does in a maturing market), and SBF got high on his own farts and started making directional bets. This is clear from the amount of FTT tokens that were held by Alameda in comparison to the amount of assets a typical market maker would hold relative to a pair's liquidity.

[jeffreyrogers]

Yes I think this is more likely to be correct. And Alameda started making directional bets back in 2020 at least: https://twitter.com/AlamedaTrabucco/status/13851809411867893...

[naijaboiler]

This is what likely happened!! These group of inexperienced guys thought they had found a better way to market make, they even had a blog explaining their better strategy. But 5 minutes of reading it immediately becomes obvious that it can easily be exploited and leave alameda holding the bags.

You can't be the exchange, the person loaning out huge margins, and the person backing up the entire system, all in one. Too many conflicts of interests, that leads to making suboptimal decisions. One part of you has to keep the process propped up, so that the value of margin loans you gave out don't fall, which means eating up a lot of lot of losses from the people you gave margin loans too. And you can't stop eating up the losses, or the whole thing collapses.

This was always going to fail. The only play they had was to keep the crypto hype going so that something other than them will drive the prices up and they can exit all the losses they took on from market making quietly. And that was the play they were going for. Hence all the SBP hype, the superbowl ads, the naming of sports arena. Excess crypto hype was their only play. And that's all they did the last few months. Find ways to get publicity for crypto, SBF etc

[smsm42]

That answers the question who got those 16 billions, at least.

[felixbraun]

And then Luna happened, sealing their fate

[caiomassan]

well, he is the 6th highest donor for the democratic party.

[mikeyouse]

Yep, SBF was 6th on the list of largest 2022 donors by donating exclusively to Democrats. Guess who's 14th on that same list donating exclusively to Republicans:

https://www.opensecrets.org/outside-spending/top_donors

That's right, Ryan Salame - CoCEO of FTX. Trying to make this into a partisan thing is silly.