Matt Levine explains that FTX's balance sheet (which has been leaked) is a nightmare. Sample quote:
And then the basic question is, how bad is the mismatch [between liabilities and assets on the balance sheet]. Like, $16 billion of dollar liabilities and $16 billion of liquid dollar-denominated assets? Sure, great. $16 billion of dollar liabilities and $16 billion worth of Bitcoin assets? Not ideal, incredibly risky, but in some broad sense understandable. $16 billion of dollar liabilities and assets consisting entirely of some magic beans that you bought in the market for $16 billion? Very bad. $16 billion of dollar liabilities and assets consisting mostly of some magic beans that you invented yourself and acquired for zero dollars? WHAT? Never mind the valuation of the beans; where did the money go? What happened to the $16 billion? Spending $5 billion of customer money on Serum would have been horrible, but FTX didn’t do that, and couldn’t have, because there wasn’t $5 billion of Serum available to buy. FTX shot its customer money into some still-unexplained reaches of the astral plane and was like “well we do have $5 billion of this Serum token we made up, that’s something?” No it isn’t!
Mirror to avoid paywall: https://archive.ph/hZszH (Loading the article in a private browsing window would probably work too.)
I don't know if what I saw was a real record? It's just a balance sheet on excel. Not even a proper accounting system generated financial statement.
Surprised to see Anthropic mentioned there, I hadn't realised that SBF led their recent funding round. I wonder what this implies for them.
That is apparently what FTX was sending to potential investors, as their balance sheet, when asking for a bailout. Seems bad.
It's really bad. I mean if some policy was in place to ask for audited financial statements, that could have shown some hint of what had transpired now....
Seems like it was something Sam wrote himself from scratch in a mad hurry last week rather than a reflection of the record-keeping actually in place until that point?
I do not think so, if he has an accountant (presumably given the amount of money involved) he will not state that that represents the totality of accounting records in his company through an unstructured excel monitoring. Or yeah, this might been the case which goes back to my recommendations in various posts to request audited financial statements from donors so that its faster to detect if one is not involved in shady transactions...
This quote raises the key question I think:
Levine then suggests six possible explanations for where the money went, one of which is about EA:
Is it possible that a big part of the money went into “other ventures,” and those just failed to the point of not being worth mentioning by name? (That’s not good of course, but it would be an explanation.)
That is not the problem. Maintaining a billion dollar accounting in excel sheets is really unbelievable. In some sense there is that part of me that says this snapshot from that blogpost could be fake.
Sure, sure. My question was in response to the quote in the original article, not the format. Specifically, “FTX shot its customer money into some still-unexplained reaches of the astral plane.”
The currently leading theory seems to be that FTX gave (loaned without appropriate collateral) a ton of the money to Alameda (which lost a lot with risky investments, possibly before FTX gave them money), but I have no idea how much money went to what other ventures.
"Ms. Ellison explained what had caused the collapse, according to a person familiar with the matter. Her voice shaking, she apologized, saying she had let the group down. Over recent months, she said, Alameda had taken out loans and used the money to make venture capital investments, among other expenditures. Around the time the crypto market crashed this spring, Ms. Ellison explained, lenders moved to recall those loans, the person familiar with the meeting said. But the funds that Alameda had spent were no longer easily available, so the company used FTX customer funds to make the payments."