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: (Loading the article in a private browsing window would probably work too.)




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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... 

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.)

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."

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.”

This quote raises the key question I think:

I tried, in the previous section, to capture the horrors of FTX’s balance sheet as it spiraled into bankruptcy. But, as I said, there is something important missing in that account. What’s missing is the money. What’s missing is that FTX had at some point something like $16 billion of customer money, but most of its assets turned out to be tokens that it made up. It did not pay $16 billion for those tokens, or even $1 billion, probably. Money came in, but then when customers came to FTX and pried open the doors of the safe, all they found were cobwebs and Serum. Where did the money go?

I don’t know, but the leading story appears to be that FTX gave the money to Alameda, and Alameda lost it. I am not sure about the order of operations here. The most sensible explanation is that Alameda lost the money first — during the crypto-market meltdown of this spring and summer, when markets were crazy and Alameda spent money propping up other failing crypto firms — and then FTX transferred customer money to prop up Alameda. And Alameda never made the money back, and eventually everyone noticed that it was gone.

Levine then suggests six possible explanations for where the money went, one of which is about EA:

FTX/Alameda were funneling customer money into effective altruism. Bankman-Fried seems to have generously funded a lot of effective altruism charities, artificial-intelligence and pandemic research, Democratic political candidates, etc. One $500 million entry on the desperation balance sheet is “Anthropic,” a venture investment in an AI safety company. At that same Bloomberg Crypto Summit, I asked Bankman-Fried 9 : “You are sort of in the business of funneling money from people who are going to use it poorly on gambling to, like, animal charities and pandemic preparedness and Joe Biden. Is that too cynical a view, or is that not cynical at all, or what?” My question assumed that FTX and Alameda made a lot of money on fees and spreads from running a crypto exchange and market-maker, so they were legitimately taking money from gamblers and using it for charity. But “not cynical enough” might have been the correct answer. 10 

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