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- Is FTX...insolvent 👀? The story behind the scandal
Is FTX...insolvent 👀? The story behind the scandal
Market manipulation, competitive rivalry and insolvency
Build in Bear
November 07, 2022
GM folks, this is Web3 Seems Legit, the weekly newsletter that keeps you tuned into all the latest crypto Twitter gossip...and you don't even have to pay $8 for it 😉.
You'll want to pop that bag of popcorn for this week's issue:
Is FTX insolvent? A new report dropped revealing FTX and Alameda Research's balance sheet, and it doesn't look good. In fact, it's quite scandalous.
What is OpenSea's take on creator royalties? The biggest NFT marketplace has finally come out with their stance on creator royalties, but not everyone is pleased.
Google announces partnership with Solana. Finally, some bullish news! Google Cloud and Solana have announced their partnership to launch dedicated nodes in the cloud.
Is FTX insolvent?
If a movie was to be made about the crypto industry in 2022, it would probably be named The Fall From Grace, featuring big names like Celsius, LUNA and now FTX 😔. Here's the scoop.
Sam Bankman-fried (SBF) is the Founder of FTX (an exchange) and Alameda Research (a trading firm). He is relatively influential in the industry and for the most part, well-respected for helping out other troubled crypto companies.
This was until a few months ago when people began to realize that this one guy has a little too much control over the crypto industry 🤔. When he started lobbying for crypto regulation, his intentions became even clearer.
Wait till the end. 👇
#FTX CEO has lost the plot IMO. This guy does not deserve what crypto has to offer.
I'd be very careful about anything this guy touches.
He should not do interviews either. 😅
— Duo Nine | discord.gg/ycc (@DU09BTC)
8:10 AM • Oct 29, 2022
Well, the plot thickens when Coindesk dropped a report last week revealing that Alameda/FTX is...insolvent - the famous cursed word 😱. Turns out, Alameda's balance sheet is dominated by FTX's $FTT token and SBF has been running a dirty scheme between his two companies.
FTX prints $FTT from thin air
Alameda pumps $FTT by purchasing it from the market
Alameda takes a loan against $FTT for cash
Use borrowed cash to rinse and repeat
seeing some far-out takes from this Coindesk Alameda story
to better clarify, here's some insights we can draw about Alameda's operations 🧵
disclaimers: not financial advice, not the official view of Coindesk, only Alameda knows the whole picture
— Tracy Wang (@0x_tracy)
8:49 PM • Nov 3, 2022
The sad part is that this type of flywheel scheme isn't new and we've all seen how it ended. Alameda now potentially holds more $FTT than what's circulating in the market which could lead to its crash. Think LUNA and Celsius.
NEW: “IS ALAMEDA RESEARCH INSOLVENT?”
According to a recent leak, the firm’s finances rely on the same scheme that destroyed Celsius Network. Will it work out differently for SBF? 🧵👇
dirtybubblemedia.substack.com/p/is-alameda-r…
— DIRTY BUBBLE MEDIA: THE ALAMEDA SPECIAL (@MikeBurgersburg)
10:41 AM • Nov 4, 2022
To make things even juicier, Binance, FTX's competitor and holder of about $500 million worth of $FTT has started selling their position in light of the recent news.
As part of Binance’s exit from FTX equity last year, Binance received roughly $2.1 billion USD equivalent in cash (BUSD and FTT). Due to recent revelations that have came to light, we have decided to liquidate any remaining FTT on our books. 1/4
— CZ 🔶 Binance (@cz_binance)
3:47 PM • Nov 6, 2022
So, not only has SBF been lobbying for DeFi regulation, but apparently, he has been trying to take down Binance and CEO CZ is not having any of it. It seems like the battle between CEXes has been brewing for a while though and this was just the tipping point.
nope, CZ does not respect the pump
the recent alameda/FTT saga feels like a major escalation in the CZ-SBF feud that's been brewing
— Tracy Wang (@0x_tracy)
3:55 PM • Nov 6, 2022
While the two exchanges continue to battle it out, the whole crypto community is watching closely with their bags of popcorn 👀.
1) A competitor is trying to go after us with false rumors.
FTX is fine. Assets are fine.
Details:
— SBF (@SBF_FTX)
12:38 PM • Nov 7, 2022
It may seem like a silly rivalry between competitors, but at the end of the day, this is real people's money on the line. Stay safe in this battle folks 🫡.
What is OpenSea's take on creator royalties?
Creator royalties have always been the heart and soul of NFTs. Original artists could finally be compensated fairly for all secondary market transactions, but this all changed a month ago when 0% royalties started popping up.
Now OpenSea, the largest NFT marketplace, has finally come out as pro-royalty and even launched a new tool to help enforce on-chain fees.
There’s been a lot of discussion over the past few months about business models for NFT creators & whether creator fees (“royalties”) are viable.
Given our role in the ecosystem, we want to take a thoughtful, principled approach to this topic & to lead w/ solutions. 🧵
— OpenSea (@opensea)
12:55 AM • Nov 6, 2022
But instead of receiving praise, they're criticized for being anti-competition. See, OpenSea will only pay creator royalties if the NFT project chooses to blacklist other competing marketplaces.
Opensea's suggested fix for "The Royalty Problem" is that they will host a blacklist of exchanges.
If your project chooses to implement that blacklist, they'll give you royalties.
If you don't, they won't.
Does anybody else see the issue with that?
— quit.q00t.eth (@0xQuit)
4:47 AM • Nov 6, 2022
While it's clear that OpenSea is trying to monopolize the NFT market, they are also undeniably offering the highest royalty rate for creators to earn 🤷♀️.
Effective royalty rates across exchanges. It's OpenSea or bust at this point
Blur's promise of promoting royalties and being pro-creator was empty. Everyone else threw in the towel
Exchanges couldn't win market share by cutting down their own fees, so they cut out creators too
— NFTstatistics.eth (@punk9059)
12:26 AM • Nov 6, 2022
In a few weeks, this could all change again though with hints that OpenSea may be going optional on royalties come December 8th. Can anyone even keep up these days?
Google announces partnership with Solana
Onto some brighter, bullish news, Google Cloud and Solana blockchain have announced a partnership to allow anyone to launch a dedicated Solana node in the cloud 🤝. Google will be running a Solana validator set to launch in 2023.
Yesterday Solana’s price surged as Google confirmed a partnership with the L1 blockchain.
Here’s the scoop. 👇
— Lite // @Breakpoint Lisbon (@LitecoinYagami)
1:58 PM • Nov 6, 2022
With this news, we expect other competitors like AWS and Cloudfare to follow shortly 🚀!