❘ Published: 2022-12-08T08:12:26
❘ Updated: 2022-12-08T08:12:35
YouTube star Stephen ‘Coffeezilla’ Findeisen claims he got disgraced FTX founder Sam Bankman-Fried to admit to “fraud” during a Twitter Spaces interview. It comes after the crypto marketplace crashed in November.
Cryptocurrency exchange FTX has been in the headlines for weeks following the platform’s sudden implosion in November. After a failed buyout from rival Binance due to FTX’s deteriorating finances, the organization filed for bankruptcy.
Founder Sam Bankman-Fried has been criticized for his handling of the situation, but none were as scathing as Coffeezilla. The cryptocurrency detective on YouTube has called out a number of “scams” in the past, and he had it out for SBF.
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After two failed attempts to get the FTX founder to admit to “fraud”, the YouTube star believes he got him on the third attempt in a public Twitter Space.
He questioned Bankman-Fried on whether FTX were “treating client assets, just on the regular assets side, different from the margin trading side.” What this implies is keeping the funds of users, who signed on for different terms of services and risk levels, separate in case of a crash.
Bankman-Fried did state the exchange “were treating them differently”, but once questioned on why those “client assets no longer existed” on the exchange, the tone changed.
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The FTX founder said they “processed $5-6 billion of withdrawals over the few days during the crash” with some billions left in the company’s estate, but users are unable to cash out on falling currencies due to the bankruptcy. He said all clients were treated equally, no matter the kinds of transactions they made on FTX — despite the fact clients did sign up for different risk levels.
With no clear cut on what funds were part of the exchange FTX or part of other ventures, like trading firm Alameda Research, it was ‘first come, first served’ for whatever money was left, leaving some users in the lurch.
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“If you look at the withdrawals that happened, they weren’t only coming from people who never used margin trading, futures, staking, or anything else,” Bankman-Fried said. “Those weren’t just withdrawals from people who were keeping 1:1 back or keeping them as pure spot balances.
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“If you’re saying we should have held off withdrawals for everyone with an open futures position, for clawback potential, maybe that would have been the right thing to do.
“I processed withdrawals as we normally do until we couldn’t anymore and that’s when we shut them off. There was a big liquidity hole. If you want to judge that and think we should have been spending those days frantically trying to code up a new withdrawal process I disagree with you.”
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This “commingling” of funds, Coffeezilla claimed, amounts to fraud: “Sam explicitly says FTX was not separating funds. They were allowing generalized withdrawals. The dollars were fungible from different buckets. You can’t do that.”
“We finally got to the heart of it, which is there are no funds left over for the people who should have had their funds separated because they never separated them from the beginning. They were always, seemingly, commingled.
“I don’t think you should be coding up a new withdrawal process while you’re going bankrupt, but if you throw all your client funds into a pool and let the ‘first come, first served’ get the money, that’s the wrong process to begin with. Your process was fraudulent from the start.”
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Sam Bankman-Fried has not been charged for any crimes yet regarding FTX, although experts believe he could be on the hook for “criminal violations of securities laws, bank fraud laws, and wire fraud laws.”