[Updated] FTX

[Beparanf]

Rise of DEX is now inevitable after the fall of FTX and the recent shady transaction between Cryprto.com and Gate for the sake of there snap shot reserve. This shady behaviour of CEX is what makes me twice to even deposit my Bitcoin in there even with a short time. They are using people money for there personal interest without any consent from there investors.

Btw does the news about FTX being the gate to wash democrats money from UK donation is already share here? This recent discovery will surely make the FTX irredeemable since there illegal transaction is already exposed same with all SBF invested company.

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[o_e_l_e_o]

CZ is a big irony!

Speaking of CZ, here he is blatantly lying on Twitter and claiming that Binance-owned Trust wallet is open source: https://nitter.it/cz_binance/status/1591804907702874113
As I explain here, Trust wallet is not open source: https://bitcointalk.org/index.php?topic=5415683.msg61049268#msg61049268
But hey, what's one more lie to his Twitter followers who just believe his every word without a second thought, just like his proof of reserves bullshit. And speaking of proof of reserves, is it just me or has Binance's proof of reserves page (https://www.binance.com/en/assets-proof) been down since soon after it launched? I'm sure that's not suspicious at all!

[tiCeR]

CZ is a big irony!

Speaking of CZ, here he is blatantly lying on Twitter and claiming that Binance-owned Trust wallet is open source: https://nitter.it/cz_binance/status/1591804907702874113
As I explain here, Trust wallet is not open source: https://bitcointalk.org/index.php?topic=5415683.msg61049268#msg61049268
But hey, what's one more lie to his Twitter followers who just believe his every word without a second thought, just like his proof of reserves bullshit. And speaking of proof of reserves, is it just me or has Binance's proof of reserves page (https://www.binance.com/en/assets-proof) been down since soon after it launched? I'm sure that's not suspicious at all!

There is a nice video series created on Youtube. It's quite nuts what was going on at FTX. He is even said to have had special accounting software that made sure no warnings are triggered when he makes transactions out of the system and others weren't supposed to get aware of it. He transferred out about $10 billion to Alameda, and did lots of shady stuff here and there.

Now this Tweet is quite interesting and I believe that other exchanges also have a lot of borderline stuff going on for themselves. I'd be surprised if no others fail because of the current market conditions and over leveraged positions. But the video is a real popcorn video. The FTX corporate structure is more complex than the one of Lehman Brothers used to be. He shows a graphic in the video.  

[LoyceV]

I received an email from Kraken, the summary is this:

Your assets are completely safe and accessible. Kraken does not make use of your assets in any way without client-specific direction and we hold them 1:1.

It sounds more trustworthy. Since they're US-based and not hiding in some shady jurisdiction, and considering they've been around much longer, I am quite confident they're more trustworthy. Nevertheless, I withdrew all funds that aren't locked in open orders. I didn't expect FTX to go down this way either.

[o_e_l_e_o]

I received an email from Kraken, the summary is this:

The Celsius CEO did an AMA where he spoke about how trustworthy and transparent they are three days before they went under.
Voyager released a statement saying they were "unaffected by market conditions" three days before taking out an emergency loan worth $200 million and 15,000 BTC.
FTX made a bunch of tweets showing off their new offices and saying how everything is fine the day before this all kicked off.
BlockFi made statements also reassuring users everything was fine two days before freezing withdrawals.

The bottom line is that no exchange is ever going to come forward and say "Yeah guys, we are struggling", because they know that doing so would kick off a bank run which would be guaranteed to end in them insolvent and bankrupt. Every exchange is going to come out with variations of the same nonsense over the coming days and weeks - we don't lend funds, we are fully solvent, we are backed 1-to-1, here is our proof of reserves, here are our bank statements, and so on. Every one of these statements will be exactly what the exchange wants you to hear, with absolutely zero guarantee or way to verify that they are accurate, honest, or truthful.

Statements are meaningless. Withdraw everything.

[LoyceV]

Every one of these statements will be exactly what the exchange wants you to hear, with absolutely zero guarantee or way to verify that they are accurate, honest, or truthful.

That's the thing: they say you can actually verify it! They explain how to verify your funds with the Proof of Reserve audits.

Using data from our audits, you can easily and independently verify that Kraken is worthy of the responsibility of securing your finances.

Note that I haven't verified it, but I also haven't read claims from anyone that they couldn't verify their funds.

[tiCeR]

Reading that Crypto.com has of its reserves in Shiba Inu Coin and guess what, they are into trouble right now because of some other meme or trash token (GALA). There was an arbitrage opportunity between exchanges and some people went for it and made lots of money with it. Now Crypto.com froze a ton of accounts, asking customers to pay more than they actually have in their accounts in order to get access to whatever is in their accounts. Worse than that, they are individually negotiating with people about the amounts they need to pay back and sometimes even admit they seem to have wrong numbers in their accounting systems.

The interesting question is actually, why would an exchange complain about customers making arbitrage gains? There aren't many good reasons, but one is that the exchange itself loaded up heavily on that token without disclosing it, intended to manipulate its price and then didn't react quickly enough to sudden arbitrage opportunities when dumps happened elsewhere. Huobi is also involved.

Thank god that Crypto.com has Shiba Coin as part of their reservers, that means we are all safe!

There is probably a lot more to come over the next weeks and months.

[o_e_l_e_o]

That's the thing: they say you can actually verify it!

You can verify it only by using data they provide, which will only ever show you what they want you to see. If they are insolvent, then they simply won't release a new audit until they are. And I can think of a dozen ways they could fudge this process. Only use a proportion of accounts to create the Merkle tree. Audit half their user accounts at once and the other half later. Take out loans or borrow funds for the day of the audit. Claw back some outstanding loans or investments for the day of the audit. Even just pay some large player to sign a message saying they own coins they don't. Convert some of their other assets which are not covered by this audit. Collusion with the audit firm. I'm sure there are plenty more you could come up with if you sat and thought about it for a while.

Thank god that Crypto.com has Shiba Coin as part of their reservers, that means we are all safe!

As utterly stupid as this meme-coin-based-on-a-meme-coin is, if customers are depositing it then the exchange should be holding it.

[LoyceV]

I can think of a dozen ways they could fudge this process.

Those are valid points, but wouldn't all these mean jail time if it ever comes out? Getting richer is one thing, risking jail is still undesirable.

[o_e_l_e_o]

Getting richer is one thing, risking jail is still undesirable.

Didn't stop the likes of Kumbhani and Arcaro (BitConnect), Do Kwon (Terra Luna), or SBF.

I'd also point out what I pointed out earlier in this thread, that court documents have shown that Tether have done one of these exact things, borrowing money from others on the very day of their independent audits and returning it the very next day. No arrests or jail time there, and in fact continues to be the largest fractional reserve scam in the whole of crypto.

[examplens]

of course, no matter how bad the whole FTX thing is, it can always be worse.
All FTX customers who have ever made a deposit or withdrawal on that exchange could become public in the Chapter 11 bankruptcy filing.



source: https://twitter.com/GRDecter/status/1592277141684879361

[o_e_l_e_o]

-snip-

This should be no surprise, really. This is exactly what happened with Celsius, in that they had to publish a full list of the users' names, holdings, associated transactions, and so on. As I warned over a month ago, now that this precedent has been set, then any data held on you by any centralized exchange or platform is at the same risk of similar disclosure. I fully expect a similar full list of all FTX users to be published in the coming weeks.

Just as if you don't want your coins at risk then you need to withdraw them from centralized exchanges, if you don't want your data at risk then you need to be shutting your accounts and requesting they delete all data they hold on you.

[dkbit98]

As utterly stupid as this meme-coin-based-on-a-meme-coin is, if customers are depositing it then the exchange should be holding it.

It's one thing to support depositing and withdrawing of some shitcoins, but it's totally different level to keep this trash coins in your reserves.
I would imagine that reserves for any serious crypto company should be mostly in Bitcoin, some in stable coins and maybe few biggest shitcoins.
Analogy for shiba inu shitcoin reserves would be like if banks would keep bananas in their safe deposit reserves, instead of gold and silver.

of course, no matter how bad the whole FTX thing is, it can always be worse.
All FTX customers who have ever made a deposit or withdrawal on that exchange could become public in the Chapter 11 bankruptcy filing.

Only in case IF they passed KYC verification.
This is one more good reason why you should avoid sending your documents everywhere, or even better switch to dex echanges like Bisq and p2p trading.

[LoyceV]

As utterly stupid as this meme-coin-based-on-a-meme-coin is, if customers are depositing it then the exchange should be holding it.

It's one thing to support depositing and withdrawing of some shitcoins, but it's totally different level to keep this trash coins in your reserves.
I would imagine that reserves for any serious crypto company should be mostly in Bitcoin, some in stable coins and maybe few biggest shitcoins.

O_e_l_e_o is right: if someone has shitcoins in their exchange account, the exchange should have those shitcoins. Let's say they didn't have Doge, and Doge went up 100-fold. They'd be insolvent if that happens, and it's not something they should risk.

Analogy for shiba inu shitcoin reserves would be like if banks would keep bananas in their safe deposit reserves, instead of gold and silver.

If a customer puts bananas in their safe deposit box, the bank should keep the bananas. They shouldn't speculate on bananas becoming cheaper later on, so they can turn a profit by selling the bananas and holding gold instead.

[o_e_l_e_o]

It's one thing to support depositing and withdrawing of some shitcoins, but it's totally different level to keep this trash coins in your reserves.

Exchanges should be holding exactly what their customers deposit, and not a single satoshi (or shiba) less. If I deposited a bunch of dollars at my bank, I wouldn't expect them to swap my USD to CHF on the basis that CHF is less inflationary than USD, even if doing so would make me lose less money long term. Similarly, centralized exchanges shouldn't be swapping customers' assets for other assets, regardless of how moronic those assets are. This kind of playing fast-and-loose with customer deposits is exactly the reason so many exchanges are in the mess they are in. If they just held on to exactly what was deposited, they wouldn't all be insolvent.

I would imagine that reserves for any serious crypto company should be mostly in Bitcoin, some in stable coins and maybe few biggest shitcoins.

Now, if we are talking about the exchange's own money, earned from trading fees, withdrawals fees, and what have you, then yes, they should obviously be holding a bulk of their own money in bitcoin and not shitcoins. But if they are offering shitcoins to their users, then they should be holding whatever shitcoins are deposited. Otherwise they are essentially just trading with users' money, and well, we've got plenty of examples of how that's turned out for them so far.

[dkbit98]

If a customer puts bananas in their safe deposit box, the bank should keep the bananas. They shouldn't speculate on bananas becoming cheaper later on, so they can turn a profit by selling the bananas and holding gold instead.

My point was that bananas would get rotten soon in safe deposits, and I really don't think that 20% of all funds in Crypto.com was held in Shiba Inu by customers, when we know that price of that crap token is $0.000009 and it fell 90% in value.
This looks like deliberate misleading information by owners, maybe to justify if they shut down or close their business.
Someone has to be really stupid to have portfolio like this:

Exchanges should be holding exactly what their customers deposit, and not a single satoshi (or shiba) less. If I deposited a bunch of dollars at my bank, I wouldn't expect them to swap my USD to CHF on the basis that CHF is less inflationary than USD, even if doing so would make me lose less money long term. Similarly, centralized exchanges shouldn't be swapping customers' assets for other assets, regardless of how moronic those assets are. This kind of playing fast-and-loose with customer deposits is exactly the reason so many exchanges are in the mess they are in. If they just held on to exactly what was deposited, they wouldn't all be insolvent.

This is not how this platform works.
When you create account with them you are giving the full right to do whatever they want with your coins, invest in crap, to leverage trading, and you only have numbers on screen.
It's much different that bank accounts really, and if everyone would try to withdraw all dollars from bank account, system would also collapse.

[royalfestus]

I can think of a dozen ways they could fudge this process.

Those are valid points, but wouldn't all these mean jail time if it ever comes out? Getting richer is one thing, risking jail is still undesirable.

It is also important to note the exchange CEO bankruptcy news that came earlier. CZ binance space defended his exit decision then. It has now been revealed that the CEO has taken major positions in BNB, DAI, and Ethereum, with over $250 million investment. It will be a challenge, even though it has not been verified. (https://thecryptobasic.com/2022/11/16/ftx-hacker-now-holds-235k-eth-74k-bnb-and1-68m-dai/?utm_source=rss&utm_medium=rss&utm_campaign=ftx-hacker-now-holds-235k-eth-74k-bnb-and1-68m-dai).

[JeromeTash]

Then I listened to CZ binance space defending his decisions on the exit.

Wait, people still listen to these crappy "crypto billionaire" CEO's?

Our escape to crypto was away from the lying, corrupt, greedy and dishonest politicians and lawmakers. All the so-called CEOs and big wigs you see currently in the crypto community are just a replica of the normal world politicians and rich folks.

They will do whatever it takes to keep their position at the top, including lying. I don't trust any of them

[LoyceV]

My point was that bananas would get rotten soon in safe deposits

That doesn't give the company the right to sell your bananas and speculate on turning a profit. If they don't want rotting bananas, they shouldn't allow them. But they do, because they earn money from trading bananas shitcoins.

This is not how this platform works.
When you create account with them you are giving the full right to do whatever they want with your coins, invest in crap, to leverage trading, and you only have numbers on screen.

So unregulated fractional reserve banking? What can go wrong

It's much different that bank accounts really, and if everyone would try to withdraw all dollars from bank account, system would also collapse.

As Henry Ford said:

It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.

[aysg76]

This should be no surprise, really. This is exactly what happened with Celsius, in that they had to publish a full list of the users' names, holdings, associated transactions, and so on. As I warned over a month ago, now that this precedent has been set, then any data held on you by any centralized exchange or platform is at the same risk of similar disclosure. I fully expect a similar full list of all FTX users to be published in the coming weeks.

Just as if you don't want your coins at risk then you need to withdraw them from centralized exchanges, if you don't want your data at risk then you need to be shutting your accounts and requesting they delete all data they hold on you.

But the problem with people is they don't listen and think these exchanges are best place to store your funds so well we have perfect example of how the FTX crash has lead to the whole market crash but those who have funds over there or say networth in FTT tokens it's all gone and have no chance of recovering from that loss.

As you have warned them in your previous post that they should withdraw funds from exchange and take custody of your funds they were having thoughts like it would never happen with FTX or Binance and people were inviting SBF to some talk show with showing youngest billionaire but now what? He is under supervision of the authority and said he fucked up but who lost funds? Those who believe in them and we have announcement from @theymos as well explaining the risk of storing funds over there but if we still prefer to keep funds over CEX then nobody can help in that case.

So unregulated fractional reserve banking? What can go wrong

A kind of because you have deposited your funds with them and now they can utilise it like the traditional banking system to invest it anywhere keeping the reserve funds in treasury like FTX have them in FTT tokens with 1:1 but they couldn't manage to make balance between it and got liquidated.The wrong was on their part but actual victims were the people who lost funds in this scenario.