Here's a quick explainer of what happened with crypto giant FTX — and how the GOP is lying about it

If you are online or have paid a little bit of attention over the past week, you’ve probably heard about FTX (short for “Futures Exchange”) and its various connected companies crashing and burning in the marketplace. What does it all mean? To be completely honest, it is mostly crypto Ponzi scheme magic unfolding in real time. On Nov. 11, FTX CEO Sam Bankman-Fried (who is also known by the moniker “SBF”) announced he was stepping down and his crypto exchange was filing for bankruptcy. On Wednesday, FTX Digital Markets, based in the Bahamas, filed for Chapter 15 bankruptcy protections in New York. Chapter 15 is what you do when you want U.S. protections for a company that is “based” offshore.

FTX had been touted as, The New York Times puts it, “the most stable and responsible companies in the freewheeling, loosely regulated crypto industry.” In January it was valued at an estimated $32 billion. It turns out that this reputation was based on … nothing. It was based on magic. It has very quickly unfolded that the unregulated crypto exchange, with “digital assets” in a range between $10 billion and $50 billion,^* was giving out billions in loans using customers’ money and just doing all sorts of (alleged) securities fraud, regular fraud, banking fraud, and wire fraud behavior.

However, conservatives (and Elon Musk) are seizing on the connections the Democratic Party had with SBF. Bankman-Fried was a big Democratic donator this past cycle. The now 30-year-old Bankman-Fried, who went from being worth about $17 billion to nothing in about a week, wasn’t the only person at the top of the FTX food chain giving money to politicians. His co-CEO, Ryan Salame, was donating at a pace that was neck and neck with SBF, except his donations went to conservatives.

_{*For comparison, Enron had $60 billion in assets when it filed for bankruptcy in 2006.}

In the beginning, FTX said that the company’s sudden plunge in stock numbers were the result of an old time-y run on the bank. Then the full extent of this rose-colored glasses “run on the bank” began to unfold. A timeline:

The largest U.S. crypto exchange, CoinDesk, published a report on Alameda Research (Bankman-Fried’s original FTX crypto trading firm) and its leaked balance sheet. This revealed that Alameda Research was wildly overleveraged by the FTT token issued by FTX itself. This is the equivalent of me telling you that I have tons of money in the bank and when you look at my vault, you see that the “money” I have are pictures of my cats with word bubbles saying “I.O.U purrr.”

FTX customers began trading off their digital assets and hitting FTX with a reported $5 billion in withdrawal requests, forcing the firm to pause customer withdrawals. FTX quickly realized it needed to find big investors.

Then the other crypto trade and exchange giant, Binance, announced that it would be getting out of the FTX token business. This led FTT token prices to beginning to drop exchange value of over $26 a coin to a lot less over the next few hours. FTT sits at $1.56 as of the writing of this story.

The following day, Binance announced it had reached a deal with its rival to buy out FTX. Twenty-four hours after that, Binance walked away from this deal, stating that “as a result of corporate due diligence, as well as the latest news reports regarding mishandled customer funds and alleged US agency investigations, we have decided that we will not pursue the potential acquisition of FTX.com.”

Two days later, Alameda Research filed for bankruptcy. The Wall Street Journal reported that Bankman-Fried was telling his investors that Alameda Research owed FTX about $10 billion. By then, SBF had also resigned his position. Why did his one company owe this other company more than half of the other company’s supposed customers’ money? You don’t have to be a finance wizard to understand.

Bankman-Fried seems to have usedmost of his customers’ money (FTX) in order to cover loans his trading firm (Alameda Research) had received to gamble with but had lost.

The following day, reports came out that “between $1 billion and $2 billion in client money is unaccounted.”

Politico reports that some of that money being spread around Congress is being given back symbolically right now:

Campaigns for Reps. Chuy García (D-Ill.) and Kevin Hern (R-Okla.) have given local charities money equal to the amount they received from FTX leaders, according to their spokespeople.

But I thought this was a big Democratic Party money-laundering scam? Bankman-Fried reportedly funneled almost $40 million into Democratic Party hands through direct contributions and super PACs.

What has been lost in all of this is that is Salame served as co-CEO of FTX Digital Markets Ltd., hanging in the Bahamas with Bankman-Fried. Instead of showering Dems with money like SBF, Salame donated around $24 million to Republicans. Between the two men, their bases were covered. Anyway, as The Berkshire Eagle points out, Salame, just like Bankman-Fried, has some dubious finance questions to answer. One of the FTX units, FTV Trading Ltd., seems to have an outstanding loan with Salame of (checks notes) $55 million. Yeeghaaaad, man!

As of right now,Forbes reports that lawyers for the “liquidators” of FTX are battling between whether to allow the Chapter 15 filing for the Bahamas-based business to take place in Delaware or New York. FTX has turned over control of the bankruptcy of the company to John J. Ray III. If you remember that name, it’s because he was the same “restructuring specialist” who handled Enron’s collapse.

Is this the last you and I will speak about FTX?

Probably not. Throw it on the Hunter Biden pile of investigations.

The sad part here is that there really is something here to investigate, and there is a very good chance that lots of elected politicians with red and blue badges have some skin in the game. Unfortunately, Marjorie Taylor Greene isn’t the kind of broken clock that tells the time right twice a day—she’s special in that way. The crypto world is made up of a lot of Ponzi schemes. Some might argue there is no crypto market that isn’t a Ponzi scheme.

Nicholas Weaver is a senior staff researcher at the International Computer Science Institute and lecturer in the computer science department at UC Berkeley. He has been very critical of cryptocurrencies. During an interview in May, he said the last decade with unregulated cryptocurrency markets open to the world has been like “speed-running 500 years of financial history” with booms and busts and every example of why regulatory markets were adopted in our financial market in the first place.

The fact of the matter is that there is a good chance more crypto exchanges and trading firms will go down in flames with the failure of FTX. How deep FTX’s penetration is into the market on the whole remains to be seen, and what will come of this in regards to oversight also remains to be seen. It is a big fish going down, and there will be all kinds of waves.

And how about this.

And this is also interesting.