YouSaid · the spoken record

Zachary Seward

lines on the record: 71
first: 2022-11-28
most recent: 2022-11-28
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“That what he did to FTX was, I think, more probably more of a move of desperation than one of strength. That would be my guess. And then in addition to everything else, regardless of their financial position, they face very, very serious regulatory problems, both in the U.S. and in other countries for a variety of things involving everything from money laundering and tax evasion, avoiding the securities regulations and et cetera, et cetera. So I think there's a reason why they don't have a known headquarters anywhere in the world and they constantly are on the move.”
2022-11-28 · Forward Guidance · CeFi Crypto Contagion Is Just Getting Started, Says Analyst Who Predicted FTX's Fall · IDENTIFIED FROM THE TRANSCRIPT
“The problem is that all of these crypto exchanges, all of them without exception, are very happy to show you how much money they have in their books and how much money they have in their crypto wallets, but they never tell you how much they owe people. They show their gross assets. They never show what their liabilities are. Binance has billions and billions and billions of dollars. That's very true, but we don't know how much money they owe their customers and other parties. I think that Binance probably is not in a great financial position. My guess is that the.”
2022-11-28 · Forward Guidance · CeFi Crypto Contagion Is Just Getting Started, Says Analyst Who Predicted FTX's Fall · IDENTIFIED FROM THE TRANSCRIPT
“So, the difference, the only difference being that they have their own blockchain associated with that token. So it's something closer to like a layer one token. Again, I don't believe any of these things have any value. If you look at what the Binance Smart Chain, which is their own real blockchain, is used for, it's exclusively used for incredibly small, scammy tokens that make the stuff on Ethereum look like it's Blue Chip. So what the real value of that thing is, I don't think it's a whole lot, if anything. Binance does claim to have billions of dollars in stablecoins that are their own stablecoin, the Binance dollar. And that's actually issued by a separate company called Paxos, which is based in the US. I don't think they've ever been audited, but they probably are more trustworthy than maybe like Tether is, whether or not they have the dollars or not, nobody knows for certain. I think it's probable that they do. So, you know, Binance can show a lot of money on their balance sheet.”
2022-11-28 · Forward Guidance · CeFi Crypto Contagion Is Just Getting Started, Says Analyst Who Predicted FTX's Fall · IDENTIFIED FROM THE TRANSCRIPT
“Talk to me about Binance, which is now not only number one crypto exchange, but it became even bigger after the fall of FTX. They have their token, BNB. People are looking at CZ, the head of Binance as something of a savior. Some are more skeptical. What do you think of Binance? Do you think that it suffers from the same problems as FDX? And yeah, I know they have their own token VNB, I think it's called.”
2022-11-28 · Forward Guidance · CeFi Crypto Contagion Is Just Getting Started, Says Analyst Who Predicted FTX's Fall · IDENTIFIED FROM THE TRANSCRIPT
“So, the FTX, holding the FTT token in FTX's exchange would give you certain benefits, like it would reduce your trading costs. I think you could get certain other benefits. You could earn yield on them, of course, because why not? But yeah, that's a very good question about these essentially almost function like rewards programs or something, right? Celsius was doing the same thing with their sell token. What you would get with the cell token if you held enough of it on their platform, you could get better rates on loans. You could get paid a little bit more yield on your other assets. And then you could also earn yield in sell. So they would actually pay you, for example, you could deposit dollars to their system and then they would pay you back more if you took the payout in their token. And that was what a great deal, right? They were really helping people out with that one. So that's what these things are. They basically tell people, oh, look at all the utility these tokens have in practice what they're being used.”
2022-11-28 · Forward Guidance · CeFi Crypto Contagion Is Just Getting Started, Says Analyst Who Predicted FTX's Fall · IDENTIFIED FROM THE TRANSCRIPT
“What is the function of those tokens? I know there's FTX has equity, had investors from people like Sequoia, Ontario's pensions, stuff like that. But then what was the FTX token? What was the purpose of it?”
2022-11-28 · Forward Guidance · CeFi Crypto Contagion Is Just Getting Started, Says Analyst Who Predicted FTX's Fall · IDENTIFIED FROM THE TRANSCRIPT
“Right. And that's one part of what I showed too in my piece. And I personally am very skeptical about cryptocurrency in general and the value of any of these tokens, even the base layer ones like Bitcoin or Ethereum. But what I show in my piece, for example, is that there are other crypto tokens that were of a similar market cap to FTT. And the very least there were real people holding these tokens and trading them. At the very least, there's somebody who believes these things have value out there besides the people that issued them. That was not true for FTT, and that's not true for any of these other exchange tokens. There's multiple other exchanges and lending firms that have done this exact same scheme. And if you look at the way the tokens are distributed and look at how they trade, it's almost certain that basically no real people own any of these tokens. It's all the company manufacturing the appearance of demand.”
2022-11-28 · Forward Guidance · CeFi Crypto Contagion Is Just Getting Started, Says Analyst Who Predicted FTX's Fall · IDENTIFIED FROM THE TRANSCRIPT
“Yes, and the critique that you just laid out, I feel like it's a, you could make that about the case of a lot of cryptocurrencies like, oh, Apple stock, you know, they make the iPhone when you have a mortgage, that's your house. But I feel like with FTX, it's a lot more specific because with Ethereum and Bitcoin, there's real demand there of a huge network and the amount of wallets is growing. And you may say, oh, okay, where's the house? Where's the iPhone? And that's a fair critique. But I feel like with these tokens, it's much, much, much worse because they're sort of manufacturing the demand.”
2022-11-28 · Forward Guidance · CeFi Crypto Contagion Is Just Getting Started, Says Analyst Who Predicted FTX's Fall · IDENTIFIED FROM THE TRANSCRIPT
“Well, so I go by both. I get confused sometimes myself about who I am anymore. But yeah, so it's incredible. And the thing that's amazing about this is that, you know, a lot of dumb things happen in financial markets. There's no question. Go back to 2008, the collateralized debt obligations and all that stuff. I mean, yeah, these were things that were illiquid and massively overvalued. But at the very least, somewhere along the line, there was a mortgage, right? At least there was something of value somewhere. There's literally nothing of value here. These things have been created from scratch. They're literally just pieces of code sitting on a blockchain. These things have no connection to any equity. They have no connection to any debt. There's no cash flow associated with any of these things. They're literally just pieces of code that are floating around. And by through some very simple techniques of creating fake markets, these guys were able to spin up billions of dollars in paper wealth that they then used to raise capital from VCs.”
2022-11-28 · Forward Guidance · CeFi Crypto Contagion Is Just Getting Started, Says Analyst Who Predicted FTX's Fall · IDENTIFIED FROM THE TRANSCRIPT
“And they keep the circulating supply low, but the maximum supply is quite large. It just will be released in 2025, 2026, 2027. And then you use those tokens that will only come into existence years later as a value on your balance sheet. And you have the GAL to put it as less liquid. In the balance sheet that was leaked to the Financial Times and said liquid, less liquid, and then illiquid. And they put these serum tokens as less liquid, which.”
2022-11-28 · Forward Guidance · CeFi Crypto Contagion Is Just Getting Started, Says Analyst Who Predicted FTX's Fall · IDENTIFIED FROM THE TRANSCRIPT
“Right. And again, we can pretty much demonstrate conclusively that even these incredibly small volumes were probably dominated by Alameda themselves, like essentially wash trading it to make the appearance of there being some liquidity. Yeah, and so a serum is an even worse example because a lot of the tokens are not even released yet. They're not distributed. So what this chart shows is that A lot of these schemes in crypto rely on this very, very simplified understanding of how supply and demand affect prices. And they all have this notion that as long as you keep the supply low enough, the price will stay up. Of course, that's a very fallacious assumption, but that's honestly what a lot of these projects are built around.”
2022-11-28 · Forward Guidance · CeFi Crypto Contagion Is Just Getting Started, Says Analyst Who Predicted FTX's Fall · IDENTIFIED FROM THE TRANSCRIPT
“Yes, I think in October FTT, according to the leak balance sheet to the Financial Times, had something like 180% of all the circulating supply on its balance sheet. And they had about six times like 700%, I guess, or 500% of the circulating supply of serum tokens and 250 times the daily trading volume. So if they wanted to sell at all and sell the max trading volume, it would take them almost a year.”
2022-11-28 · Forward Guidance · CeFi Crypto Contagion Is Just Getting Started, Says Analyst Who Predicted FTX's Fall · IDENTIFIED FROM THE TRANSCRIPT
“Inflating this supposed trading. So if you look at, for example, yeah, this is a great chart because basically what this is showing is the tokens come in, the tokens come out, and they just go in a big circle and the wallets that are training them are essentially Alameda wallets. So they're basically creating this illusion of volume. And so what this means is that Alameda, if they needed to make money off of these tokens, if they needed to get the cash to actually pay these debts off that they had, they would need to try to sell these tokens and nobody else was buying them. So the real value of these tokens was zero.”
2022-11-28 · Forward Guidance · CeFi Crypto Contagion Is Just Getting Started, Says Analyst Who Predicted FTX's Fall · IDENTIFIED FROM THE TRANSCRIPT
“Essentially, in all of these cases, Alameda was controlling a vast majority of the toll tokens in existence. So, for example, with FTT token, they own something like 80 to 90 percent of the total tokens that were in existence. And a number of these tokens were considered locked, so they weren't even circulating in the market. And then on top of that, So essentially what they owed, they owned more tokens than were actually circulating in throughout the entire market. And then the daily volume was like a tiny percentage of the total amount of tokens that were available, basically showing that liquidity was very, very low relative to the amount that they owned. And then if you looked at the blockchain, you could show that most of the tokens that were trading through these exchanges, primarily FTX, appeared to be trading in a big circle, which is a key sign for market makers that are basically inflating the”
2022-11-28 · Forward Guidance · CeFi Crypto Contagion Is Just Getting Started, Says Analyst Who Predicted FTX's Fall · IDENTIFIED FROM THE TRANSCRIPT
“And let's talk about the illiquid tokens that were on the balance sheet of Alameda research and then later FTX or perhaps at the same time FTX. And they're tokens like FTT, FTX token, and serum, SRM. And just tell us about the shocking amount a small amount that was actually traded per day relative to the tokens. You've got some great charts in your original piece about you call them a flywheel. Yeah, just what is a circulating supply? What does the max supply? And why is that so bad to have such a big mismatch?”
2022-11-28 · Forward Guidance · CeFi Crypto Contagion Is Just Getting Started, Says Analyst Who Predicted FTX's Fall · IDENTIFIED FROM THE TRANSCRIPT
“A way to prop up their balance sheet and show that they were making money. And apparently, these big institutional investors fell for it. So that was one part of the way that Celsius and FTX were tied. The other part of it was that when Celsius froze withdrawals back in June, they basically prevented their customers from taking their money out anymore. They had a very large amount of debt, both to FTX as well as to a number of these decentralized finance platforms. These were secured by a significant amount of customer collateral. So what they did was they actually liquidated large amounts of their customers collateral using FTX as the intermediary and then in the process paid back over $700 million in loans, both to FTX or from FTX and from these decentralized protocols. So there are a couple different places where the relationship between these companies was very close. And then the third thing to remember is that Celsius was very closely tied to the Tether Stablecoin, which was also very closely tied to”
2022-11-28 · Forward Guidance · CeFi Crypto Contagion Is Just Getting Started, Says Analyst Who Predicted FTX's Fall · IDENTIFIED FROM THE TRANSCRIPT
“Well, the two companies had very, very close relationship going back well over a year. So Celsius was engaged in a very similar scheme as FTX and Alameda were with their tokens, the sell token. And so FTX was like the main exchange that sell token traded on throughout 2021. And during that period, my research and as well as sworn statements from Vermont Securities Regulators and others have shown that Celsius was buying tens of millions of these tokens on FTX's exchange in order to manipulate the price of that token. The token was then marketed on their balance sheet and then they used that to show that they were solvent and raise funds. Celsius successfully completed a $750 million equity raise in 2021 with WestCap and the law CDPQ which is the Montreal Pension Fund as the main investors in that. So they basically were in the Celsius case they were able to use these tokens”
2022-11-28 · Forward Guidance · CeFi Crypto Contagion Is Just Getting Started, Says Analyst Who Predicted FTX's Fall · IDENTIFIED FROM THE TRANSCRIPT
“Right. So FTX is the exchange that recently went bankrupt, started by Sam Bankman freed. People call him SBF. He also started Alameda Research, a hedge fund that was rumored to be filled of these very smart quantitative traders who could make a lot of money because they knew really how to take risk in a very responsible way. Celsius is a crypto lending firm that went bankrupt earlier this year. You said you looked into the research of Alameda and Celsius earlier this year and you started to notice I think the word you use is some very odd things. What were the odd things that you noticed?”
2022-11-28 · Forward Guidance · CeFi Crypto Contagion Is Just Getting Started, Says Analyst Who Predicted FTX's Fall · IDENTIFIED FROM THE TRANSCRIPT
“And other projects they had invested in had basically spun up out of Thinir. And then using various market manipulation techniques had created billions of dollars in totally fake value. And once because of the Celsius network investigations, I was pretty familiar with how these types of token schemes worked. And so it was pretty straightforward for me to show here's why these tokens have no actual value and what would happen if or if Alameda would try to realize any value out of these tokens they would crash the market to zero and basically showing that their balance sheet was basically all smoke and mirrors and they owned somebody billions of dollars that they probably couldn't pay back.”
2022-11-28 · Forward Guidance · CeFi Crypto Contagion Is Just Getting Started, Says Analyst Who Predicted FTX's Fall · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so as a little bit of background, I've been investigating crypto for about a year. I focused a lot on a company called Celsius Network, which was a lending firm that had a lot of very close ties to FTX and Alameda. And so that's kind of how I got introduced to the subject and started really digging into it. I'd written a couple pieces prior to this about kind of the relationship between the two companies and some of the very odd things that I'd been noticing going on. piece on Alameda's solvency came about because I actually obtained a copy of this balance sheet shortly before the Coindesk piece went public and I then published it because I wanted to wait to make sure that the balance sheet was actually real and once they published it I was ready to go with my piece so essentially what I found was that Alameda had been using these incredibly illiquid crypto tokens that their associated companies FT”
2022-11-28 · Forward Guidance · CeFi Crypto Contagion Is Just Getting Started, Says Analyst Who Predicted FTX's Fall · IDENTIFIED FROM THE TRANSCRIPT
“James, you in early November wrote a bombshell of a piece called Is Alameda Insolvent. What were your findings there? What was your thesis? And how did your thesis change as sort of your worst fears were sort of proven true almost immediately?”
2022-11-28 · Forward Guidance · CeFi Crypto Contagion Is Just Getting Started, Says Analyst Who Predicted FTX's Fall · IDENTIFIED FROM THE TRANSCRIPT