Hey everybody, no doubt you’ve heard about the FTX bankruptcy, the FTX insolvency. This guy named Sam Backman, fried, and this is all allegedly and it’s all in opinion, by the way. So don’t go running to the bank and buying Bitcoin or whatever from this is all an opinion. But allegedly, ran off with what’s reported now at $16 billion worth of people’s money. And so, you’ve got to be careful, right? This is a teachable moment as Michael Saylor would say; “we have the ability to learn from this”. So, let’s figure out what happened. We’re not going to know everything that happened, but I’m going to give you my best synopsis. My best synopsis is this:  

You’ve got this guy who’s a nerdy dude from MIT. And he created an exchange called FTX. And he basically shopped it around the jurisdictions, he tried Singapore, he couldn’t get it to stick there. He tried a bunch of the places and he ended up in the Bahamas, created this thing. It’s an exchange where you can put your money in and then you can buy cryptocurrencies. Seems pretty reasonable, right? It was offshore flag number one. But it was called ftx.us. So, it made it seem like maybe it was a US sanctions thing or whatever. 

What he did was he went out and raised money. How did he raise money? Well, he created a cryptocurrency of his own, he created several but FTT was the main one. I’m going to show you some data on just a second. FTT was the main one that he created, and who was the buyer, a hedge fund that he created called Alameda capital. Alameda capital happen to be run by a girlfriend, there’s always some cool part of the story. So, she basically said, okay, cool, let me buy some of this. Well, she bought it, it was recently a wash transaction, he spent $100 million over got $100 million back. And now on FTX, his balance sheet, it shows that they’ve got this cryptocurrency called FTT, that’s got some value, created a billion dollars out of thin air. And then Alameda basically had a billion dollars out of thin air because nobody was auditing them, and there wasn’t a regulator checking them. So, then he’s like, let’s do this again. And basically, he did it over and over and over again, and he got other investors to come in and go, “Wow, look at all the value you have on your balance sheet with this cryptocurrency.” And it looks like it’s trading, let’s give you some money. So, they either loaned him or invested in his projects, this guy apparently had 138 different projects, all intertwined into one or two or three entities that all went belly up over the last couple of weeks. Now, the unfortunate part is when all this stuff happened, he actually took people’s money. So, if you invested on the FTX, exchange, you gave him your money. And then if you bought Bitcoin, or Ethereum, or Cardano, or any other coins, you kept them on his exchange, well, when you keep something on somebody else’s exchange, it’s essentially their wallet that you’re keeping it on, right? It’s not your wallet, they just have a little line item that says it’s your money. But at the end of the day, it’s not really your money, it’s their money. Because it’s like saying, “Here you go hold my $1,000 in your wallet, I’ll see you next week.” Well, if they say, “See you later”, and they never see you next week, you never get your $1,000 back because it’s in somebody else’s wallet. So, there’s an adage on the street that says “not your keys, not your coins”. Keys means that specific spot that unlocks the private address that you have your coins on. And so, if you know those keys, then you control your coins. So, what most people do, who, you know, listen to that adage, what they do is they take their money off the exchange. They say, “Look, I don’t want to leave it in your wallet, put it over here on my wallet, and they get a little cold wallet, it’s like a little USB, and they put it on a USB that’s programmable, and then they unplug it from their computer. So, it’s not connected to the internet, you put it into a vault somewhere. And so that is not your keys, not your coins. Now, if it’s your keys, nobody can do anything. If you leave it on the exchange, what this guy allegedly did was he took these billions of dollars of people’s money, hedge funds money that were on the exchange, and he took it off the exchange and bought into these different projects. Well, as long nobody questioned what the value was of FTT and the other cryptocurrencies that he created and had on his balance sheet, then everything was fine. But unfortunately, somebody said, “Wait a minute, I don’t think that’s real. I’m going to sell all mine.” And when he went to sell it, there were no bidders. And so, when there when it went no bid, basically the bottom dropped out of it. It was illiquid. And then the whole house of cards collapses. And this guy took off right? Taking over a million customers with them. It’s between one and 5 million. They’re not sure yet. But like $16 billion worth of value. So, this guy who was on the cover of Fortune is the next Jesus Christ or the next, you know, Savior of cryptocurrency, and you know, people went like gaga over this guy. He essentially took everybody’s money, essentially, and maybe allegedly, and maybe we’ll find out that he didn’t, but It’s certainly seems like because now he’s trolling, he’s messing with people on Twitter.  You know, there were lots of methamphetamines being used and uppers and all kinds of stuff. And he basically became sociopathic. Now, I have no idea of any this is true. This is just the report that I’m giving you.  

But let’s take a look at this balance sheet that I have. And it’s a leaked balance sheet. And it’s, it’s put into a visual format, kind of like an infographic from a company called Visual capitalist. It’s a really good company. And I’m going to be quoting them here. So, I’ll give them all the credit for doing this. But let’s take a look at it. So, it’s here’s a picture of Sam Bankmen-Fried. And there’s the balance sheet and it says the they file for bankruptcy as the exchanges finance have unraveled amidst the bank run. So, when this happens at the end of every cryptocurrency at the end, ever fiat currency, people run on the bank because they don’t believe in the in the trust that’s holding that up in the background. And so they go, “Okay, let me get my money out.” And when everybody does that, then everything collapses, especially because he was using as what’s called the fractional reserve system. He basically said, “Well, yeah, you put in a billion dollars, but I’m going to loan 10 billion or borrow 10 billion against it,” what are the chances everybody’s going to come and ask for your billion dollars back? Well, it turned out to be pretty good, but that was only when the faith and trust was gone.  

Let’s start with the liability. So, you can look on the screen it says the liabilities are, $5 billion of liabilities in US dollars. Okay? A billion dollars’ worth of bitcoin 1.4 billion, 672 million worth of Ethereum. So, on those two major cryptocurrencies, Bitcoin being number one and Ethereum being number two in stature and status, they lost $2 billion, right, adding to the $5 billion, they borrowed to do some other stuff with so these are, these are liabilities, right? This is what they’re owed. This is customer money, Genesis, which is another exchange. And now as I, as I talk about this, they’re freezing. Some of the assets on Genesis is having problems because systemically, they apparently had some money on this balance sheet, which I don’t understand why you would do that as an exchange. But that’s people. And then some euros, right, they owed $115 million a year, as all told, there was a bunch of other stuff over here. In other projects, more than half of FTX is liquid assets were in Robin Hood stock, which is a millennial based exchange that allows you to buy and sell cryptocurrencies, as well. And so, their assets were in a lot Robin Hood, which is the largest, largest liquid asset on the balance sheet, that’s foreign 72 million. So, when you add those liquid assets, the money that can be readily converted to cash, there was 900 million, okay? Then there’s some other stuff like look at all these other things at the bottom USD, which is tether, it’s supposed to be called a stable coin, which basically means it’s pegged to the US dollar, well, that’s lost a little bit of value, it’s trading at 97% of the US dollar value. And so anyway, I’m not going to go into all of them. And then this block phi is another exchange. Now block phi is in trouble, right? Because they’re know you know, out 215 million and who knows what other exchanges they’ve given money to what are their hedge funds, like a lot of stuff is collapsing in June of 2022 FTX, bailed out block phi with a $250 million revolving credit facility. And the reports are suggesting that block fie user funds migrated to the FTX platform in return. So, there’s a lot of backhanding, and backroom deals going on, you know, that that are just odd. And it’s a shame because a lot of the faith that we all had in cryptocurrency is coming down. Now, maybe that’s good. And that usually happens in capitalism, the weak are taken out. Unfortunately, if you didn’t see it coming, and you were one of those customers that got sucked into it, you might have lost all your money. And that’s, that’s the real shame. That’s what happens here.  

You can look at the less liquid assets. These are different tokens. SRM is a token that he created called serum, which is basically $2.2 billion created out of thin air. This is Solana that’s almost a billion dollars in liquid assets, you know, other ventures that he took this borrowed money and customer money and invested in other things that allegedly, and you can look at all of this stuff. And like I said before, it was it was 138 different entities that were sucked into the vortex of this thing. He created this cryptocurrency called Trump lose. This basically means you can create something out of thin air, he created $7.4 million worth of Trump lose. And it was a basically a bet on whether Trump was going to win the 2020 election, right? He was basically betting win or lose the 2020 election, and then people would buy and sell this cryptocurrency, and he borrowed against that, too. So, you can see there’s a lot of funny business if you really look under the hood. And it’s hard to look under the hood, right? It’s hard to trust, by doing due diligence. I mean, imagine you have 200 bucks, right and you open an account on FTX and you go through all the stuff to verify your name and address and all that kind of stuff. You think you’re dealing with a record or entity and at the end of the day, you’re not going to be able to decide whether these assets are worth this or not or that you believe that they’re stated on the balance sheet. So unfortunately, they weren’t and, people got really hammered on FTX. So, it’s a real shame. That’s kind of a quick explanation of what happened. There’s a lot of other things going on behind the scenes, allegedly, he’s been brought back to the United States for questioning, maybe he’ll get charged here, maybe he won’t, maybe it’ll stay in the Bahamas, maybe he’ll be on the run.  

Because this guy stashed away billions of dollars of customers money in Bitcoin or in some exchanges, or it’s even in Switzerland. It’s not all just using cryptocurrency to hide your money, you can, but you can also just put your money in Swiss bank accounts, you can put your money in Panama, you can take your money and put it anywhere. When you’re a billionaire, you have a lot of things you can put my money in. In fact, I think he’s got a condo that he bought with probably customers money allegedly. And in the Bahamas, it’s he’s got it on the market for $40 million. So, a $40 million condo, this guy, even if he just sells that, he’s probably not going to have to miss many meals. It’s just an instructive moment for us all that we can’t trust people. We can’t trust the entities that we think we can trust. You know, we put our faith in the government over the last couple years. And I think now we’re starting to realize maybe that wasn’t the best thing to do. We put our faith in the Fed, and I think we’ve seen over the last plus since 1913, it’s lost 99% of its value. And we’ve printed more money in the last few years than we’ve printed in the last while since the country’s been around. And you know, that’s creating inflation, which is a devaluation of the dollar. And you know, these entities that we give our trust to, are taken advantage of that trust. And it happens in human cultures for 1000s of years, it’s been happening. And we continue to make the same mistakes because humans believe in goodness of others. And unfortunately, we should, what I always say here, “is never give up your power and your health, your wealth, or your time. People gave up their power and their wealth to this exchange. If they didn’t pull their keys off of the exchange, they might have lost all of their money. And that’s why I say “Never give up your power and your health, your wealth or your time.” Take control of your health. Take control of your time, take control of your money, because if you don’t, you might be subject to some crazy FTX fraud, potentially fraud brought upon by somebody like a Sam Bankman-Fried. I hope that’s instructive and helped you understand a little bit about what happened in this market. It’s crazy. Protect yourself, be careful, but there’ll be good times ahead. Take care.