So due diligence showed how big a hole FTX is in. No surprise. As I said yesterday, about 50% of announce M&A deals fall through. This deal looked unlikely to succeed. If FTX was out of cash but had a lot of money tied up in things that are slow to sell, like factories or real estate, a merger would make sense. But this is crypto. No big tangible assets. If FTX is well into negative territory, there's no hope.
Next stop for FTX is bankruptcy.
Does FTX.us have any exposure to FTX.intl? They're not supposed to. But do they?
The SEC and CFTC are now investigating to find out.[1] Bloomberg: "US financial regulators are investigating whether beleaguered crypto-exchange FTX.com properly handled customer funds, as well as its relationship with other parts of Sam Bankman-Fried’s crypto empire..." In other crypto collapses, we've seen "assets" that were actually loans to affiliated parties. Loans that became worthless.
At FTX's web site, "https://ftx.com/intl", there is no mention of any problems. Typical.
How can DD find a hole within a day of announcing? It seems too fast. To me, I assume it's CZ getting FTX to explode and then be the firm everyone comes to without having to acquire them.
Edit: Fair enough, thanks for the input repliers! I thought DD was a much slower event to prepare this information and get legal stuff set up with NDAs etc..
"So, step one, let's see your top-level balance sheet, you know, assets and liabilities."
"Sure, we have a notional $1 billion in a combination of junk bonds that have already crashed to a market value of $25 million and other cryptocurrencies worth another nominally $15 million as long as we never try to actually sell them, and we have $1.4 billion in concrete dollar liabilities."
Numbers completely made up, just to be clear.
You can investigate that until you're blue in your face and apply all the nuance in the world to it, that's never going to make any sense.
Also, I'd say Binance is well aware of the message the speed is sending. I don't think that's a mistake. This sort of signalling in "the metadata" of a message happens all the time. You can decide whether or not you believe it.
A billion dollar assets/liabilities mismatch? I'd bet that's quite easy to find.
Honestly, with all the market info. that Binance has on their hands, I'm sure they already knew where to look at, LOL. They were just having fun with SBF.
Maybe that was Option A, while Option B was "spend a couple billion dollars fixing the mess these kids made while still seeing 30% of our Crypto assets disappear ...". They chose A.
They're also now the only big player standing in the game, they're having fun already.
We'll see, but I think you can ask for some topline numbers and evaluate if it's even worth digging deeper. I'm sure this is not about accounting for a million, or two, or even a hundred.
> How can DD find a hole within a day of announcing? It seems too fast.
CZ: “Can I see your balance sheet? Oh, it says here you have $10B in assets and $16B in liabilities. Welp, good luck finding a buyer, I withdraw my LOI to purchase FTX”
It's still shocking because aside from anything else, CZ must know that FTX dying is going to be massive blow to the whole industry. Like Lehman and Bear Stern's but with no Fed or Treasury bailout.
Practically every crypto organisation has been planning on offering some kind of proof of how good its reserves are, real soon now, right up until it went bankrupt.
Next stop for FTX is bankruptcy.
Does FTX.us have any exposure to FTX.intl? They're not supposed to. But do they? The SEC and CFTC are now investigating to find out.[1] Bloomberg: "US financial regulators are investigating whether beleaguered crypto-exchange FTX.com properly handled customer funds, as well as its relationship with other parts of Sam Bankman-Fried’s crypto empire..." In other crypto collapses, we've seen "assets" that were actually loans to affiliated parties. Loans that became worthless.
At FTX's web site, "https://ftx.com/intl", there is no mention of any problems. Typical.
[1] https://www.bloomberg.com/news/articles/2022-11-09/us-probes...