ColdFusion - FTX Disaster - 7 Unbelievable Bankruptcy Discoveries

Starting point is 00:00:00 This video is brought to you by CuriosityStream. Hi, welcome to another episode of Coldfusion. So last episode we ran through the complete history of the FTX situation. To sum it all up, a man named Sam Bankmanfried, founded a crypto hedge fund and exchange worth $37 billion. It had investments from big players such as Black Rock and endorsements from celebrities. In the end, it was all a bit of a Ponzi scheme ran by Sam and his girlfriend and a bunch of their friends in the Bahamas. investors and customers lost billions in the disaster. Last time we left off, Sam was under police surveillance in the Bahamas and were still

Starting point is 00:00:36 tweeting about making it up to customers. But today, we'll cover some major updates since then. From leaked messages to criminal investigations, as well as some inside information on the full extent of the company's mess. So after the dust had settled from the original shock of the bankruptcy and the wild story leading up to it, FTX's new CEO, John Ray III, took a good look at their books and what he saw was unbelievable. It was just a chaotic, fraudulent mess. In his report, John would state that in his 40 years of experience, quote, Never in my career have I seen such a complete failure of corporate controls

Starting point is 00:01:20 and such a complete absence of trustworthy financial information, the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals. this situation is unprecedented. And that is really saying something because John sorted out the bankruptcy of Enron in 2001. Yeah, so part of the issue at John Ray, the new CEO, has talked about, is how messy the accounting was.

Starting point is 00:01:45 So keeping track of these assets, whether they're in Bahamas or in the U.S., and who has the right to really oversee those is one of the issues, and it goes back to the beginning days of FTCX. And sort of the mismanagement, as John Ray has described it. And nobody really knows where the assets are at this point. trying to untangle this web at the moment. So what exactly made it so bad? Hold onto your seats because it's wild.

Starting point is 00:02:09 FTX didn't even know exactly how much cash it had on hand, or how many people even worked for the company. Let's take a look at some highlights from the 30-page report. One, employees submitted payment requests over chat. A random manager would accept or reject those reimbursements with an emoji. Number two, Alameda research gave Sam a $1 billion. personal loan and also according to the Wall Street Journal FTX raised 450 million dollars from some big investors Sam said that this was supposedly

Starting point is 00:02:41 supposed to help grow the business and allow them to engage more with regulators but in reality 300 million dollars of that money was instead siphoned off to Sam lovely number three very few records were kept most decisions were made over chat with the messages automatically being deleted after a certain time 4. FTX, a company valued at $32 billion, never had any board meetings, and neither did most of their subsidiaries. Number 5. Management had no idea about how much cash was on hand at any given time, or even where all of the cash was. Number 6. FTX didn't keep proper records of who they employed. Employees and contractors co-mingled throughout the different companies without proper documentation,

Starting point is 00:03:29 of how they spent their time, certain employees can't be located. Number 7. Corporate funds were used to purchase personal real estate, and employees and executives put their own names on the homes that they purchase with company funds. Sources also state that several of FTX's luxury properties in the Bahamas were purchased with 50% FTT and 50% FTX stock. And more news just in. Over the past two years, Sam's parents and senior executives spent $300 million on luxury properties in the Bahamas. What's worse is that just in September 2022, Sam said that FTX had $5.5 billion in quote, less liquid crypto tokens. The real value was

Starting point is 00:04:14 only $659,000. So at this point, one major question remains, how did so many of the smartest people fall for this? Well, aside from the financial sector being fueled by a mania from low interest rates and cheap money. According to Fortune, Sam would send investors a document that was too good to refuse. It was a spreadsheet that included revenue, daily users and expenses. What it didn't mention was Alameda. It also gave the impression that FTX was a rapidly growing company with solid financials, going from $15 million in revenue in 2019 when it was founded, all the way to over $1 billion in 2021. In reality, these were sales documents with no true accounting. In the end, it didn't matter because investors just saw the dollar signs, and they were

Starting point is 00:05:01 drooling and wanted a piece of the action. Let's turn now to the latest around FTX. A court filing over the weekend showing the crypto exchange owes its 50 largest creditors more than $3 billion. Class action lawsuits against FTX and the celebrity promoters are flying. Shaquille O'Neal and Tom Brady are just some of the celebrities under fire. A lawsuit filed by the attorney, Adam Moskowitz, claims, quote, the deceptive FTCS platform maintained by the FTX entities was truly a house of cards, a Ponzi scheme,

Starting point is 00:05:33 where the FTX entities shuffled consumer funds between their opaque, affiliated entities, using new investor funds obtained through investments and loans to pay for interest to the old ones, an attempt to maintain the appearance of liquidity. It goes on to say that FTX used some of the biggest names in sports and entertainment to raise funds and drive American consumers to invest in the Ponzi scheme. We discussed this more in the Cold Fusion podcast called Through the Web. So check it out if you haven't. I'll leave it in the description below. According to the news outlet, the information, some venture capital firms are also considering suing Sam.

Starting point is 00:06:08 On the 20th of November 2020, Joe Biden would call for changes to global Bitcoin and crypto rules. Meanwhile, the United States House Committee on Financial Services plans to conduct hearings on the FTX disaster in December. Sam Bankman Freed is set to testify. Unfortunately, Maxine Waters, who would be in charge, of the hearing appears to be cozy with Sam. The two have also met before the collapse in April of 2022. This was to discuss crypto, among other things. So what about the possible government corruption? Well, an attorney, John Deaton, has launched a petition to investigate the ties between the SEC Chair Gary Gensler and Sam. It's recently come to light that Gary had a 45-minute

Starting point is 00:06:53 call with Sam in March to discuss a new trading platform that was supposed to be approved by the SEC. This behavior has been called unusual by people familiar with the matter. Fortune has stated that Washington DC insiders presume that Gary will be grilled by Congress and is, quote, in a corner. U.S. Senator Josh Howley has also demanded that top Democrats and Biden officials release emails regarding FTX, Alameda Research and Sam Bankmanfried. The aim is to determine whether Sam's $37 million in political donations to Democrats may have created pressure on regulatory. to be lenient with FTX. If anything actually comes from all of this, remains to be seen.

Starting point is 00:07:34 So will the victims get their money back? As Robert Frenchman, a partner at New York law firm, Mukasey Frenchman puts it, FtX customers will have to get in line with the rest of the creditors because there are no special protections for customers of unregistered crypto firms like FTX. John Ray, who is currently going through the books of Sam's Empire, says that there isn't even a single document detailing all the company's depositors, So really, it's not looking great. Some people may get funds back, but it's likely to be sent on the doll.

Starting point is 00:08:05 And finally, there have been some leaked messages between Sam and a Vox reporter. Sam admits that his efforts to appear moral during the company's heyday, where, quote, a dumb woke game we Westerners play, where we say all the right shibboleths, and so everyone likes us. He also said F regulators. They make everything worse. And then he goes on to blame his then girlfriend, Caroline. who was running Alameda, he states that essentially, FTX didn't lose money, the money was loaned to Alameda,

Starting point is 00:08:35 and they lost it. Sam just thought that Alameda had more collateral than they did. We know we can't trust the guy, but if we do give him the benefit of the doubt, it's safe to say that with no accounting department, this is no surprise. So where was his lawyer? Well, Sam had been blabbing so much after the collapse that his lawyer, Paul Weiss, dropped him as a client. And I don't blame him, Sam is almost impossible to legally defend at this point. As for Caroline, there's rumours that she's fleeing to Dubai, a country that doesn't have an extradition treaty with the US. But these claims are unsubstantiated at this point. So in the end, behind all the smoke and mirrors, Sam's multi-billion dollar empire functioned like so. They

Starting point is 00:09:19 used emojis to hash out expenses. Sam received a $1 billion personal loan. Important decisions were made over chat and deleted. There were no board meetings, and the company had no idea how much cash they had or who even worked there. If billions of dollars of consumer money wasn't wasted, this all would have been pretty funny. Collapses of other crypto firms are likely to happen,

Starting point is 00:09:41 with Gemini being the most recent. In the future, if any other major news breaks and you guys want to know about it, I could make another episode. Anyways, that's all for today, and I think that's where I'm going to leave the story. Ah, and last week, Sam was spotted roaming free in the Bahamas.

Starting point is 00:09:57 Sammy, oh Sammy, my boy, you may want to be careful out there, buddy. There's a lot of people that you piss the fuck off, my boy. You may want to take some percussionary. You can already see some pretty stark differences, guys, here on the island is FTX unwinds. The lit up sign that said FTCX when we were here back in August, that's gone.

Starting point is 00:10:22 We also stopped by FGX headquarters. parking lot was essentially empty security guards, shoot us away pretty quickly. We also saw a car leaving those offices with four young people. We couldn't confirm that they were indeed FTCS employees, but they rolled up the window, wouldn't talk to us, wouldn't make eye contact and sped away pretty quickly. There's been a lot of business and financial news recently. Facebook is facing a myriad of problems and has laid off over 11,000 staff. I've made an episode that discusses exactly what's happening, and interestingly, it can all be

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Starting point is 00:12:10 My name is Degogo and you've been watching Cold Fusion. Take a look around on this channel and see if you like anything else. Thanks for watching and I'll catch you again soon for the next episode. I'll play you guys all out with the track that I'm working on now. Cheers guys. Have a good one. Thank you.

ColdFusion - FTX Disaster - 7 Unbelievable Bankruptcy Discoveries

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