The FTX Collapse

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Sam Bankman-Fried, founder and former CEO of FTX

I am in no way, shape, or form an expert on finances, much less on cryptocurrency. The big news in finance this month, of course, is the collapse of FTX and the demise of its former CEO, Sam Bankman-Fried. Here’s an explanation for those of you who have a background in finance. It’s simple enough for even me to understand (I think!).

Basically, from what I can gather, the whole thing looks like a Ponzi scheme. SBF (Bankman-Fried’s moniker) was double-dipping in the cryptocurrency world with two companies he founded, Alameda Research and FTX. An article on a crypto news source reported that Alameda was in financial trouble. SBF was illegally transferring money from FTX to prop up Alameda (meaning, essentially, he was using the money his customers had invested in FTX to invest in Alameda, which he also owned, likely to create the appearance that Alameda was solvent). This caused concerns among investors in both Alameda and FTX, given their close relationship (a relationship, experts claim – if I’m reading it right – that should not have existed and would not have existed if regulators had been doing their jobs). So, what happens when investors get worried that their investments are on shaky ground? They sell. They demand their money. Well, FTX didn’t have enough money on hand to satisfy all the investors who were jumping ship, so a liquidity crisis quickly developed. SBF claimed that “poor internal labeling” (whatever that means) was the reason behind FTX claiming it had more money on hand than it actually did. Which is another way of saying they misrepresented their financial position, probably in hopes that this would cause people to have confidence to invest with them. That’s what scammers do.

Now the whole deck of cards has collapsed, causing what some say will lead to a global recession and what pretty much everybody is saying will change the face of cryptocurrency for the foreseeable future, and not in a good way. SBF is being sued for creating a fraudulent cryptocurrency scheme, and several celebrities are named in that lawsuit for conspiring with SBF to do so, including Tom Brady, Steph Curry, Shaquille O’Neal, Shohei Ohtani, Naomi Osaka, Larry David, and Kevin “Mr. Wonderful” O’Leary.

Oh, but that’s not all! SBF was a big contributor to Democratic Party mid-term political campaigns. In fact, his personal support for Democratic candidates was second only to George Soros. Support to the tune of nearly $40 million. Some are wondering if SBF’s support for Democrat pols is why he was not watched more closely by our regulatory institutions, like the Securities and Exchange Commission. Did SBF’s support for Democrats create a conflict of interest for federal regulators and law enforcement under a Democratic administration? We’ll likely never find out. But some are claiming they knew long ago that FTX was a scam and SBF a con man, so why didn’t the regulators? I guess it’s easy to say “I knew it all along” after the man behind the curtain has been exposed. Still, those whose job it is to make sure con men aren’t exploiting people ought to have been paying more attention. Or maybe that was the point all along, some claim, raising concerns that the collapse of FTX will be exploited by government and banks to assume greater control of citizens’ personal assets, control that can be used to punish or reward people politically. Never let a crisis go to waste. Does that make me a conspiracy theorist? Well, I’m not saying I agree, just that flags are being raised.

What’s the lesson here? First, money is not the root of all evils. The love of money is the root of all evils (1 Tim 6:10). Second, if it sounds too good to be true, it is. Third, look before you leap (in other words, ask the right questions before you hand over your money to people). Fourth, if you don’t understand how money works (if you don’t know what the right questions to ask are), find a financial counselor you trust. Fifth, don’t bet on anything making you rich quickly. Finally, if you have nothing, you have nothing to lose – so live simply and you won’t attract the sharks.

Be Christ for all. Bring Christ to all. See Christ in all.

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