One important accounting complexity is that there might be a lot of futures contracts that effectively represent borrow/lend without involving physical borrowing or lending. My impression is that FTX offered a lot of futures so this could be significant.
For example, a bunch of people might have had long BTC futures contracts, with Alameda having the short end of that contract. If Alameda is insolvent then it can’t pay its side of the contract; usually FTX (which is both broker and clearinghouse) would make a margin call to ensure that Alameda has enough collateral to pay, but it is clear that FTX was completely irresponsible about Alameda’s collateral.
So it would be nice to know the volume of futures contracts, in addition to the $3B of borrow/lend. CoinGecko currently lists open interest of $2.5B, but I don’t know if that number is accurate or if there are other subtleties, and moreover I could imagine that the number was significantly larger prior to the collapse.
No matter how large the futures volume, this would still leave point 2 above as a complaint. If the FTX clearinghouse was failing, then I think morally they should just admit it. Probably what would happen instead is that they would desperately try to make customers whole including by liquidating other customers whose assets weren’t theirs to liquidate (especially given that if they do so successfully and FTX mostly recovers then they will ultimately be solvent).
One important accounting complexity is that there might be a lot of futures contracts that effectively represent borrow/lend without involving physical borrowing or lending. My impression is that FTX offered a lot of futures so this could be significant.
For example, a bunch of people might have had long BTC futures contracts, with Alameda having the short end of that contract. If Alameda is insolvent then it can’t pay its side of the contract; usually FTX (which is both broker and clearinghouse) would make a margin call to ensure that Alameda has enough collateral to pay, but it is clear that FTX was completely irresponsible about Alameda’s collateral.
So it would be nice to know the volume of futures contracts, in addition to the $3B of borrow/lend. CoinGecko currently lists open interest of $2.5B, but I don’t know if that number is accurate or if there are other subtleties, and moreover I could imagine that the number was significantly larger prior to the collapse.
No matter how large the futures volume, this would still leave point 2 above as a complaint. If the FTX clearinghouse was failing, then I think morally they should just admit it. Probably what would happen instead is that they would desperately try to make customers whole including by liquidating other customers whose assets weren’t theirs to liquidate (especially given that if they do so successfully and FTX mostly recovers then they will ultimately be solvent).