While none of know exactly what went on or what the state was at any time, my mental model is basically that there was never a time where FTX genuinely had “honest profits” it was free to disperse as it wanted.
It sounds like they intermixed user deposits with operating capital from day 1, and never accounted for anything well enough to have a responsible estimate of whether they had money to donate.
It could be that if you went back to some particular snapshot in time, you could find various points where yes their actual assets exceeded their liabilities (which doesn’t count having as “assets” a bunch of shitcoins marked to market). But even at that point, I think if you go back a further they’ll have passed through points where they weren’t solvent—where they traded on user funds. This is basically what Shkreli went to jail for: he dipped into one fund to rescue another. The trades happened to work so everyone was in the black, but this still isn’t legit.
However, let’s grant the premise of your hypothetical, and imagine a world where FTX circa 2020 had always been in the black, and it granted out some of its rightly gained profits. The recipient of that grant shouldn’t need to give anything back. In that transaction FTX did have the right to give the grant, so there’s no issue.
But I really don’t think this hypothetical has much relation to the actual situation. I think it’s better for recipients of money from FTX to assume it wasn’t legit, and set anything aside that hasn’t been spent.
It sounds like they intermixed user deposits with operating capital from day 1, and never accounted for anything well enough to have a responsible estimate of whether they had money to donate.
I think this is plausible, but I would currently take a bet against this. My best guess is that customer deposits were safe until earlier this year.
While none of know exactly what went on or what the state was at any time, my mental model is basically that there was never a time where FTX genuinely had “honest profits” it was free to disperse as it wanted.
It sounds like they intermixed user deposits with operating capital from day 1, and never accounted for anything well enough to have a responsible estimate of whether they had money to donate.
It could be that if you went back to some particular snapshot in time, you could find various points where yes their actual assets exceeded their liabilities (which doesn’t count having as “assets” a bunch of shitcoins marked to market). But even at that point, I think if you go back a further they’ll have passed through points where they weren’t solvent—where they traded on user funds. This is basically what Shkreli went to jail for: he dipped into one fund to rescue another. The trades happened to work so everyone was in the black, but this still isn’t legit.
However, let’s grant the premise of your hypothetical, and imagine a world where FTX circa 2020 had always been in the black, and it granted out some of its rightly gained profits. The recipient of that grant shouldn’t need to give anything back. In that transaction FTX did have the right to give the grant, so there’s no issue.
But I really don’t think this hypothetical has much relation to the actual situation. I think it’s better for recipients of money from FTX to assume it wasn’t legit, and set anything aside that hasn’t been spent.
I think this is plausible, but I would currently take a bet against this. My best guess is that customer deposits were safe until earlier this year.
Fair enough, thanks for the explanation!