> In making some of these leveraged trades, the quant fund was using a cryptocurrency created by the exchange called FTT as collateral. In a lending agreement, collateral is typically the borrower’s pledge to secure repayment. It’s often dollars, or something else of value — like real estate. In this case, a source said Alameda was borrowing from FTX, and using the exchange’s in-house cryptocurrency, FTT token, to back those loans. The price of the FTT token nosedived 75% in a day, making the collateral insufficient to cover the trade.
This was nothing like a Ponzi scheme - the money was lost due to bad trades, poor collateral, bad accounting/compliance with probably a little bit of criminality thrown in at the end.
Although they were trading crypto it was more like an old fashioned/real money collapse.
There's a slide deck floating around[1] purported to be from Alameda research in 2018. That deck claims they offer 15% fixed returns to investors. If that slide deck is genuine, it seems possible that the unaccounted for money at Alameda Research went to paying for redemptions by early investors. Given how bad the accounting at FTX/Alameda seems to be, it seems possible to me that Alameda investors were paid back at high APYs even as the underlying strategies performed poorly, and the people at the top might not be aware that they were heading towards insolvency. If this is the case, it would be close to a pure Ponzi.
Now I don't really know how likely this is because there's very little public information about Alameda. It's also possible that Alameda bought Doge and Shiba which proceeded to crash 10x.
On that reasoning any company that is successful and people make profit early on then fails would be a Ponzi. It still looks like Alameda/FTX was initially profitable and then began to make losses which resulted in FTX customers (not investors in Alameda) deposits being loaned/stolen.
An investment fund which is successful early on then is not successful but still pays investors high returns is a Ponzi in my opinion. Many Ponzis in history have been backed by a legitimate business.
And worse: pretty much everyone was aware of it, but thought that because they were aware of it and everyone else is a schmuck, they could benefit from it. Some did, but only if they liquidated their holdings last year.
NFTs this year was a microcosm of exactly that. Loads of people jumped on the bandwagon, buying up NFTs as they were released, but the whole thing collapsed again when it turned out the resale market just wasn't there. Except for the first movers.
The art market itself is a bubble. Famous art is primarily used for investment, tax avoidance, and sometimes money laundering. Occasionally someone will hang it on a wall and look at it, but it's more likely to end up in storage.
NFTs were designed as a microcosm of the art investment market, sold on the promise of increasing resale value - like the real thing.
Of course that didn't happen. But some artists made a lot of money, some dealers made even more, and some people made significant savings on their tax bills.
No. Some NFTs are definitely art, like the ones by @beeple on Twitter. There are also NFTs that work as a membership card for a community, like BAYC. And of course there are scams too. You're oversimplifying.
I’d say that Madoff was a Ponzi Scheme. It seems, what Bankman-Fried et al have pulled off was more of stealing other people’s money and probably washing money, both for political purposes. They have donated other people’s money to Dem’s and have paid visits to the Biden White House. And, considering how billions have been sent to one of the most corrupt countries in the world (Ukraine; according to Transparency), I am not the first one to think that probably some of that money was laundered and used for elections or even for personal gain. It wouldn’t be the first time (Hunter’s “Laptop from hell”).
(I am not an US American. And I don’t care for either the Democrats nor the Republicans.)
