It looks like CZ went to war with SBF, and crypto markets are among its casualties.
? What happened?
Last Wednesday, Coindesk published a scoop about Alameda Research (trading company of FTX founder Sam Bankman-Fried, or SBF). Relying on a leaked balance sheet, it noted that out of $14.6 billion of Alameda’s assets, $3.6 bn were FTT (FTX token), $2.16 bn – FTT collateral, $1.15 bn of $SOL and $2.2 bn more of crypto, including some illiquid tokens.
?Is it bad?
The scoop highlighted the closer-than-expected relationship between FTX and Alameda and raised concern about a third of Alameda’s equity being composed of FTT tokens “created out of thin air”. This is alarming, but so far not catastrophic.
? How did it escalate?
On Sunday, CZ, CEO of Binance, announced that his company will be liquidating FTT that remained on its books after Binance exited from FTX equity last year. He added that this liquidation was just “post-exit risk management, learning from LUNA”.
Of course, seeing “FTT” and “LUNA” in the same tweet (? btw they have nothing in common), people panicked. Soon after, crypto Twitter was filled with suspicions, conspiracy theories, rumours of Alameda insolvency and comparisons with Celsius.
? Market reaction
On the same day, Alameda’s CEO Caroline Ellison responded that the leaked balance sheet did not reflect another $10 bn of assets and proposed to buy all Binance’s FTT tokens at a current price of $22.
CZ declined, and $FTT dropped below $16. Users started massively withdrawing their funds from FTX, causing delays and spreading panic. Bitcoin dropped 6%.
? Is it all personal?
There’s another side to CZ decision: “We won’t support people who lobby against other industry players behind their backs”, and maybe it was the biggest reason why he decided to announce his FTT sale in such an indelicate manner.
⚖️ SBF and crypto lobby
Over the course of the last few weeks, SBF has been supporting the Digital Commodities Consumer Protection Act (DCCPA), which the crypto media has dubbed a “DeFi-killer”. After a massive outrage, he came back on his words and said that it was centralized finance that had to bear the regulation burden.
However, knowing that SBF is a known contributor to both political parties ($50 M for these mid-terms), crypto Twitter continues suspecting him of anti-DeFi lobby.
?♀️ Was it all worth it?
Whether the concerns about Alameda were justified or not, CZ managed to hurt SBF badly, together with millions of crypto users caught up in the market drop.