You can subscribe at this link, or read the archive at this link. That is, the problem is not a timing mismatch, in which FTXs customers asked for their cash back but FTX did not have enough ready cash because it had long-term but money-good loans out. He makes readers feel in on the savage joke that is late capitalism. If the customer defaults, you still have to pay your lender (and then you get the Bitcoin back and can sell it to pay off your customers liability to you); if you default, the lender sells the Bitcoin. Part of the problem was that he couldnt really access a contempt for Wall Street titans. Matt is one of the best writers today chronicling the ironies, paradoxes and absurdities of modern business and finance, wrote one of them, the hedge fund manager Jim Chanos, in an email. If, say, the operator of the biggest crypto exchange gently raises one eyebrow and says FTT, eh? that can be enough to topple FTX. And since you were not visiting clients in person during the pandemic, or sitting in your office, you might have been a bit more inclined to use your personal cell phone to communicate. The worst outcome is that you dont have enough capital, you go bankrupt, and Customer B does not get his money back. A coverage banker an investment banker whose job was to know companies and advise them on financial topics would bring me to a meeting with the chief financial officer of one of her companies to talk about convertible bonds. Having closed the deal for Twitter and spent a few days wreaking havoc, Musk has gotten bored and moved on to some other expensive hobby, which we will hear about in due time. You have 100 Customer Bs who are short Bitcoin on margin: They each have $20,000 in their account and owe you 0.5 Bitcoin. FTT goes down, leaving FTX undercapitalized, leading to customer withdrawals, leading to ruin. Also profitable nonprofits, FTX assets and WWE governance. Christine Weaver . Coindesk reported on Alamedas FTT exposure, and then Changpeng CZ Zhao, the founder of Binance Holdings Ltd., the largest crypto exchange, raised eyebrows by tweeting that Binance would sell its FTT holdings due to recent revelations. People worried that this would tank the price of FTT and put pressure on FTX, so they started withdrawing money from FTX. Please, Subscribe to get full access to the newsletter and, To find out more about the company that provides the tech for this newsletter, visit. If you are a crypto exchange, this is a nice opportunity. Archive. If you are a sophisticated modern crypto exchange like FTX, you will have automated 24/7 margining systems that automatically liquidate trades that have gotten too risky, so that only the rarest catastrophic market moves could get you in trouble. If thats the case, then a crash in the price of FTT will destabilize FTX. Never use a token you created as collateral suggests, to me, that FTX accepted its FTT token as collateral, probably from Alameda, probably in exchange for borrowing assets that it owes to customers. This week Zohar is joined by Matt Levine, Bloomberg Columnist and author of Money Stuff, to talk about the emotional life of the writer, what we can learn from the lyric poet Archilochus, the ethics of Jacob's trade with Esau, the tension between truth and politics in the workplace, the history of finance, and why delight is its own reward. Barclays Joins Rivals in Culling Investment-Banking Staff. Its single biggest asset: $3.66 billion of unlocked FTT. The third-largest entry on the assets side of the accounting ledger? (With one exception: Bank of America Corp. paid a bit more for being a bit more culpable.) The way it makes money is that each time its customers trade stocks (or options, or cryptocurrencies), Robinhood sends their order to a market maker, and the market maker pays Robinhood a tiny fee for the right to execute the order. Dont use capital efficiently. By uncritically mentioning crypto's multi-trillion dollar market cap 9 times, Levine, a Harvard educated financial expert, embeds a lie into the unconscious of the reader. On that note: Changpeng Zhao moved fast when Sam Bankman-Frieds FTX.com was on the brink, offering to take it over and stem any further crypto contagion. It is a death spiral. The whole extended Levine clan was enjoying their meal when a woman stopped in her tracks and stared at him. Levine's coverage and analysis of the 2012 JPMorgan Chase trading loss was featured in the Columbia Journalism Review's anthology "The Best Business Writing 2013. 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Roughly 5,000 words later on a long-winded day, he files Money Stuff to his editor, and its sent to subscribers around noon. Matt Levine in Prospect Park in August. His newsletter is Money Stuff. Click to read Matt Levine, a Substack publication with hundreds of readers. Everybody used WhatsApp and now everybody writes checks. 4. He structured derivatives agreements that let companies and other Goldman clients buy and sell stocks using a variety of methods meant to help them reduce their taxes or get a better price. Then he starts to write. Mr. Levine wasnt always a darling of business media and finance Twitter. Be part of a community of people who share your interests. Journalist. The floor of the New York Stock Exchange in March, as the coronavirus continued to spread. We have no gating for client loan recalls or withdrawals. And they both pay you interest. They may be the only entertaining words a financial markets professional reads all day. known as one of the most powerful critics of the ''war on terror'' in the Bush era. In modern US stock markets, buybacks are the principal way of returning profits to shareholders, meaning that the connection between stock prices and corporate profits is in practice when there are profits the company buys back stock just like with FTT. Left Coast Crime is an annual conference organised by mystery fiction fans for mystery fiction fans, first held in San Francisco in 1991. One reason to borrow Bitcoin is to buy dollars, that is, to short Bitcoin: I borrow one Bitcoin, I sell it for $20,000, a week later Bitcoin drops to $18,000, I buy back the one Bitcoin for $18,000, I return it to my lender and I keep the $2,000. Matt Levine Matt Levine Matt Levine. Also Elon Musk theories and insurance underwriting. Here is my author page, possibly. Are all those debts coming due? Or equivalently a customer comes to you and says I have $20,000 of Bitcoin in my account, and I need some cash this month. His answer, at least for now, is that the financial hole appears too deep. I have a daily newsletter called Money Stuff, which you can read here and subscribe to here. Welcome to Matt Levine by me, Matt Levine. Comments disabled. He never joined an elite social club or spent six figures on a Hamptons summer rental. Im doing a bit, he says. Now lets add one more crypto element. Coinbase does offer a noncustodial wallet where you can trade on Coinbase and hold your Bitcoins yourself. Despite having made more money at white-shoe law and Wall Street firms than he does as a writer, Mr. Levine says he is happier now. Or you can subscribe to Money Stuff and other great Bloomberg newsletters here. And now as a writer, he makes sense of it for the rest of us. Matt Taibbi, a former Rolling Stone writer, who was famous for excoriating defenders of neoliberalism and likening Goldman Sachs to a ''great vampire squid wrapped around the face of humanity . I write about finance for Bloomberg Opinion. It is not actually stock in FTX in fact FTX is a company and has stock and venture capitalists bought it, etc. For starters, Binance executives quickly found themselves staring into a financial black hole -- a gap between liabilities and assets at FTX thats probably in the billions, and possibly more than $6 billion, according to a person familiar with the matter. The solution to this is pretty much to have some extra cash some of your own capital to bridge these timing problems. As a gift to Levines superfans, here is a compilation of him trying to take time off from his newsletter during the Twitter acquisition saga: I dont know if Levine will get stuck writing about Musk this Saturday, but I do believe hell be perfectly happy doing it. Technology's news site of record. Please Click the Donate button and support BeSpacific. Unlike many other retail brokers, Robinhood charges these market makers a variable fee that is, roughly speaking, higher for very volatile stocks. the SEC doesn't do that stuff. I'm hoping to rely on loyal readers rather than erratic ads. If the price of FTT goes down, then FTXs business is riskier, because it has less collateral. Everyone knows this, which is why crypto exchanges and securities broker-dealers, who have the same basic business model spend most of their time thinking about risk management. Matt won yesterday's game and returns today to . by Paul Ford, earlier) . Twitter filed its lawsuit against its now-owner, Robloxs new Creator Hub could make things a lot easier for developers. I was writing more about the gossipy side of Wall Street and more the culture of it, and I thought it was a great opportunity for him to use his incredible knowledge of how the business works. 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