FTX Fallout Continues – Brace for Impact
A Flock of Black Swans
Unless you have been off the grid for the past week, you likely are familiar with the shockingly abrupt implosion of FTX. For those just entering the fold, to make a long story short – Sam Bankman Fried (SBF) allegedly stole an estimated $4 billion of customer deposits for Alameda, the fund in which he has a significant ownership stake. Alameda subsequently lost these funds, and now due to declining prices and a run on FTX, the liquidity shortfall has expanded to an estimated $10-50 billion.
Details are still emerging, but it appears that the scam runs quite deep, and unfortunately, many retail consumers, funds, and LPs with funds custodied on FTX, as well as FTX creditors, now find themselves in a dire spot. In the past six months, we have witnessed the unraveling of a web of leverage that entangled the crypto space. It started with LUNA/UST, seemingly resolved in the 3AC unwind, only to find that SBF now appears to have been insolvent as well.
These notes do not serve to commiserate, rather, they are to inform. Therefore, we will save our more colorful thoughts on the issue for a later date.
Risk Not Quite Worth the Reward Just Yet
The Drawdown
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