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⚡FTX's Hidden Code Scandal♎

Croxroad

10 Oct 2023 — 5 min read

☕️ GM Dear Plebs!

Here is Crox Road, your daily dose of orange pill that will turn you into a Bitcoin Maxi.

The menu for today:

🧪 FTX's Deceptive Tactics Exposed

FTX, a crypto exchange, is in hot water. The co-founder, Gary Wang, spilled the beans and testified that they were up to some shady stuff. They apparently used hidden Python code to make it look like they had a hefty $100 million insurance fund to protect users in case things went south with their trades. But, surprise! According to Gary, that fund was totally fake and didn't actually have any of the FTX tokens it was supposed to. Instead, they cooked up this number by multiplying the daily trading volume of their FTX Token by a random number around 7,500. It's a bit like smoke and mirrors in the world of crypto, and it's not looking good for FTX.

During the trial, the prosecution presented a tweet and other public statements that claimed a certain value for the insurance fund. When asked if this amount was accurate, Gary Wang, one of FTX's co-founders, simply responded with "No." He explained that the insurance fund didn't actually contain any FTX tokens (FTT); it was just represented as a USD amount. Moreover, the value mentioned in the tweet didn't match what was found in the database. An exhibit shown during the trial revealed the alleged code used to determine the size of the "Backstop Fund" or public insurance fund, shedding light on how this misleading information was generated.

FTX's insurance fund was supposed to act as a safety net for users in case of sudden and significant market swings, and the exchange frequently boasted about its value on its website and social media. However, according to Gary Wang's testimony, the reality was quite different. The fund often didn't have enough money to cover substantial losses.

For instance, in 2021, a trader managed to exploit a flaw in FTX's margin system, taking an unusually large position in MobileCoin. This led to a loss of hundreds of millions of dollars for FTX, as revealed by Wang. When the founder of FTX, Sam Bankman-Fried, realized that the insurance fund was nearly depleted, Wang claimed he was instructed to shift the loss onto Alameda, another entity, likely in an effort to keep the loss hidden. Alameda's financial records were apparently more private compared to FTX's, making it a convenient choice for this maneuver.

Gary Wang not only exposed the alleged fraudulent aspects of FTX's insurance fund but also made some concerning claims about Sam Bankman-Fried. Wang stated that Bankman-Fried instructed him and Nishad Singh to incorporate an "allow_negative" balance feature into FTX's code. This feature essentially granted Alameda Research, Bankman-Fried's company, the ability to trade on the crypto exchange with what seemed like almost limitless liquidity.

On October 5, Wang, who had already pleaded guilty to all the charges against him, including wire fraud, commodities fraud, and securities fraud, came forward and admitted that he had committed these fraudulent activities in collaboration with Sam Bankman-Fried, former Alameda Research CEO Caroline Ellison, and former FTX director of engineering Nishad Singh.

🤔 From Doubters to BTC Believers

In the ever-evolving world of cryptocurrency, it's fascinating to observe how various celebrities, financial tycoons, and politicians have transformed their perspectives on Bitcoin over the years. A recent YouTube video by Chris White delves into these intriguing shifts in opinions.

The video opens with a clip of a well-known individual expressing skepticism, claiming that Bitcoin is primarily a tool for illegal transactions. However, the narrative quickly takes a turn as another voice chimes in, emphasizing the potential of Bitcoin to enhance the quality of economic information. It becomes evident that not everyone sees Bitcoin in the same light.

The video then showcases the audacity of John McAfee, who famously pledged to eat his own member if Bitcoin didn't reach a million dollars by 2020. McAfee's belief in Bitcoin's potential was unshakable, and he was willing to make a bizarre, albeit highly publicized, commitment to prove it.

The video doesn't shy away from highlighting Bitcoin's critics, including prominent figures who have labeled it as "rat poison" or "garbage." These individuals see little value in the digital currency and express their disdain for it. Some even compare Bitcoin to baseball cards, comic books, or artwork, asserting that it lacks intrinsic worth.

The video also touches on the evolving perspective of Warren Buffett, a legendary investor who initially had reservations about Bitcoin. Buffett's investing philosophy centers on staying within one's "circle of competence," and technology wasn't in his wheelhouse. However, this didn't stop him from venturing into Apple, which is considered a technology company.

As the video progresses, it highlights Sam Bankman-Fried's conviction in Bitcoin. He views it as a hedge against traditional currencies and believes it's essential to include Bitcoin exposure in one's financial portfolio.

The debate surrounding Bitcoin and gold is another intriguing aspect of the video. Some individuals see Bitcoin as a digital store of value that could potentially outperform gold in the long run, while others remain steadfast in their belief in the traditional precious metal.

The video also discusses the growing interest in cryptocurrency from global investors. Cryptocurrency is seen as an international asset that transcends individual currencies, providing a potential hedge against currency devaluation.

Towards the end of the video, it becomes evident that even those who were once skeptics are starting to see the value and potential of Bitcoin. Some are warming up to it as a viable asset class, while others have already allocated a portion of their assets to it.

The video concludes with a reflection on the uncertain future of Bitcoin. While some believe it's indestructible due to its vast network and security measures, others question its long-term sustainability, especially in the face of government intervention.

In the ever-changing landscape of cryptocurrency, these shifts in perspective from celebrities, financial moguls, and politicians underscore the ongoing evolution and debate surrounding Bitcoin's role in the financial world. As the saying goes, "The only constant is change," and this certainly holds true for the world of digital currency.

🧸 Bearish Pennant

A bearish pennant in the world of crypto trading is basically the opposite of a bullish pennant. Picture a sharp drop in prices as the flagpole, followed by a further decline. It's like a warning sign to sell your assets. Now, what's interesting is that these patterns are not just about prices; they also take trading volume into account. During that initial sharp drop (the flagpole), trading volume should be pretty darn high, but then it gradually decreases as things stabilize. Typically, these bearish pennants play out over a period of one to four weeks. So, it's all about recognizing these patterns in cryptocurrency charts to make informed trading decisions.