WEBVTT - The FTX Collapse 0:00:04.400 --> 0:00:07.800 Welcome to tech Stuff, a production from I Heart Radio. 0:00:11.800 --> 0:00:14.520 Hey there, and welcome to tech Stuff. I'm your host, 0:00:14.640 --> 0:00:18.000 Jonathan Strickland. I'm an executive producer with I Heart Radio. 0:00:18.079 --> 0:00:21.680 And how the tech are you? So recently I mentioned 0:00:21.720 --> 0:00:25.520 in a tech News episode of tech Stuff that cryptocurrency 0:00:25.560 --> 0:00:30.320 exchange f t X was in deep trouble, which honestly 0:00:30.560 --> 0:00:33.960 was putting it lightly, and I mentioned that the founder 0:00:34.320 --> 0:00:37.600 of that exchange, or co founder I should say, a 0:00:37.640 --> 0:00:41.440 guy named Sam Bankman Freed but more commonly referred to 0:00:41.600 --> 0:00:46.000 as s b F was making the rounds, taking responsibility 0:00:46.040 --> 0:00:50.199 for the whole thing. He subsequently resigned as CEO of 0:00:50.360 --> 0:00:54.600 f t X. That happened on Friday, last Friday today, 0:00:54.600 --> 0:00:59.160 by the way, being November twenty two. So for those 0:00:59.200 --> 0:01:01.520 of you listening from the future you can you're gonna 0:01:01.520 --> 0:01:06.720 be referring to that calendar a lot. Anyway, Uh, that catastrophe, 0:01:06.800 --> 0:01:09.319 the f t X catastrophe, is far larger than I 0:01:09.319 --> 0:01:13.600 could cover in a typical tech News segment, so I 0:01:13.640 --> 0:01:17.240 thought I would explain it in greater detail here, so 0:01:17.319 --> 0:01:20.440 much detail, and we'll also talk about the ripple effect 0:01:20.480 --> 0:01:25.720 we're seeing as ft X goes through this existential crisis, 0:01:26.160 --> 0:01:28.240 which I think even that is being generous. I think 0:01:28.600 --> 0:01:32.600 ft X is is just uh seeing the end of 0:01:32.640 --> 0:01:36.920 its days. But first, let's talk about cryptocurrency and exchanges 0:01:36.959 --> 0:01:40.360 in general so that we can understand the foundation of 0:01:40.400 --> 0:01:42.560 what's going on before we get into the details of 0:01:42.560 --> 0:01:45.959 what happened at f t X. So let's think back 0:01:46.160 --> 0:01:50.080 way back to the origin of bitcoin. In two thousand eight, 0:01:50.240 --> 0:01:54.480 someone using the name Satoshi Nakamoto published a white paper 0:01:54.680 --> 0:02:00.240 that was titled Bitcoin, a Peer to Peer Electronic Cash System. 0:02:00.280 --> 0:02:04.160 That white paper laid out the details for Bitcoin's operation. 0:02:04.800 --> 0:02:09.480 That this was going to be a decentralized digital currency, 0:02:09.520 --> 0:02:12.320 that it would have a community of participants who would 0:02:12.680 --> 0:02:16.520 track transactions through a shared ledger that was on top 0:02:16.560 --> 0:02:20.600 of a blockchain. That this community would compete against one 0:02:20.600 --> 0:02:25.000 another to validate blocks of transactions, and the winner would 0:02:25.040 --> 0:02:29.079 take uh some newly minted bitcoin as a reward. That 0:02:29.200 --> 0:02:33.880 the supply of bitcoin itself would be finite, That eventually 0:02:34.120 --> 0:02:37.240 all bitcoin that will ever exist will be on the market, 0:02:37.680 --> 0:02:40.040 and that every couple of years, the number of bitcoins 0:02:40.040 --> 0:02:43.680 that are awarded to the successful system that verifies a 0:02:43.680 --> 0:02:48.080 block of transactions will be cut down by half, that 0:02:48.160 --> 0:02:51.840 the system itself would adjust the difficulty of the verification 0:02:51.960 --> 0:02:55.240 task based on the amount of computational power dedicated to 0:02:55.360 --> 0:02:59.120 solving it. This is called proof of work. It's a 0:02:59.240 --> 0:03:05.160 version of UM cryptocurrency validation and minting that is used 0:03:05.440 --> 0:03:10.160 not exclusively but by a lot of different cryptocurrencies, including bitcoin. 0:03:10.880 --> 0:03:14.959 And that's the thing that feeds into people making increasingly 0:03:15.080 --> 0:03:20.600 powerful computer systems to attempt to mine bitcoin. But what 0:03:21.120 --> 0:03:24.400 wasn't really laid out was how people were going to 0:03:24.480 --> 0:03:29.040 get bitcoin outside of just mining it. The peer to 0:03:29.120 --> 0:03:33.160 peer nature would allow one bitcoin holder to transfer bitcoin 0:03:33.240 --> 0:03:37.280 to someone else via some form of forum such as 0:03:37.320 --> 0:03:40.480 bitcoin talk. That was one that Satoshi Nakamoto founded in 0:03:40.560 --> 0:03:43.520 early two thousand nine. Two thousand nine is also when 0:03:43.520 --> 0:03:46.600 bitcoin officially launched. The white paper came out a year earlier, 0:03:46.840 --> 0:03:48.760 or early a few months earlier, at the end of 0:03:48.760 --> 0:03:51.800 two thousand eight. In January two nine, was when bitcoin 0:03:51.920 --> 0:03:55.480 became something that people could actually participate in. Now you 0:03:55.520 --> 0:03:59.360 could use bitcoin in a personal transaction peer to peer, 0:04:00.160 --> 0:04:02.200 but that was really about it. And the peer to 0:04:02.280 --> 0:04:05.640 peer method worked, but it was also risky because there 0:04:05.680 --> 0:04:07.760 was no guarantee that the person with whom you were 0:04:07.800 --> 0:04:11.240 trading was on the up and up, or that whomever 0:04:11.280 --> 0:04:14.720 held the bitcoin would actually transfer the bitcoin at the 0:04:14.760 --> 0:04:18.919 conclusion of the transaction. However, bitcoin at the time was 0:04:18.960 --> 0:04:23.479 also virtually worthless. It would take thousands and thousands of 0:04:23.520 --> 0:04:26.760 bitcoin to amount to enough money to buy a pizza, 0:04:26.800 --> 0:04:29.839 for example, and it would take a year before bitcoin 0:04:29.920 --> 0:04:33.720 was worth even thirty nine cents per single bitcoin. So 0:04:33.760 --> 0:04:37.560 what I'm saying is that while it was technically risky 0:04:37.560 --> 0:04:40.960 to engage in a peer to peer bitcoin transaction, the 0:04:41.040 --> 0:04:43.400 value of the currency was so low that even a 0:04:43.440 --> 0:04:46.240 bad experience would likely result in the loss of at 0:04:46.279 --> 0:04:50.119 most a few bucks. Now today, a bitcoin is worth 0:04:50.400 --> 0:04:54.279 around sixteen hundred bucks as of the recording of this episode. 0:04:54.320 --> 0:04:56.720 That is, that level of risk is a bit too 0:04:56.720 --> 0:04:58.880 steep for most folks to just trust a peer to 0:04:58.960 --> 0:05:02.920 peer transaction, though those can still happen. But by late 0:05:03.920 --> 0:05:08.400 we started to see the first exchanges. So in exchange 0:05:08.760 --> 0:05:11.320 does what it says on the ten. It's an entity 0:05:11.400 --> 0:05:15.839 that can exchange one form of currency for another. One 0:05:15.880 --> 0:05:19.280 of the first exchanges was Bitcoin Market, and here's how 0:05:19.279 --> 0:05:22.520 it would work. Let's say you wanted some bitcoin, but 0:05:22.760 --> 0:05:25.360 you weren't interested in mining for it. You just wanted 0:05:25.400 --> 0:05:28.200 to purchase some You want to exchange some let's say 0:05:28.279 --> 0:05:31.960 U S dollars for the equivalent value in bitcoin. Well, 0:05:32.080 --> 0:05:35.200 you could arrange to purchase bitcoin from someone else who 0:05:35.400 --> 0:05:38.160 has it in their own digital wallet to do the 0:05:38.200 --> 0:05:40.880 peer to peer transaction, but again that's risky. The other 0:05:40.920 --> 0:05:45.400 ways you could go with a bitcoin market exchange approach, 0:05:45.760 --> 0:05:49.520 where the bitcoin owner would place the appropriate amount of 0:05:49.520 --> 0:05:53.200 bitcoin in escrow and it would sit there in escrow 0:05:53.320 --> 0:05:56.720 until your payment of the equivalent in U S dollars 0:05:56.800 --> 0:06:00.960 or whatever currency you're using cleared and got to the seller. 0:06:02.040 --> 0:06:04.279 Once the seller received the money, the bitcoin would be 0:06:04.320 --> 0:06:07.839 released from scrow to your digital wallet, whether that was 0:06:07.880 --> 0:06:10.880 on the market or your own personal digital wallet. That's 0:06:11.160 --> 0:06:14.480 you know, that can be pulled offline if you want, 0:06:14.960 --> 0:06:18.239 and the transaction is concluded. One bit that is important 0:06:18.279 --> 0:06:23.039 to remember cryptocurrency exchanges typically require a transaction fee to 0:06:23.240 --> 0:06:27.000 cover this process. The reason that's important is that there's 0:06:27.040 --> 0:06:31.160 really no incentive to use cryptocurrency for very small transactions 0:06:31.680 --> 0:06:35.080 because you end up paying more in transaction fees than 0:06:35.160 --> 0:06:38.000 you would for whatever the actual purchase was. This would 0:06:38.040 --> 0:06:40.279 be like if you walked into a store and you 0:06:40.320 --> 0:06:42.960 wanted to buy some gum and you had a credit card, 0:06:43.320 --> 0:06:44.840 so you buy it. You know, you got a pack 0:06:44.880 --> 0:06:47.520 of gum that's I don't know, a dollar, and you 0:06:47.520 --> 0:06:50.360 want to pay with your credit card, but the merchant 0:06:50.760 --> 0:06:53.920 charges a five dollar minimum for any credit card purchase. 0:06:54.400 --> 0:06:57.440 So do you really want the gun where you're gonna 0:06:57.440 --> 0:07:00.320 pay five bucks for a one dollar pack of gum? 0:07:00.360 --> 0:07:02.280 I mean, alternatively, I guess you could buy a bunch 0:07:02.320 --> 0:07:04.360 of other stuff so that you at least feel like 0:07:04.360 --> 0:07:07.120 you're getting value for your money. But that's the point, right, Like, 0:07:07.200 --> 0:07:11.680 you're not going to use a cryptocurrency if there's a 0:07:11.840 --> 0:07:15.240 if the transaction fee amounts to a significant percentage of 0:07:15.280 --> 0:07:19.000 whatever you're purchasing in the first place. Well. Another early 0:07:19.040 --> 0:07:23.880 cryptocurrency exchange that launched was uh Mount Cox. It launched 0:07:23.880 --> 0:07:29.080 in Mount Cox was empty period g o X, and 0:07:29.160 --> 0:07:33.080 that name was actually an initialism for magic. The gathering 0:07:33.240 --> 0:07:38.840 exchange is referencing the the trading card fantasy game. This 0:07:38.920 --> 0:07:41.680 name is one of the most infamous in cryptocurrency history 0:07:41.720 --> 0:07:45.040 because not only did it become the dominant exchange in 0:07:45.080 --> 0:07:49.320 the crypto world, handling something like sevent of all bitcoin 0:07:49.480 --> 0:07:55.640 transactions by early but that same year saw Mount Cox 0:07:55.760 --> 0:07:58.559 go under, so like they were on top of the heat, 0:07:59.160 --> 0:08:03.120 and in that same year they went extinct. Is not 0:08:03.320 --> 0:08:05.000 that different from what we're going to talk about with 0:08:05.040 --> 0:08:07.920 ft X, At least the outcome is not that different. 0:08:07.960 --> 0:08:11.560 The actual events that led to it were a little different. 0:08:11.800 --> 0:08:14.400 The exchange, which again was the dominant entity on the 0:08:14.400 --> 0:08:17.880 crypto market, found for bankruptcy and we would learn that 0:08:17.920 --> 0:08:21.400 Mount Cox had been hacked, with assets stolen and hundreds 0:08:21.440 --> 0:08:24.720 of millions of dollars worth of bitcoin disappearing from the exchange. 0:08:25.680 --> 0:08:29.240 In fact, at the time, the thefts amounted to seven 0:08:29.320 --> 0:08:32.760 percent of the total supply of bitcoin in the world. 0:08:33.679 --> 0:08:35.760 Like when you can when you can look at a 0:08:35.800 --> 0:08:40.520 bank robbery and you can contextualize that as a percentage 0:08:40.559 --> 0:08:43.800 of all the money in the world. That's a big 0:08:43.840 --> 0:08:48.320 bank robbery. And most of the the money that was 0:08:48.360 --> 0:08:52.000 stolen didn't belong to the exchange itself. It belonged to 0:08:52.200 --> 0:08:56.120 customers who were keeping their money on digital wallets that 0:08:56.160 --> 0:09:00.560 were on exchange accounts. Again, not a good look when 0:09:00.600 --> 0:09:03.680 a bunch of people lose their money, not through any 0:09:03.679 --> 0:09:07.240 fault of their own but because the exchange that held 0:09:07.280 --> 0:09:12.600 their accounts got hacked. Now, Mount Gox's implosion sent a 0:09:12.640 --> 0:09:15.040 shock way through the bitcoin community and the value of 0:09:15.080 --> 0:09:19.560 the currency dropped more than But despite the massive and 0:09:19.679 --> 0:09:24.160 public collapse of this exchange, cryptocurrency was able to stick 0:09:24.200 --> 0:09:28.600 it out and recovered Alright. So there's a lot more 0:09:28.800 --> 0:09:32.640 to the history of cryptocurrency as well as cryptocurrency exchanges. 0:09:32.800 --> 0:09:35.679 But that really gives us a foundation that we can 0:09:35.720 --> 0:09:38.720 work from. So we're not gonna dive into that anymore. 0:09:38.800 --> 0:09:43.000 Let's talk about f t X in particular. Now, that 0:09:43.160 --> 0:09:48.240 story begins with Sam Bankman Freed or SBF. This young 0:09:48.280 --> 0:09:50.959 man had worked for a while on Wall Street, and 0:09:51.040 --> 0:09:54.840 in sen he co founded a company called Alameda Research. 0:09:55.840 --> 0:09:59.839 This was a quantitative trading firm. And that phrase, will 0:10:00.160 --> 0:10:04.480 we have at least some of you say in what now? 0:10:04.520 --> 0:10:06.720 If you didn't say what, you should at least know 0:10:06.800 --> 0:10:10.040 that I did say what when I encountered it, Because 0:10:10.360 --> 0:10:12.720 the world of investment is one that I'm not particularly 0:10:12.760 --> 0:10:17.040 well versed in, but I'll give it a shot. Generally speaking, 0:10:17.600 --> 0:10:23.839 a quantitative trading firm relies heavily on math, statistics, and probability. 0:10:23.960 --> 0:10:28.960 Estimations to determine where markets are most likely heading, So 0:10:29.000 --> 0:10:31.280 you can sort of think of it as feeding a 0:10:31.360 --> 0:10:34.760 whole bunch of variables into a computer model and then 0:10:34.800 --> 0:10:39.280 projecting out what will happen from there. This, of course, 0:10:39.400 --> 0:10:42.680 is predicated on the assumption that financial markets will generally 0:10:42.760 --> 0:10:46.360 behave according to the value of these variables, which is 0:10:46.360 --> 0:10:51.479 an assumption that not everyone agrees with. This quantitative approach 0:10:51.720 --> 0:10:56.920 is heavily disputed in the investment world. I personally think 0:10:56.960 --> 0:11:00.760 it might be somewhat unreliable, but again, I hadn't even 0:11:00.800 --> 0:11:05.000 heard about this approach until today, so you could very 0:11:05.080 --> 0:11:08.400 legitimately argue that this is just my skeptical nature coming out, 0:11:08.440 --> 0:11:10.120 and I don't know what I'm talking about when it 0:11:10.160 --> 0:11:16.599 comes to validity of the theory. Anyway, Alameda Research specialized 0:11:16.720 --> 0:11:20.719 in cryptocurrencies, so the firm would leverage cryptocurrency markets to 0:11:20.800 --> 0:11:24.440 make itself and its clients money. So that could include 0:11:24.440 --> 0:11:29.080 stuff like arbitrage. This is where you attempt to leverage 0:11:29.080 --> 0:11:33.280 a difference in price for something like a commodity or 0:11:33.320 --> 0:11:36.640 some asset and you try to make a profit. So 0:11:37.240 --> 0:11:41.480 if you wanted, like an oversimplified example, let's say you 0:11:41.520 --> 0:11:45.520 know that apples are super cheap near you at the supermarket, 0:11:45.559 --> 0:11:47.840 like you can buy them for super super cheap, but 0:11:47.920 --> 0:11:51.400 you also happen to know that apples are twice as 0:11:51.440 --> 0:11:55.200 expensive across town. So you might buy up a bunch 0:11:55.240 --> 0:11:58.079 of cheap apples near you and then go across town 0:11:58.160 --> 0:12:00.960 and sell them for a profit, you know, lower than 0:12:01.000 --> 0:12:03.920 what the local markets are selling, but higher than what 0:12:04.000 --> 0:12:07.080 you paid for them. That kind of thing is what 0:12:07.280 --> 0:12:10.240 arbitrage is about, except you know, with crypto, and in 0:12:10.360 --> 0:12:14.640 much larger amounts than a few apples. So yeah, crypto apples. 0:12:15.080 --> 0:12:19.200 Alimator Research did more than arbitrage deals, however, but we 0:12:19.200 --> 0:12:21.240 can really think of it as a company that relied 0:12:21.320 --> 0:12:27.000 on computer models to make market based decisions related to cryptocurrency. 0:12:27.200 --> 0:12:30.040 Alimator Research is going to play a huge part in 0:12:30.080 --> 0:12:35.560 our story moving forward. So SPF founds Alimator Research. In 0:12:35.760 --> 0:12:41.079 two years later, twenty nineteen, SPF partners with Gary Wong, 0:12:41.600 --> 0:12:45.240 who used to be a Googler. He worked for Google. Uh. 0:12:45.320 --> 0:12:49.360 They in turn founded the ft X Cryptocurrency Exchange. So 0:12:50.600 --> 0:12:55.280 now they've got a company that is an investment company 0:12:55.320 --> 0:13:02.080 that's entrenched in cryptocurrency and a cryptocurrency exchange, so two 0:13:02.200 --> 0:13:07.000 very closely related entities here they do different things, but 0:13:07.040 --> 0:13:10.280 it's all in the world of crypto now. F d X, 0:13:10.720 --> 0:13:15.200 like a lot of cryptocurrency exchanges, had its own exchange token. 0:13:15.880 --> 0:13:18.720 This is a type of cryptocurrency that's created by the 0:13:18.800 --> 0:13:21.959 exchange itself, and it's meant to be used in all 0:13:22.000 --> 0:13:26.120 sorts of transactions and as an award and an incentive. 0:13:26.480 --> 0:13:30.080 So exchanges often use these tokens to encourage users to 0:13:30.200 --> 0:13:33.720 cover transaction costs and that kind of thing, or they 0:13:33.760 --> 0:13:37.839 might do it to raise the company's liquidity in the exchange. 0:13:38.280 --> 0:13:40.560 It may also be used to hold a stake in 0:13:40.600 --> 0:13:45.440 the exchange, so users can purchase exchange tokens in order 0:13:45.520 --> 0:13:48.440 to have kind of a seat at the table when 0:13:48.440 --> 0:13:51.720 it comes to blockchain governance. This is kind of the 0:13:51.800 --> 0:13:56.000 decentralized approach of crypto, the idea that governance does not 0:13:56.120 --> 0:14:00.280 fall to some centralized entity, but instead is made up 0:14:00.320 --> 0:14:03.640 of the community itself. So by putting a stake in, 0:14:04.360 --> 0:14:07.560 you have a seat. It's kind of like owning stock 0:14:07.600 --> 0:14:10.480 in a company. Right. If you own stock, that gives 0:14:10.480 --> 0:14:16.319 you the right to vote in various um stockholder meetings. 0:14:16.360 --> 0:14:20.840 Throughout the year. So yeah, that's kind of what these 0:14:20.880 --> 0:14:23.280 tokens are used for in general. And the f t 0:14:23.520 --> 0:14:27.720 X exchange token is the f t T And yes, 0:14:27.840 --> 0:14:32.160 I apologize, we're getting into alphabet suit territory here, right 0:14:32.560 --> 0:14:36.760 because we've got SPF the guy, the human being who 0:14:36.800 --> 0:14:40.680 co founded this company, and then you've got f t 0:14:41.080 --> 0:14:44.040 X the company, and then f t X meants the 0:14:44.160 --> 0:14:47.520 f t T token. Yeah, you know me, I'm down 0:14:47.600 --> 0:14:50.160 with f t T. Not really, I'm not down with 0:14:50.200 --> 0:14:53.800 f t T at all. F t T is down though. Um, 0:14:53.920 --> 0:14:56.520 we're not done with initialisms. We're going to have more 0:14:56.600 --> 0:14:59.120 before this is done. But you know, this is kind 0:14:59.120 --> 0:15:02.000 of the way that the crypto community communicates. They do 0:15:02.080 --> 0:15:06.640 it in a lot of like idioms and initialisms and acronyms, 0:15:06.840 --> 0:15:08.360 and it gets to a point where you start to 0:15:08.360 --> 0:15:11.600 wonder if anyone knows what they're talking about, or can 0:15:11.680 --> 0:15:16.400 even you know, explain the content of their sentences. I 0:15:16.440 --> 0:15:21.400 don't know, it's all Greek to me. Before everything went 0:15:21.600 --> 0:15:25.800 pear shaped, you could buy f t T on f 0:15:25.960 --> 0:15:29.560 t X, but there were also other cryptocurrency exchanges that 0:15:29.720 --> 0:15:32.479 bought and sold f t T, so it was available 0:15:32.960 --> 0:15:36.480 on exchanges across the crypto world, not just f t 0:15:36.720 --> 0:15:40.000 X is and I mentioned ft T because that's also 0:15:40.080 --> 0:15:44.800 going to play a very important part in our story later. Okay, 0:15:44.800 --> 0:15:47.200 we've been going for a bit. Let's take a quick break, 0:15:47.240 --> 0:15:49.400 and when we come back, we'll talk more about what 0:15:49.520 --> 0:16:02.880 went down at f t X. All right, So SBF 0:16:03.200 --> 0:16:07.800 and Wong co founded f t X in two thousand nineteen. 0:16:08.720 --> 0:16:14.240 One early investor in the company was a rival cryptocurrency exchange, 0:16:14.480 --> 0:16:18.680 the number one cryptocurrency exchange in the world, called Binance. 0:16:19.560 --> 0:16:24.120 So yeah, the biggest cryptocurrency exchange out there. Now, this 0:16:24.160 --> 0:16:26.680 story is going to unfold a little bit like a 0:16:26.760 --> 0:16:31.480 superhero and their arch nemesis kind of both coming of 0:16:31.520 --> 0:16:33.480 age at the same time. You know, they start off 0:16:33.520 --> 0:16:36.280 as friends, the old Clark Kent and Lex Luthor or 0:16:36.320 --> 0:16:39.600 buddies at first, but then things take a turn and 0:16:39.680 --> 0:16:42.440 one of them wants to see the end of the other. 0:16:42.640 --> 0:16:46.520 You've got your supervillain. So if ft X is our superhero, 0:16:46.680 --> 0:16:50.240 Binance is our supervillain, or if we want to talk 0:16:50.280 --> 0:16:55.320 about founders, SBF is our superhero. And Chong Peng Zhao 0:16:55.880 --> 0:17:01.600 also known as c Z because again more initialisms, is 0:17:01.640 --> 0:17:05.760 our supervillain, and spoiler alert, and this superhero story, the 0:17:05.800 --> 0:17:09.560 bad guy wins. Now, for the record, I actually don't 0:17:09.560 --> 0:17:13.200 want to cast Binance or c Z as the villain, 0:17:13.880 --> 0:17:16.880 partly because the more we learn about fd X and SBF, 0:17:16.920 --> 0:17:19.920 the less heroic those seem as well. And I think 0:17:19.960 --> 0:17:22.479 this is more of a story of a bunch of 0:17:22.520 --> 0:17:27.480 supervillains working against each other in a way. Alright, So 0:17:28.240 --> 0:17:32.760 Finance puts in a significant investment into this young f 0:17:32.960 --> 0:17:39.280 t X cryptocurrency exchange company. Two years later in fd 0:17:39.600 --> 0:17:43.200 X is ready to pay back Binances investment. You know, 0:17:43.320 --> 0:17:46.280 the whole point of an investment is to get a return. 0:17:46.400 --> 0:17:48.879 So this is ft X saying, okay, we've made our money. 0:17:48.920 --> 0:17:52.479 We're paying you off. Here's what you gave us plus more. 0:17:53.520 --> 0:17:58.560 Finance was essentially cashing out and ft X paid Binance 0:17:58.680 --> 0:18:02.800 in ft T. Again, that's the exchange currency for f 0:18:02.920 --> 0:18:04.800 t X, right we talked about just a minute ago. 0:18:05.160 --> 0:18:09.600 So in all, Finance received twenty three million f t 0:18:09.800 --> 0:18:13.400 T tokens and it had a value around that time 0:18:13.440 --> 0:18:17.040 of five nine million dollars. So Binance has a big 0:18:17.040 --> 0:18:21.760 old stash of FTT sitting in the exchange in June, 0:18:22.640 --> 0:18:25.360 f d X holds a round of funding that accumulates 0:18:25.400 --> 0:18:30.000 nearly one billion dollars in investments. That's billion with a B. 0:18:31.119 --> 0:18:35.719 The company's value is projected at eighteen billion bucks. Not 0:18:35.920 --> 0:18:40.600 bad to go from being founded in twenty nineteen two 0:18:41.040 --> 0:18:45.360 hitting nearly twenty billion dollars in value in just two years. 0:18:45.400 --> 0:18:50.600 That's crazy. But hold onto your proverbial hats because we're 0:18:50.600 --> 0:18:53.000 about to get crazier. In fact, hold onto your hats 0:18:53.160 --> 0:18:56.000 and since your socks tight, because I'm gonna knock both 0:18:56.040 --> 0:18:59.480 of them off if you're not careful. So in October 0:18:59.520 --> 0:19:02.440 of twenty twenty one, just a few months after being 0:19:02.520 --> 0:19:06.600 valued at eighteen billion dollars, f t X went up 0:19:06.600 --> 0:19:10.880 to being valued at twenty five billion dollars, a boost 0:19:11.040 --> 0:19:14.959 of seven billion dollars in just a few months, and 0:19:15.040 --> 0:19:17.960 f t X was leveraging this valuation to raise even 0:19:18.000 --> 0:19:21.720 more money from investors. That's one of the reasons why 0:19:21.760 --> 0:19:24.880 you want to tout your valuation, as you're telling investors, hey, 0:19:25.480 --> 0:19:28.720 look at how quickly we are growing. You want to 0:19:28.760 --> 0:19:30.760 get in on this, so pour your money into it. 0:19:31.400 --> 0:19:33.359 So you might wonder, well, what is f t X 0:19:33.400 --> 0:19:37.440 doing with all the money it's making, you know, because 0:19:37.480 --> 0:19:39.919 I mean, obviously a lot of it's going into the 0:19:39.960 --> 0:19:42.800 operation of the exchange itself. But f t X was 0:19:42.840 --> 0:19:46.400 getting so much cash, so what was it doing with it? Well, 0:19:46.400 --> 0:19:48.919 one thing he was doing was promoting f t X 0:19:48.960 --> 0:19:53.640 in various extravagant ways. For example, in September one, ft 0:19:53.920 --> 0:19:57.600 X signed a sponsorship deal with a Formula One racing team, 0:19:57.640 --> 0:20:00.760 so they started putting the logo on the cars. And 0:20:00.840 --> 0:20:05.040 in April one, ft X signed a sponsorship deal with 0:20:05.119 --> 0:20:09.639 the home arena for the Miami Heat basketball team, calling 0:20:09.680 --> 0:20:13.080 it the f t X Arena. And this was a 0:20:13.240 --> 0:20:17.639 nineteen year deal to have that naming rights. But f 0:20:17.760 --> 0:20:21.800 t X wouldn't last nineteen years. And if I remember 0:20:21.840 --> 0:20:23.399 to come back to this, I'll give you an update 0:20:23.440 --> 0:20:25.560 on what's going on at the home of the Miami 0:20:25.640 --> 0:20:29.119 Heat and also that Formula one team spoiler alert. I 0:20:29.119 --> 0:20:32.800 will remember because I know I wrote it down. Meanwhile, 0:20:33.200 --> 0:20:37.560 f t X is operating as a cryptocurrency exchange and 0:20:37.640 --> 0:20:42.880 becomes the second largest crypto exchange, only behind Binance. So 0:20:43.119 --> 0:20:45.960 Binance helped f t X get started, and now f 0:20:46.080 --> 0:20:49.760 t X is number two behind Finances number one and 0:20:49.960 --> 0:20:52.159 SPF started to make some really big moves, some of 0:20:52.200 --> 0:20:55.520 which would sour his relationship with Binance and its CEO 0:20:56.240 --> 0:20:59.400 c z you know, Chong Pang Zhao. Alright, so first 0:20:59.480 --> 0:21:02.800 let's talk about SPFS moves to help companies that were 0:21:02.840 --> 0:21:06.159 affected by the collapse of cryptos value. Now, I'm pretty 0:21:06.200 --> 0:21:09.720 sure in a recent news episode I talked about cryptos 0:21:09.760 --> 0:21:12.280 value crashing a couple of years ago. But that was 0:21:12.359 --> 0:21:15.840 my brain misfiring, Like it hit me later that day 0:21:15.840 --> 0:21:18.200 that I said something that was wrong, because I think 0:21:18.240 --> 0:21:20.320 I said, you know, a couple of years ago when 0:21:20.359 --> 0:21:23.560 bitcoin was worth sixty dollars. That wasn't a couple of 0:21:23.680 --> 0:21:26.480 years ago. That was this year. That crash actually happened 0:21:26.520 --> 0:21:28.399 earlier this year, in the spring of this year. It 0:21:28.400 --> 0:21:31.399 just feels to me like this year has lasted five years, 0:21:31.880 --> 0:21:34.240 which I guess I could say about the last couple 0:21:34.240 --> 0:21:36.800 of years have felt that way. But anyway, so this 0:21:36.880 --> 0:21:40.560 past spring, and again that's the Spring of two for 0:21:40.640 --> 0:21:43.840 any of you listening from the future, we saw crypto 0:21:43.960 --> 0:21:49.200 values in sharp decline. In a May two article titled 0:21:49.320 --> 0:21:52.959 Cryptocurrencies melt down in a perfect storm of fear and panic, 0:21:53.480 --> 0:21:56.720 The New York Times reporter team spelled it all out, 0:21:57.240 --> 0:22:00.200 all right. So towards the beginning of the Panto back 0:22:00.240 --> 0:22:04.960 back in, there was a spike in cryptocurrency adoption. This 0:22:05.119 --> 0:22:09.159 increase in demand caused cryptocurrency values to increase. You know, 0:22:09.200 --> 0:22:11.679 the more people want something, the more expensive it gets. 0:22:12.280 --> 0:22:15.600 And these included not just your regular old folks dipping 0:22:15.600 --> 0:22:19.120 their toes into doge coin or whatever. You had these 0:22:19.320 --> 0:22:23.640 massive financial companies, including banks and hedge funds that were 0:22:23.640 --> 0:22:26.960 purchasing large amounts of cryptocurrency and a bet that those 0:22:27.000 --> 0:22:30.679 coins would continue to increase in value to the moon. 0:22:31.040 --> 0:22:35.240 As the crypto bros would say. Um side note, crypto 0:22:35.400 --> 0:22:41.320 bro is a pretty common, somewhat dismissive term for cryptocurrency enthusiasts, 0:22:41.359 --> 0:22:46.320 but obviously anyone of any gender can be interested in crypto, 0:22:46.480 --> 0:22:49.720 so crypto bro, as far as I'm concerned, should be 0:22:49.760 --> 0:22:54.840 considered a non gendered term. But whether you agree with 0:22:54.880 --> 0:22:56.560 that or not, it is the term that a lot 0:22:56.640 --> 0:23:00.760 of folks use, all right. So the value for cryptocurrencies 0:23:00.800 --> 0:23:05.000 in general goes up and up. Bitcoin reached a peak 0:23:05.040 --> 0:23:08.280 of around sixty grand for a single unit of bitcoin. 0:23:08.840 --> 0:23:12.159 In turn, the rising value of cryptocurrencies had lots of 0:23:12.200 --> 0:23:16.520 other consequences. Proof of work cryptocurrencies like bitcoin, you know, 0:23:16.560 --> 0:23:20.240 those are the ones that require participants to dedicate enormous 0:23:20.280 --> 0:23:23.400 amounts of compute power to have even a hope of 0:23:23.480 --> 0:23:27.560 mining a block of transactions. Well, that meant that collectively, 0:23:28.000 --> 0:23:30.560 people were spending the same amount of electricity just to 0:23:30.600 --> 0:23:35.040 mind cryptocurrency as certain countries would use in an entire year. 0:23:35.960 --> 0:23:39.320 That in turn has an impact not just on electrical grids, 0:23:39.359 --> 0:23:43.120 but on carbon dioxide emissions. So for any coal powered 0:23:43.760 --> 0:23:47.199 power plants out there, I mean that increased demand just 0:23:47.280 --> 0:23:49.679 meant we were dumping more CEO two in the atmosphere 0:23:49.680 --> 0:23:53.960 because people wanted to mine Bitcoin. Then, for less valuable 0:23:54.000 --> 0:23:57.880 cryptocurrencies like Ether, a lot of the miners were scooping 0:23:57.920 --> 0:24:01.119 up powerful graphics cards like Bitcoin at this point had 0:24:01.160 --> 0:24:05.000 graduated well beyond graphics cards. You could have the best 0:24:05.040 --> 0:24:07.760 graphics cards on the market and not even make a 0:24:07.880 --> 0:24:12.080 dent in the sophisticated bitcoin mining systems out there. But 0:24:12.160 --> 0:24:16.439 for stuff like either where it wouldn't make financial sense 0:24:16.560 --> 0:24:20.840 to go so hard on your mining rig. You know, 0:24:21.440 --> 0:24:24.479 GPUs were a big asset, and it made it very 0:24:24.560 --> 0:24:26.760 hard for anyone else to get hold of those graphics 0:24:26.760 --> 0:24:31.760 processing cards, which really irritated a lot of gamers. Anyway, 0:24:31.800 --> 0:24:36.159 this trend could not continue indefinitely, and eventually values began 0:24:36.280 --> 0:24:38.359 to dip a bit. Now there were a lot of 0:24:38.400 --> 0:24:41.760 external forces that would have a big impact as well. 0:24:42.160 --> 0:24:46.760 The world began to enter into economic uncertainty. I guess 0:24:46.760 --> 0:24:49.479 I still can't say recession. Um. You started to have 0:24:49.720 --> 0:24:54.280 issues with inflation, you had interest rates going up, investments 0:24:54.280 --> 0:24:57.400 and stuff like crypto started to look increasingly risky. Then 0:24:57.480 --> 0:25:01.760 you know, Russia invaded Ukraine, which may economic uncertainty even worse, 0:25:02.440 --> 0:25:05.240 and that led to some folks pulling out of the 0:25:05.280 --> 0:25:08.320 crypto market. So they were selling off their crypto so 0:25:08.359 --> 0:25:10.320 that they could walk away with a nice little profit, 0:25:10.560 --> 0:25:12.320 and then the value would dip a bit. Then you 0:25:12.359 --> 0:25:15.840 had folks getting nervous, So some folks began to sell 0:25:15.880 --> 0:25:18.239 off their's because they're like, well, it's starting to go 0:25:18.320 --> 0:25:20.720 down and I don't want to be left holding the bag, 0:25:21.080 --> 0:25:26.480