Speaker 1: Hello everyone, and welcome to the latest episode from the
Speaker 1: midweek edition of the coin Bureau podcast. Every week, I
Speaker 1: pick out two of my favorite videos from coin Bureau's
Speaker 1: YouTube channel to present to you in podcast form. The
Speaker 1: audio you're about to hear is from those videos I've
Speaker 1: chosen this week, and I hope you enjoy listening. First up,
Speaker 1: back to ft X, the big story of the moment
Speaker 1: and likely to remain so for some time yet. The
Speaker 1: company is now in the throes of bankruptcy proceedings, and
Speaker 1: the recent chapter eleven filing that kicked these off makes
Speaker 1: interesting reading. To put it mildly, the filing was submitted
Speaker 1: by one John J. Ray the Third, the man now
Speaker 1: serving as f t X is CEO and charged with
Speaker 1: clearing up the mess left behind by his predecessor, and
Speaker 1: what a mess it is. The filing reveals just how haphazardly, unprofessionally,
Speaker 1: and dan Wright negligently f t X and Alameda Research
Speaker 1: were run by Sam bankman Fried and his inner circle
Speaker 1: of friends and acolytes. The filing almost reads like an
Speaker 1: outline for how not to run a company and has
Speaker 1: left many in the crypto industry and beyond aghast. In
Speaker 1: the first part of today's episode, you'll hear our breakdown
Speaker 1: of it. Keep those stress balls at the ready. One
Speaker 1: of the talking points in the wake of the f
Speaker 1: t X scandal is around proof of reserves. This is
Speaker 1: the idea that crypto exchanges should become more transparent about
Speaker 1: the assets they hold and crucially, their liabilities as well.
Speaker 1: So many people trusted f t X to hold their
Speaker 1: assets and saw that trust abused. That cannot be allowed
Speaker 1: to happen again. So have a listen to our breakdown
Speaker 1: of what proof of reserves means and what some of
Speaker 1: the biggest exchanges out there are doing to reassure their
Speaker 1: users that they do in fact have the necessary funds
Speaker 1: to hand to honor withdrawals. We also ask the question
Speaker 1: of whether the future lies not with centralized exchanges but
Speaker 1: decentralized ones instead. Could recent events be the start of
Speaker 1: a shift in how people buy crypto Thanks for listening
Speaker 1: to today's episode, and there'll be more coming your way
Speaker 1: very soon. And if you want even more content from
Speaker 1: coin Bureau, be sure to subscribe to our YouTube channel
Speaker 1: and visit us on social media too. It's been two
Speaker 1: weeks since f t X and Alameda Research collapsed. And
Speaker 1: yet we are still only just starting to understand what
Speaker 1: happened and what the effects on all of cryptocurrency could be.
Speaker 1: One of the biggest bombshells so far has been ft
Speaker 1: x is bankruptcy filing from last Thursday. What it reveals
Speaker 1: about the crypto exchange is downright disturbing and foreshadows further
Speaker 1: grave issues for crypto. Today, I'm going to give you
Speaker 1: a summary of f t x is bankruptcy filing, tell
Speaker 1: you what it says in simple terms, and explain exactly
Speaker 1: how it could affect the crypto market. Okay, let's get
Speaker 1: straight into it. F t x is bankruptcy filing begins
Speaker 1: with a declaration from the exchangees new CEO, John J.
Speaker 1: Ray the third Now there is a name for context,
Speaker 1: Sam Bankman. Fried stepped down as CEO of f t
Speaker 1: X when f t X and its sister company, Alameda
Speaker 1: Research declared bankruptcy on the eleventh of November. You should
Speaker 1: also know that John is famous for being the CEO
Speaker 1: in charge of overseeing the bankruptcy of American energy company Enron.
Speaker 1: John has also worked on other high profile bankruptcies such
Speaker 1: as Nortel. His involvement in the ft X bankruptcy therefore
Speaker 1: underscores how serious the situation is now. John starts by
Speaker 1: saying that he was appointed CEO of f t X
Speaker 1: in the quote early morning hours of the eleventh of November,
Speaker 1: and his first order of business was to file for bankruptcy.
Speaker 1: His second order of business was to work with blockchain analytics, firms, regulators,
Speaker 1: and law enforcement to identify f t x's assets. John
Speaker 1: then bluntly states, quote, never in my career have I
Speaker 1: seen such a complete failure of corporate controls and such
Speaker 1: a complete absence of trustworthy financial information as occurred here.
Speaker 1: This statement made the headlines in both the crypto and
Speaker 1: mainstream media's. John goes on to explain that the Chapter
Speaker 1: eleven bankruptcy filing by f t X has five objectives.
Speaker 1: Implementation of controls I set up new procedures in the company,
Speaker 1: asset protection and recovery, transparency and investigation of Sam Bankman Freed,
Speaker 1: efficiency and coordination with regulators, law enforcement, et cetera. And
Speaker 1: the maximalization of value i e. Compensating those affected as
Speaker 1: best as possible. John reveals that the information in this
Speaker 1: bankruptcy filing is based on his knowledge of what was
Speaker 1: going on at f t X. Obviously, the information is
Speaker 1: likely to be incomplete, hence why John notes that f
Speaker 1: t X will submit additional information in the coming weeks
Speaker 1: as it's unearthed. In other words, this still might just
Speaker 1: be the tip of the iceberg. Now, the first part
Speaker 1: of the bankruptcy filing details how f t X was structured.
Speaker 1: John identifies for groups of businesses which he refers to
Speaker 1: as silos. The first is called the w R S silo,
Speaker 1: and it includes all of f t X, S U
Speaker 1: S companies and subsidiaries. Now, for the sake of simplicity,
Speaker 1: I'll refer to the w R S silo as the
Speaker 1: f t X U S silo. The second silo is
Speaker 1: the Alameda silo, which includes all the companies related to
Speaker 1: Alameda Research, which was one of the biggest traders and
Speaker 1: market makers in crypto. Alameda was actually the largest recipient
Speaker 1: of all the U S DT ever issued by Tever.
Speaker 1: More about that in the description I digress. A footnote
Speaker 1: for the Alameda silos balance sheet notes that Alameda Research
Speaker 1: loaned one billion dollars to Sam Bankman freed over five
Speaker 1: D forty million dollars to engineering director Nishad Singh. And
Speaker 1: over fifty million dollars to f t X co CEO
Speaker 1: Ryan Salame. The third silo is the ventures silo, which
Speaker 1: includes all the companies related to ft x's investment activities.
Speaker 1: Now John refers to the fourth silo as the dot
Speaker 1: com silo. This is a little confusing since the dot
Speaker 1: com silo includes all of f t x is overseas
Speaker 1: companies and subsidiaries. So let's just call this the ft
Speaker 1: X BBAL silo. Now, John explains that these four silos
Speaker 1: make up the f t X Group. Not Surprisingly, Sam
Speaker 1: Bankman Freed was the controller of all four silos. John
Speaker 1: notes f t X and Alameda Research co founder Gary
Speaker 1: Wang as a minority shareholder in f t X group,
Speaker 1: along with Nishad Singh, who was apparently also a co founder.
Speaker 1: What's crazy is that no other investors besides Sam, Gary,
Speaker 1: and Nishad held more than two percent of any of
Speaker 1: the silos. What's even crazier is that f t X
Speaker 1: had raised two billion dollars before going bust. This means
Speaker 1: that those investors got basically nothing in return, which raises
Speaker 1: lots of questions in my book. Anyways, what you're looking
Speaker 1: at here is a breakdown of the four silos, along
Speaker 1: with the ownership stakes that Sam, Gary Nishad and other
Speaker 1: investors had in them. If you're just listening in, Sam
Speaker 1: held fifty of the f t x U S silo,
Speaker 1: of the Alameda silo, sixty seven percent of the Venture silo,
Speaker 1: and seventy five percent of the f t x Global silo.
Speaker 1: Third party investors only held two percent of the f
Speaker 1: t x U S silo and twenty five percent of
Speaker 1: the f t x Global silo. The rest was owned
Speaker 1: by the trio. John also provides a corporate structure chart
Speaker 1: for these silos and their sub surgeries. Now, there's honestly
Speaker 1: too much information to go over here, and it's also
Speaker 1: kind of pointless to summarize since John cautions that it's
Speaker 1: preliminary I incomplete. The link to the full bankruptcy filing
Speaker 1: will be in the description if you want to take
Speaker 1: a closer look. The company organization chart is on the
Speaker 1: very last page. Anyways, John goes on to give a
Speaker 1: detailed breakdown of each of the four silos, starting with
Speaker 1: the f t x U S one. He begins by
Speaker 1: explaining that the f t x US Exchange itself had
Speaker 1: over one million users and was registered with the Department
Speaker 1: of the Treasury as a money services business. Not only that,
Speaker 1: but one of the subsidiaries of f t x US
Speaker 1: was registered with the SEC. Some of you may have
Speaker 1: heard that there are peculiar connections between f t x
Speaker 1: Alameda Research and the SEC via SAM and Alameda CEO
Speaker 1: Caroline Ellison I reckon this SEC registration is another peculiarity
Speaker 1: to add to that pile. After talking about all the
Speaker 1: other subsidiaries that were owned and operated by the f
Speaker 1: t x U s silo, John reveals that these subsidiaries
Speaker 1: hold around one point four billion dollars in assets. However,
Speaker 1: he cautions that the numbers are likely incorrect due to
Speaker 1: Sam's involvement in the balance sheet report. It was also unordered. Interestingly,
Speaker 1: the f t x US silo appears to have just
Speaker 1: under four hundred thousand dollars of liabilities, that is debt.
Speaker 1: John notes that this can't possibly be accurate given that
Speaker 1: f t x US presume be held billions of dollars
Speaker 1: in user assets, which would count as liabilities but are
Speaker 1: not noted in the balance sheet report. Next, John gives
Speaker 1: a detailed breakdown of the Alameda silo, as with the
Speaker 1: f t x U S silo. John cast doubt on
Speaker 1: the idea that Alameda Research had thirteen point five billion
Speaker 1: dollars in assets and just five billion dollars of liabilities.
Speaker 1: This is again because the balance sheet report was provided
Speaker 1: by SAM and unordited. Like the others. For the Ventures silo,
Speaker 1: the balance sheet has been divided into two for the
Speaker 1: two major subsidiaries of the silo. Together, these two subsidiaries
Speaker 1: had two billion dollars in assets and an almost equal
Speaker 1: amount in liabilities, though John says it is once again
Speaker 1: unknown whether their balance sheets are correct. And last, but
Speaker 1: not least, we have the ft X Global Silo, and
Speaker 1: John admits that his team couldn't figure out how many
Speaker 1: users the ft X Exchange actually had. All they know
Speaker 1: for now is that SAM claimed f t X head
Speaker 1: quote millions of users who had over fifteen billion dollars
Speaker 1: of crypto on the exchange at the end of one
Speaker 1: the most likely cooked books claimed that f t X
Speaker 1: had over two point to five billion dollars of assets
Speaker 1: versus less than five hundred thousand dollars of liabilities. As
Speaker 1: with f t x U S, it's essentially guaranteed that
Speaker 1: f t X is liabilities were exponentially larger due to
Speaker 1: the billions of dollars of customer assets that were on
Speaker 1: the exchange. The second part of the bankruptcy filing explains
Speaker 1: the events that happened shortly before the filing itself took place.
Speaker 1: John explains that the freeze on ft x's assets by
Speaker 1: Bahamas regulators shortly before the bankruptcy filing only applied to
Speaker 1: one of the subsidiaries of the f t X Global
Speaker 1: silo explains a lot. As for Sam, he was consulting
Speaker 1: with numerous lawyers, including his own father, about his resignation
Speaker 1: as CEO and the commencement of ft x is bankruptcy.
Speaker 1: At around four thirty a m. On the eleventh of November,
Speaker 1: Sam conceded defeat and handed over control of all of
Speaker 1: f t X to John, who immediately filed for Chapter
Speaker 1: eleven bankruptcy. This ties into the third part of the
Speaker 1: bankruptcy filing, which explains what John has done since that point.
Speaker 1: The first thing he did was established a governance structure
Speaker 1: for f t X and each of its four silos,
Speaker 1: something you'll recall as being the first of the five
Speaker 1: Chapter eleven bankruptcy objectives. John explains that he and the
Speaker 1: newly appointed directors of the four silos will work together
Speaker 1: to meet all five objectives of the Chapter eleven bankruptcy.
Speaker 1: He acknowledges that this will be easier said than done,
Speaker 1: as all four silos are interrelated and could therefore have
Speaker 1: overlapping claims on the same assets. John then die its
Speaker 1: deeper into f t x is financials, and many of
Speaker 1: his findings made the headlines. The first finding was that
Speaker 1: f t x did not keep track of its cash balances,
Speaker 1: bank accounts or the people who oversaw those bank accounts.
Speaker 1: They also didn't consider the quality of banks they were using.
Speaker 1: John explains that his team will do their best to
Speaker 1: find f t x IS cash and transfer it all
Speaker 1: to financial institutions in the United States. Naturally, each silo
Speaker 1: will have its own account. Now, I couldn't help but
Speaker 1: notice that these cash transfers will only occur if they
Speaker 1: can be done quote without adverse consequences. I wonder what
Speaker 1: that means conspiracies aside. So far, John and his team
Speaker 1: have managed to dig up over two dozen ft X
Speaker 1: bank accounts around the world that collectively hold over five
Speaker 1: hundred million dollars in cash. The relevant banks have been
Speaker 1: instructed to freeze all these accounts and not to process
Speaker 1: withdraws for SAM or other signatories. Now, if you thought
Speaker 1: f t x's bank account situation was sketchy, consider the
Speaker 1: company's financial reporting. While the f t X u S
Speaker 1: silo was being properly audited, the f t X Global
Speaker 1: Silo was being audited by a questionable auditing firm that
Speaker 1: claimed to be the first to open offices in the
Speaker 1: Central Land. To add insult to injury, John couldn't find
Speaker 1: any audited financial statements for the Alameda silo or the
Speaker 1: Venture silo. He admits that it's going to take some
Speaker 1: time to accumulate accurate financial information about the four silos.
Speaker 1: Something tells me that those balance sheets will have a
Speaker 1: lot of black holes. Did I mention that f t
Speaker 1: X is Empire didn't even have an accounting department Anyhow,
Speaker 1: It turns out that f t x is human resources
Speaker 1: department wasn't any better than its financial department. John said
Speaker 1: his team hasn't even been able to put together a
Speaker 1: list of f t X employees because none of the
Speaker 1: four silos had detailed records of that information. They didn't
Speaker 1: even have board meetings for what it's worth. John says
Speaker 1: he's been working closely with a core team of f
Speaker 1: t X employees to figure out exactly what's going on.
Speaker 1: Many of you probably heard the news that almost everyone
Speaker 1: except Sam's in the circle was in the dark, and
Speaker 1: many f t X employees also had their money on
Speaker 1: the exchange. As expected, f t xs disbursements, that is,
Speaker 1: payouts were about as disorganized, with employees having to submit
Speaker 1: paycheck requests in a company chat room. As reported, some
Speaker 1: of f t x's capital was used to acquire properties
Speaker 1: in the Bahamas. The records of these transactions are of
Speaker 1: course a complete mess. Regarding the custody of cryptocurrency, f
Speaker 1: t X didn't keep any detailed record there either. If
Speaker 1: I understand correctly, only Sam Bankman Freed and co founder
Speaker 1: Gary Wang had access to the private keys for all
Speaker 1: the crypto wallets of the f t X empire. These
Speaker 1: private keys were transferred around using unsecured emails. By now,
Speaker 1: most of you will know that Sam and Gary use
Speaker 1: secret software to mask their misuse of customer funds, and
Speaker 1: that Alameter Research was exempt from auto liquidation on f
Speaker 1: t X. In plain English, this means that Alameda could
Speaker 1: enter extremely risky trades and not lose money if the
Speaker 1: trade went against them. The game was rigged in their
Speaker 1: favor and they still lost. John also confirms that the
Speaker 1: f t X Global silo and Alameda silo were both
Speaker 1: governed by Sam and Gary. This is something that I
Speaker 1: was wondering about in our video about the ft X
Speaker 1: Alameter situation. It's insane to think that much of the
Speaker 1: info has come out since that video. It will be
Speaker 1: in the description if you missed it now. The bad
Speaker 1: news is that John and his team have only been
Speaker 1: able to locate around seven hundred and forty million dollars
Speaker 1: of cryptocurrency held by f t X. This balance doesn't
Speaker 1: include the almost four hundred million dollars of crypto that
Speaker 1: was stolen from f t X, nor the three hundred
Speaker 1: million dollars of ft T that was recently printed. What's
Speaker 1: odd is that John seems to imply that Sam, Gary
Speaker 1: and the other higher ups at f t X haven't
Speaker 1: been able to identify other crypto wallets that may belong
Speaker 1: to the exchange. This is odd because they damn well
Speaker 1: should know, given that they were the only ones with
Speaker 1: access to the private keys. I suppose it doesn't matter
Speaker 1: because blockchain analytics companies are already hard at work tracking
Speaker 1: down every transaction that went in or out of ft X. Ironically, enough,
Speaker 1: chain Allie, this the largest blockchain analytics company, recently confirmed
Speaker 1: that it had exposure to f t X. John reiterates
Speaker 1: the fact that most f t X employees had no
Speaker 1: idea what Sam and co. Were up to. They had
Speaker 1: no idea that the assets of f t X and
Speaker 1: Alameda were being traded back and forth, nor that the
Speaker 1: cryptocurrencies of f t X users were being commingled with
Speaker 1: the company's cryptocurrencies. Speaking of which, John confirms that f
Speaker 1: t X had billions of dollars in other investments outside
Speaker 1: of cryptocurrency. This is something that Caroline had mentioned on
Speaker 1: Twitter during the chaos, but many people were skeptical. The
Speaker 1: list of skeptics seems to include John, as his team
Speaker 1: has yet to identify these other assets. This is all
Speaker 1: because of f t X is unbelievably bad record keeping,
Speaker 1: which extended to internal communication. Quote Sam Bankman. Freed often
Speaker 1: communicated by using applications that were set to auto delete
Speaker 1: after a short period of time, and encouraged employees to
Speaker 1: do the same. The conspiracy theorists aren't going to have
Speaker 1: a field day with that one. Now. Despite all these hurdles,
Speaker 1: John assures the court that his team is collecting as
Speaker 1: much information as possible about f t X as operations.
Speaker 1: They're working with former and current regulators and law enforcement
Speaker 1: around the world to that end. John and his team
Speaker 1: are also working to sort out all the different subsidiaries
Speaker 1: f t X had around the world, including selling them
Speaker 1: if they have any value. You can bet that competing
Speaker 1: crypto companies are going to be keeping an eye out
Speaker 1: for those fire sales. Now, what court my eye was
Speaker 1: the section about access to data. That's because John notes
Speaker 1: that his team cannot access certain data because quote the
Speaker 1: debtors have been advised that attempts to access this property
Speaker 1: of the estate may create a risk of its loss
Speaker 1: to unauthorized persons. John hints that this data is related
Speaker 1: to the largest clients of f t X, as he
Speaker 1: claims his team cannot make a list of the top
Speaker 1: fifty largest creditors without it. I reckon this list will
Speaker 1: eventually be produced, but it certainly begs the question of
Speaker 1: what information will be admitted in closing. John takes a
Speaker 1: dig at Sam, saying that he quote continues to make
Speaker 1: erratic and misleading public statements on Twitter, and that these
Speaker 1: statements should effectively be ignored. I reckon they're hard to
Speaker 1: ignore when Sam should already be behind bars and not
Speaker 1: tweeting or playing video games. So this brings me to
Speaker 1: the big question, and that's what effect f t X
Speaker 1: is bankruptcy filing is likely to have on the crypto market.
Speaker 1: In short, it's going to be really bad. And that's
Speaker 1: simply because f t X was believed to be one
Speaker 1: of the most trustworthy crypto companies in existence. I mean,
Speaker 1: take a second to consider that Sam was on a
Speaker 1: first name basis with politicians, was actively pushing for crypto regulations,
Speaker 1: and was allegedly in bed with the SEC and others.
Speaker 1: The ft X exchange received billions of dollars of investment
Speaker 1: from big names, including asset managers like black Rock. Heck,
Speaker 1: even a Canadian pension fund invested in it. This gives
Speaker 1: the impression to politicians, regulators, and even crypto holders that
Speaker 1: no matter how clean a crypto company appears to be,
Speaker 1: chances are it's doing something shady behind the scenes. The
Speaker 1: supposedly high quality of other crypto exchanges is now being
Speaker 1: called into question. And it's not good. You can bet
Speaker 1: your bottom bitcoin that we're going to see lots of
Speaker 1: investigation into not just f t X, but every other
Speaker 1: crypto exchange out there. This is almost guaranteed because ft
Speaker 1: X and Alameda were massive players in the crypto industry.
Speaker 1: This means they probably have lots of information about every
Speaker 1: crypto company. As I mentioned earlier, Alameda Research was the
Speaker 1: largest recipient of all the USDT ever issued by Terror.
Speaker 1: This means there is a high likelihood that Alameda has
Speaker 1: more information about Tether than any other crypto company besides
Speaker 1: Tether itself, and it's likely this information will be revealed
Speaker 1: very soon. On that note, the information that f t
Speaker 1: X and Alameda have about counterparties maybe why Sam isn't
Speaker 1: in prison. If it's true that f t X and
Speaker 1: Alameda were working with the U. S Government in some capacity,
Speaker 1: then you can bet that Sam has lots of information
Speaker 1: on Uncle Sam to information that powerful people don't want
Speaker 1: made public. Now, this is just my speculation, but to
Speaker 1: my mind, it's the only explanation as to Sam continues
Speaker 1: to be living life as usual despite doing tens of
Speaker 1: billions and dollars in damage to ft X is users.
Speaker 1: And the wider crypto industry. It's probably a similar situation
Speaker 1: for the other insiders at ft X and LAMED. In
Speaker 1: any case, it's clear that we're nowhere close to getting
Speaker 1: the full facts about what happened behind the scenes. Until
Speaker 1: we do, there will be no shortage of conspiracy theories,
Speaker 1: some of which could well turn out to be true.
Speaker 1: There will also be no shortage of scrutiny directed at
Speaker 1: the crypto industry, and to be honest, much of it
Speaker 1: will be justly deserved. Hold on tight. The collapse of
Speaker 1: f t X and Lameter Research has left crypto holders
Speaker 1: wondering what other exchanges might be doing with their customers
Speaker 1: coins and tokens behind the scenes. The call for transparency
Speaker 1: by the crypto community has been answered by most major
Speaker 1: cryptocurrency exchanges, which have published proofs of their crypto reserves
Speaker 1: over the last two weeks. Today, I'm going to explain
Speaker 1: what proof of reserves means, scrutinize the crypto reserves of
Speaker 1: some of these exchanges, and examine whether decentralized exchanges will
Speaker 1: take over as a result. F t x is shenanigans
Speaker 1: have inevitably led to questions over the reliability and trustworthiness
Speaker 1: of other exchanges, and rightly so. F t X secretly
Speaker 1: sent billions of dollars of its users cryptocurrency to prop
Speaker 1: up its sister trading firm, Alameda Research. This is why
Speaker 1: f t X couldn't process all the crypto withdraw requests
Speaker 1: coming from its users, and ultimately why the exchange had
Speaker 1: to file for bankruptcy. Oddly enough, it was Binance CEO
Speaker 1: Chang Peng Zhao or c Z who proposed a solution
Speaker 1: to the crypto community's collapse in trust. I say oddly
Speaker 1: because CZ's tweet that Binance would be dumping its ft
Speaker 1: T is one of the catalysts that lead to t
Speaker 1: X and alamedas collapse. On the eighth of November, CZ
Speaker 1: tweeted quote, all crypto exchanges should do mircletrey proof of reserves.
Speaker 1: Banks run on fractional reserves. Crypto exchanges should not. Finance
Speaker 1: will start to do proof of reserve soon full transparency. So,
Speaker 1: for those unfamiliar, proof of reserves or p o R
Speaker 1: essentially involves taking a cryptographic snapshot of the coins and
Speaker 1: tokens held by a cryptocurrency exchange. Now, it's important to
Speaker 1: note that p o R is supposed to be done
Speaker 1: with the help of an independent third party or protocol.
Speaker 1: In this case, it looks like most cryptocurrency exchanges have
Speaker 1: been working with blockchain analytics platform Nansen for their po rs.
Speaker 1: I'll leave a link to Nansen's exchange holding page in
Speaker 1: the description if you're interested. Now, another thing that's important
Speaker 1: to note is that p o R is also supposed
Speaker 1: to include the liabilities of a cryptocurrency exchange. In this context,
Speaker 1: liabilities means the coins and tokens and exchange is holding
Speaker 1: on behalf of its users. Obviously, these coins and tokens
Speaker 1: don't technically count as an exchanges assets. If you watched
Speaker 1: our recent video about f t x is bankruptcy filing,
Speaker 1: you'll know that both f t x u S and
Speaker 1: f t x International didn't count their users crypto as
Speaker 1: liabilities on their balance sheets. This basically made it look
Speaker 1: like both had enough crypto on hand to meet withdrawal
Speaker 1: demand when they really didn't. Now, the only exchanges that
Speaker 1: have included liabilities in their proof of reserves so far
Speaker 1: have been Kraken, which actually began doing po R back
Speaker 1: in February, gate dot Io, which uses the same accounting
Speaker 1: firm as Kraken, Armanino, and okay x, which apparently reported
Speaker 1: its own liabilities without an accounting firm. Funnily enough, coin
Speaker 1: Base has not provided p o R for assets or liabilities.
Speaker 1: Coin Bay c o O Emily Choi explained to coin
Speaker 1: Desk that this is because coin base is regularly audited
Speaker 1: as a publicly traded company, so its balance sheet is
Speaker 1: already fully available. I'll leave a link to it in
Speaker 1: the description if you're interested, and before I go on,
Speaker 1: I will caution that even if an exchange has done
Speaker 1: thorough p o R for both its assets and liabilities,
Speaker 1: there is no guarantee that your crypto is safe on
Speaker 1: that exchange. This is simply because you can never know
Speaker 1: for sure that the individual or institution that crunched the
Speaker 1: numbers is being honest. The only way to guarantee the
Speaker 1: safety of your cryptocurrency is to keep your coins and
Speaker 1: tokens in your own personal, non custody or wallet. It's
Speaker 1: also the only way to guarantee your financial freedom, because
Speaker 1: having millions in the bank means nothing if you don't
Speaker 1: have the ability to spend that money when and how
Speaker 1: you want. Seriously, guys, I can't stress this enough. Be
Speaker 1: sure to check out my recent video about how to
Speaker 1: keep your crypto safe. It too will be in the description. Now,
Speaker 1: the first p o R I want to analyze comes
Speaker 1: from Binance, which was, of course, after Kraken, the first
Speaker 1: exchange to provide p o R. If I had my
Speaker 1: tinfile hat on, i'd tell you that Binance lad the
Speaker 1: charge for p o R to further squeeze its competitors.
Speaker 1: Then again, other exchanges probably wanted to do p o
Speaker 1: R to increase user confidence. In any case, the top
Speaker 1: assets on binances balance sheet are as follows THT in
Speaker 1: the b U s D stable coin, in the U
Speaker 1: s D T stable coin, in BTC, just under ten
Speaker 1: percent in b NB, eight percent in each, and the
Speaker 1: remaining sixteen or so percent in other cryptocurrencies. Grand total
Speaker 1: sixty seven billion dollars. Now, this would be amazing were
Speaker 1: it not for the fact that Binance has yet to
Speaker 1: publish proof of liabilities, specifically of user deposits. With an
Speaker 1: estimated thirty million users, it's very likely that binances liabilities
Speaker 1: are very large and likely on par with its assets,
Speaker 1: as with other exchanges that have revealed their liabilities. That said,
Speaker 1: in a Twitter spaces discussion, ces explained that Binance has
Speaker 1: no liabilities. This doesn't make much sense given that the
Speaker 1: exchange obviously holds the coins and tokens of many of
Speaker 1: its users. This is admittedly concerning, but Binance should be
Speaker 1: publishing its liabilities soon. More about that later in the interim.
Speaker 1: We're likely to see no shortage of hit pieces such
Speaker 1: as this one from Bloomberg, which took issue with the
Speaker 1: fact that around fort of Binances reserves are held in
Speaker 1: its own branded assets, namely b U s D and
Speaker 1: b NB. Easy called the article fake news, and rightfully
Speaker 1: so to some extent. That's because even though b U
Speaker 1: s D is branded as Binances stable coin, it's actually
Speaker 1: issued by Pasos, a heavily regulated stable coin issuer based
Speaker 1: in the United States. Pasos actually seems to be the
Speaker 1: most regulated stable coin issuer of them all, which theoretically
Speaker 1: makes b U s D the safest stable coin finances.
Speaker 1: Holdings of U s DT are more concerning, though. Tether
Speaker 1: has already been under extreme scrutiny from US regulators for years.
Speaker 1: Given that Alameda Research was the largest recipient of all
Speaker 1: the U s DT ever issued, I suspect that this
Speaker 1: scrutiny will soon return and possibly with even more intensity.
Speaker 1: Don't even get me started about all the pending stable
Speaker 1: coin regulations either. It's a similar story with b NB two.
Speaker 1: If you watched our video about b NB you'll know
Speaker 1: that it was created by Binance way back in twenty
Speaker 1: seven team when it was known as binance Coin. B
Speaker 1: n B became independent of Finance earlier this year and
Speaker 1: rebranded as Build and Build, but b nbs ecosystem is
Speaker 1: still dependent on Binance. If you want more of an
Speaker 1: overview of Binance as an exchange, then you can check
Speaker 1: out our review over here. Anyways, the second p o
Speaker 1: R I want to analyze comes from crypto dot Com,
Speaker 1: which was the second exchange to release its p o
Speaker 1: R after Binance. If I recall correctly, Crypto dot Com
Speaker 1: was planning on releasing its p o R closer to
Speaker 1: the end of the month, but rush to release an
Speaker 1: initial po R after questions arose about the exchange of solvency.
Speaker 1: These questions arose because of the announcement by Crypto dot
Speaker 1: Com that it was pausing deposit and withdrawals of USDT
Speaker 1: and USDC on the Salana blockchain. What strange is that
Speaker 1: this is exactly what Binance, okay x and other exchanges
Speaker 1: did shortly afterwards, yet there were no cerns there in
Speaker 1: any case. The top assets on Crypto dot COM's balance
Speaker 1: sheet are as follows in BTC, in U s D,
Speaker 1: cent in ship, even in EA, just under four percent
Speaker 1: in U s DT, and around eighteen percent in other
Speaker 1: cryptocurrencies grand total three billion dollars. Note, Crypto dot Com
Speaker 1: claimed in its por release that it has more crypto elsewhere.
Speaker 1: Like Binance, Crypto dot Com has yet to publish proof
Speaker 1: of its liabilities. These liabilities are likely to be even
Speaker 1: larger than Binances, given the Crypto dot Com claims to
Speaker 1: have over fifty million users. This certainly begs the question
Speaker 1: of why there's such a large difference between the assets
Speaker 1: held by Binance and by Crypto dot Com. The answer
Speaker 1: seems to be on chain. Shortly after Crypto dot Com
Speaker 1: released its p O R, it was found that the
Speaker 1: exchange transferred three twenty thousand e worth over four hundred
Speaker 1: million dollars to gate dot Io in late October, which
Speaker 1: was returned a few days later. Crypto dot Com CEO
Speaker 1: Chris Marcellek claimed the transfer was just a mistake. It's
Speaker 1: safe to say that the crypto community wasn't convinced because
Speaker 1: Chris had to hold an emergency a m A to
Speaker 1: clear up the confusion. Now I have yet to watch
Speaker 1: that a m A, but it seems it was enough
Speaker 1: to calm Crypto dot COM's holders since the exchanges chronos
Speaker 1: coin pumped shortly afterwards. When it comes to Crypto dot
Speaker 1: COM's actual assets, its balance sheet is definitely a mixed bag.
Speaker 1: Having BTC as its largest holding is a bit risky
Speaker 1: giving all the crypto market volatility. Having almost all your
Speaker 1: stable coin holdings in circles USDC is likewise unwise. In
Speaker 1: my opinion, I suppose it reveals which entities Crypto dot
Speaker 1: Com is close to. More about the company taking over
Speaker 1: cryptocurrency using the link in the description digress. Now, not surprisingly,
Speaker 1: the news that Crypto dot Com holds a fifth of
Speaker 1: its asset reserves in shiba e news ship token made
Speaker 1: the crypto headlines. That's because ship is a meme coin
Speaker 1: whose value is fundamentally reliant on retail speculation, which has
Speaker 1: been quickly sucked out of the crypto market as it crashes.
Speaker 1: Chris explained in the aforementioned a m A that quote
Speaker 1: it so happens that last year does and ship were
Speaker 1: too extremely hot meme coins and people bought a lot
Speaker 1: and they're holding it. They didn't sell it. We have
Speaker 1: no control over what you guys buy. You buy it,
Speaker 1: we will store it, we will keep it safe. Now,
Speaker 1: this actually makes a lot of sense, but it won't
Speaker 1: be confirmed until crypto dot com publishes its liabilities. If
Speaker 1: I understand correctly, this will be done in the next
Speaker 1: few weeks, as the blog post announcing crypto dot COM's
Speaker 1: assets p o R notes that it will confirm a
Speaker 1: quote full to one reserve of all customer assets. Anyhow,
Speaker 1: the third po R I want to analyze comes from
Speaker 1: okay x, which you'll recall included liabilities, albeit self reported ones.
Speaker 1: Okay x release its proof of reserves just a few
Speaker 1: days ago, but what's annoying is that the proof of
Speaker 1: reserves on its website doesn't tell us all that much.
Speaker 1: That's because it only gives us info about okay x
Speaker 1: is BTC eight and usd T holdings. Okay x claims
Speaker 1: to hold around one hundred eight thousand BTC against one
Speaker 1: hundred five thousand BTC of user holdings for it's one million,
Speaker 1: fifty thousand against one million twenty five thousand, and for
Speaker 1: USDT it's three billion sixty million against three billion, sixteen million.
Speaker 1: The main takeaway is that okay x appears to have
Speaker 1: more crypto on hand than the crypto that's been deposited
Speaker 1: by its users. Now, this is excellent, but again it
Speaker 1: doesn't include the other dozens of cryptocurrencies the exchange offers.
Speaker 1: It's also not clear which accounting firm was involved, if any. Unfortunately,
Speaker 1: Nansen doesn't have any additional data either. According to Nanson,
Speaker 1: the top assets on okay x's balance sheet are as
Speaker 1: follows almost fifty in USDT, pent in BTC, in five
Speaker 1: pent in u s DC, and just a fraction of
Speaker 1: a percentage point for all the other cryptocurrencies the exchange offers.
Speaker 1: Okay x's blog post announcing its proof of reserves notes
Speaker 1: that it will publish asset and liability information about the
Speaker 1: other cryptocurrencies it holds soon to be exact. The exchange
Speaker 1: said that the self audit feature will become available for
Speaker 1: all these other cryptocurrencies. This is a small but significant
Speaker 1: detail because self auditing means that okay x users can
Speaker 1: cryptographically verify that the exchange holds the coins and tokens
Speaker 1: it claims to. If I'm not mistaken, Kraken, Bitmex and
Speaker 1: gate dot io are the only other crypto exchanges that
Speaker 1: currently offer this feature. To my understanding, Finance, crypto dot
Speaker 1: Com and others will be providing this same level of
Speaker 1: transparency over the coming weeks. The only reason they don't
Speaker 1: offer the self audit feature already is because most of
Speaker 1: the info that's been released so far is the walllett addresses,
Speaker 1: not the cryptographic proofs of reserve. Oh and in case
Speaker 1: you're wondering, the grand total of okay x is crypto
Speaker 1: holdings is around six billion dollars with around twenty million users.
Speaker 1: It sounds like okay x is well capitalized, but as
Speaker 1: with all the other exchanges so far, the devil is
Speaker 1: truly in the detail. Although holding most of your reserves
Speaker 1: in stable coins is safe, it's a lot less safe
Speaker 1: when almost all these stable coin reserves are in one
Speaker 1: specifically Tether's U s d T. As I mentioned earlier,
Speaker 1: Tether is facing its fair share of regulatory scrutiny from
Speaker 1: the United States and other countries. That is a bit
Speaker 1: risky in my opinion. Even so, okay x is incomplete
Speaker 1: reserves paint a fairly promising picture. The remaining fifty is
Speaker 1: in BTC, E and USDC, and all three are pristine
Speaker 1: collateral by crypto standards. Let's just hope that okay x
Speaker 1: doesn't reveal that it's holding a massive chunk of its
Speaker 1: reserves in some meme coin later down the line. Now,
Speaker 1: if you want to do a bit more due diligence
Speaker 1: on okay x, then we also have a review of
Speaker 1: that as well, and I will leave that in the
Speaker 1: description for you folks. Anyhoo. The fourth and final po
Speaker 1: R I want to analyze comes from cow cooin, which
Speaker 1: released all its wallet addresses earlier this month and is
Speaker 1: working on a cryptographic po R with a third party auditor.
Speaker 1: The blog posts announcing cou cooin's wallet notes the cryptographic
Speaker 1: po R will be published in early December. In any case,
Speaker 1: the top assets on cou Cooin's balance sheet are as
Speaker 1: follows in U s DT just under eighteen percent in KCS,
Speaker 1: eleven percent in BTC, around eight percent in EATH, around
Speaker 1: seven percent in U s DC, and in everything else.
Speaker 1: Grand total two point five billion dollars of assets to
Speaker 1: back whatever liabilities are coming from cow cooin's twenty million users.
Speaker 1: Like okay x and crypto dot Com, coucoin has almost
Speaker 1: all of its stable coin eggs in one basket, in
Speaker 1: this case USDT. This seems to be the standard for
Speaker 1: most crypto exchanges that aren't based in the United States,
Speaker 1: and it underscores how much damage would be done to
Speaker 1: the crypto ecosystem if tether is ever taken down. Similarly
Speaker 1: to binance, cow cooin holds a substantial chunk of its
Speaker 1: reserves in its own KCS token. In contrast to finances BMB,
Speaker 1: cow Cooin's kcs has limited exchange support and very low liquidity. However,
Speaker 1: the k c s chain also doesn't have nearly the
Speaker 1: same amount of activity and adoption as BMB. This means
Speaker 1: that the k CS tokens price action is entirely dependent
Speaker 1: on cow cooin. If the exchange ever were to experience
Speaker 1: any issues, kcs is price would plummet. In a worst
Speaker 1: case scenario, this could wipe out almost twenty of cou
Speaker 1: cooin's crypto reserves. Now, the remainder of coucoin's reserves are
Speaker 1: interesting yet expected, barely a fifth in btc anda and
Speaker 1: almost a quarter in mid to small caval coins. This
Speaker 1: makes sense because cou cooin is one of the most
Speaker 1: popular exchanges to go to for mid to small cabal coins,
Speaker 1: and the ones at list tend to be pretty good
Speaker 1: as well. Now I should also note that coucoin's blog
Speaker 1: post about its wallet addresses also states that it has
Speaker 1: more reserves than it has reported so far. The fact
Speaker 1: that coucoin will be providing cryptographic po are also suggests
Speaker 1: that the exchange will be providing the liability side of
Speaker 1: its crypto balance sheet too. This is all well and good,
Speaker 1: but I'll reiterate that the only way to know for
Speaker 1: sure that your cryptocurrency is safe is to keep it
Speaker 1: in your own personal wallet. Only keep what you're actively
Speaker 1: trading on exchanges. Otherwise, keep everything in a hot or
Speaker 1: cold wallet, and don't say I didn't warn you. That
Speaker 1: being said, if you want an overview of coucoin more broadly,
Speaker 1: I have a video for you on that as well.
Speaker 1: Top right, poor Furborn. So this brings me to the
Speaker 1: big question, and that's whether decentralized exchanges are destined to
Speaker 1: take over due to the transparency issues of centralized exchanges.
Speaker 1: In short, yes, but it's going to take quite some
Speaker 1: time for the decks experience to eat the sex experience.
Speaker 1: For starters, there's the trading experience. Using a dex is
Speaker 1: not nearly as easy as using a sex For crypto neuves,
Speaker 1: dex is also don't provide nearly the same degree of
Speaker 1: flexibility to crypto experts. The good news is that progress
Speaker 1: is being made on both fronts. By while it's like
Speaker 1: phantom and order book DEXes like GMx. Then there's the
Speaker 1: ability to swap between native cryptocurrencies. Sexes effectively let you
Speaker 1: trade whatever cryptocurrency you want, whereas most DEXes only allow
Speaker 1: you to trade between tokens on a single blockchain. This
Speaker 1: is not ideal, as some trades require multiple DEXes and
Speaker 1: cross chain bridges. The good news is that there are
Speaker 1: crypto projects like thought chain, which make it possible to
Speaker 1: swap cryptocurrencies natively between blockchains. These technologies are still very
Speaker 1: much in their infancy, but I could see an order
Speaker 1: book based cross chain decks being built by the end
Speaker 1: of the next bull market. And finally, there's the on
Speaker 1: and off ramps. The biggest advantages that sexes have over
Speaker 1: DEXes is arguably their ability to let users cash out
Speaker 1: into filthy feared. Being able to easily get your money
Speaker 1: in and out of crypto is of paramount importance, and
Speaker 1: it's something that DEXes haven't yet managed to do due
Speaker 1: to all the regulations involved. The good news is that
Speaker 1: it should become easier to get your money in and
Speaker 1: out of crypto once it becomes more widely held. Peer
Speaker 1: to peer crypto marketplaces were and continue to be something
Speaker 1: associated with privacy obsessed cipher punks, but they could become
Speaker 1: very common as crypto adoption increases in some I am
Speaker 1: confident that DEXes will displace sexes in the coming years.
Speaker 1: I reckon this will be accelerated by crypto regulations, which
Speaker 1: will only be enforceable against centralized elements of the crypto industry.
Speaker 1: The truth is that all centralized elements must be removed
Speaker 1: for this to be called crypto. Take a second to
Speaker 1: consider that it's the centralized entities which have historically caused
Speaker 1: and continue to cause all the issues in the crypto industry.
Speaker 1: It's part of the growing pains, and it is in
Speaker 1: fact something that the crypto industry should eventually grow out of,
Speaker 1: otherwise we'll end up with more of the same. After all,
Speaker 1: what f t X and Alameda we're doing is no
Speaker 1: different from what banks do today. The only differences the
Speaker 1: banks get bailed out by the central banks when they
Speaker 1: lose all their clients money speculating on risky assets with leverage.
Speaker 1: The crypto companies who do this just go under, as
Speaker 1: they should. Stronger crypto companies rise to replace them, however,
Speaker 1: until their flaws are found and they collapse too. And
Speaker 1: with each iteration, the crypto industry moves closer to its
Speaker 1: core values because that's all that's left when the greed
Speaker 1: and gains are gone. It will take time, but one
Speaker 1: day we will no longer have to trust. We will
Speaker 1: simply verify. And that's it for my video today, folks.
Speaker 1: But I'm keen to get your feedback, though. Do you
Speaker 1: trust these proof of reserves? Let me know down below
Speaker 1: if you wanted to use any of the exchanges above,
Speaker 1: I've managed to get special trading feed discounts of up
Speaker 1: to on some of them, so if you want to
Speaker 1: take advantage of that, they're linked to in the description below. Now,
Speaker 1: of course, we also get a commission when you do this,
Speaker 1: because it's how we keep the lights on here and
Speaker 1: we both benefit or You're more than welcome to sign
Speaker 1: up directly without our deal, and the links to do
Speaker 1: so are down below as well. Just remember, whatever you do,
Speaker 1: don't leave a large amount of funds on the exchange.
Speaker 1: It is not worth the risk. Thank you so much
Speaker 1: for listening to the coin Bureau podcast. If you'd like
Speaker 1: to learn more about cryptocurrency, you can visit our YouTube
Speaker 1: channel at YouTube dot com forward slash coin Burero. You
Speaker 1: can also go to coin bureau dot com for loads
Speaker 1: more information about all things crypto. You can follow me
Speaker 1: on Twitter at at coin bureau or one word, and
Speaker 1: I'm also active on TikTok and Instagram too.