FTX had $1 billion yearly revenue in 2021 which is a 1000% year-over-year improvement. 20 billion market cap for FTX is a 20x revenue multiple. 20x revenue multiples for startups aren’t uncommon and 1000% year-over-year improvement means startup.
I think that revenue is mostly trading fees which are a reasonable service. The speculative profits seem to be made by Alameda.
You can argue with all startups about whether or not they are overpriced but it’s qualitatively different than Madoff hair which has zero market value.
FTX was working on new financial products like prediction markets as well, so even in a crypto downturn, they could expand to new markets.
If you take the business part of the business and separate it from the Ponzi part of the business, it’s not a Ponzi scheme. But apparently it was a package deal—at least until Alameda were to weather the crypto crash? Like, we just need to siphon FTX customer funds over to Alameda until they recoup $8-10 billion over time in profits, which have not been forthcoming lately. But oops, we “forgot” that when we transferred that money over, it affected our financials—there it is, fake books. And that’s not even getting into the laughable valuations of their other “shitcoin” assets, or even of FTT itself, just the flow of funds!
This also speaks to further impairment of FTX’s value by management—if you separate the business part of the business from the management part of the business...and you can to some extent, but the damage has been done. Who is going to trust FTX as an exchange going forward even with a new structure and management team?
Finally, it’s not like Madoff vaporized the money and SBF/FTX/Alameda didn’t. If anything, it’s the opposite; Madoff was a far better steward, making the assets recoverable. SBF/FTX/Alameda simply gambled them away. Put differently, the non-Ponzi part of the business was a bigger share of Madoff’s fund than of SBF’s bundle. Obviously the valuation in either case was fake, based on a multiple of both real assets and Ponzi accounting over time, but Madoff skimmed customer funds while SBF/FTX straight-up embezzled them to prop up the husk of Alameda. In its death throes, FTX was in straight-up Ponzi mode, making withdrawing customers whole to maintain the facade at the expense of those last in line.
I think the comparison is quite apt, and the points of contrast are more interesting than absolving. I was initially hesitant to say there was some fraud/Ponzi beyond just accidentally falling into borderline insolvency, but by this point, especially with how enormous the hole, it looks much more intentional, and Matt Levine has even dropped the P-word because of it.
FTX had $1 billion yearly revenue in 2021 which is a 1000% year-over-year improvement. 20 billion market cap for FTX is a 20x revenue multiple. 20x revenue multiples for startups aren’t uncommon and 1000% year-over-year improvement means startup.
I think that revenue is mostly trading fees which are a reasonable service. The speculative profits seem to be made by Alameda.
You can argue with all startups about whether or not they are overpriced but it’s qualitatively different than Madoff hair which has zero market value.
FTX was working on new financial products like prediction markets as well, so even in a crypto downturn, they could expand to new markets.
If you take the business part of the business and separate it from the Ponzi part of the business, it’s not a Ponzi scheme. But apparently it was a package deal—at least until Alameda were to weather the crypto crash? Like, we just need to siphon FTX customer funds over to Alameda until they recoup $8-10 billion over time in profits, which have not been forthcoming lately. But oops, we “forgot” that when we transferred that money over, it affected our financials—there it is, fake books. And that’s not even getting into the laughable valuations of their other “shitcoin” assets, or even of FTT itself, just the flow of funds!
This also speaks to further impairment of FTX’s value by management—if you separate the business part of the business from the management part of the business...and you can to some extent, but the damage has been done. Who is going to trust FTX as an exchange going forward even with a new structure and management team?
Finally, it’s not like Madoff vaporized the money and SBF/FTX/Alameda didn’t. If anything, it’s the opposite; Madoff was a far better steward, making the assets recoverable. SBF/FTX/Alameda simply gambled them away. Put differently, the non-Ponzi part of the business was a bigger share of Madoff’s fund than of SBF’s bundle. Obviously the valuation in either case was fake, based on a multiple of both real assets and Ponzi accounting over time, but Madoff skimmed customer funds while SBF/FTX straight-up embezzled them to prop up the husk of Alameda. In its death throes, FTX was in straight-up Ponzi mode, making withdrawing customers whole to maintain the facade at the expense of those last in line.
I think the comparison is quite apt, and the points of contrast are more interesting than absolving. I was initially hesitant to say there was some fraud/Ponzi beyond just accidentally falling into borderline insolvency, but by this point, especially with how enormous the hole, it looks much more intentional, and Matt Levine has even dropped the P-word because of it.