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The Cryptocalypse Chronicles Vol. 3: Hail to the King: The Empire of Binance Has Vanquished the Kingdom of FTX
There can be only one.
“I thought of you as a god, but now I see that you are nothing but a man with a man’s weaknesses.” - Anonymous
Today was a terrible, no good, very bad day for the cryptocurrency industry.
I don’t just mean one of those normal bad days for the cryptocurrency industry wherein someone might manage to make off with $100 million in a way that’s probably not even a crime just by exploiting the stupidity of the kind of morons who are for whatever reason routinely entrusted by cryptocurrency investors with nine or ten figure sums. Nor was it one of the bad days where Russian hackers operating out of Singapore managed to cash out the $9 million they received for locking a major hospital’s critical infrastructure up with ransomware. I also don’t mean one of those bad days where someone clicks on the wrong PDF and $650 million is instantly sucked into the North Korean nuclear missile program. Hell I’m not even talking about the kind of bad day where a major art museum’s rarest monkey JPGs are lost forever when the intern who wrote down the pass phrase for the hardware wallet that holds all the important monkey JPG receipts realizes that she used that piece of paper to share a late night spliff with a guy she met at a bar who said he could roll a joint out of pretty much anything.
No - today we’re going to talk about a really bad day for crypto. Brace yourself.
FTX, the 2nd or 3rd largest cryptocurrencywas forced by his archrival Lord CZ, CEO of the Binance Empire and Ruler of the Known Cryptoverse (peace be upon him), to bend the knee in a most public and degrading style as the once mighty kingdom of FTX burned down around him. This turn of events was extremely surprising to many who assumed that GodEmperorSBF was on the cusp of fully transcending his corporeal incarnation and assuming the form of the long prophesied cyborg
exchangegambling empire in the world, imploded. FTX’s CEO GodEmperorSBF
J.P. Morgancoin(peace be upon it).
As a consequence of #1 it can be assumed that Alameda Research, probably the most consequential hedge fund in the cryptocurrency industry with one of the largest dollar figures under management, is bankrupt. FTX and Alameda are both owned and operated by GodEmperorSBF. It is reasonable to assume that GodEmperorSBF would not bend the knee to his nemesis Lord CZ (peace be upon him) if he could just call up the other company he owns and borrow some money.
Just hours prior to the incineration of GodEmperorSBF’s dream of not being forced to go through life as a member of the hectomillionaire peasantry a federal judge in the United States issued the first official judicial ruling on whether cryptocurrencies like Ethereum are, in fact, securities that need to comply with all kinds of regulations and whose sellers may thus be indictable for hundreds of felonies based on the fact that they’ve been pretending those laws don’t exist for almost a decade now. The loser in this case was a long forgotten cryptocurrency kingdom called LBRY. Because the citizens of LBRY speak a bizarre creole of English, gibberish, and avarice that few understand outside their little bubble island world the official LBRY explanation of what the federal judiciary just did to the future of cryptocurrencies in America can be kind of hard to follow. If you want to know the specifics I’ll point you to this excellent translation and analysis of LBRY’s press release by the learned scholar David Gerard. I promise it’s worth a look and won’t take long to read; Gerard is good at cutting through to the core of an issue quickly and so I’m not going to bother repeating his analyses here.
The rest of this post is going to attempt to explain calamity #1: “WTF just happened that changed the most famous and politically connected crypto bro billionaire in America from billionaire status to definitely-not-a-billionaire-and-possibly-soon-to-be-an-indicted-felon status” in what seemed to most people like less than 48 hours.
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Long ago there were two young spell casters, Changpeng Zhao of Sino-Canadia and Samuel Bankman-Fried, about whom little is known other than the fact that fate had crippled him with the curse of veganism. Together they had uncovered a mysterious force called “cryptocurrency” and, aided by
the largest financial fraud in human history $80 billion worth of a “stablecoin”
Cracks had begun to show back in 2019, when a "well-known account"that had just "started their own futures exchange" hacked into the empire of Binance, stole all its market data, and used that to strip Binance of cryptocurrency energy.
But with both men recognizing that all out war between the kingdom of FTX and the empire of Binance would slow the conversion of cryptocurrency energy into an even more powerful form of matter called “personal net worth”, lawsuits were dropped and apologies given. Relations between the realms eventually settled into a sort of uneasy detente wherein the world was divided the world into two spheres of influence. Samuel Bankman-Fried, who soon became known as “SBF”, would form an alliance with
an internationally wanted fugitive a young escape artist and Grenadian diplomat named Justin Sun to control the Asian markets with a technology stolen from the land of Ethereum called Tron Blockchain. Changpeng Zhao, who chose to form an alliance with the land of Ethereum rather than steal their technology, adopted the moniker “CZ” and was given the American and European markets. The land of Crypto was peaceful.
Until The Terraclysm of 2022 changed everything forever.
MAY - The Terraclysm
Back in May there was
the Bear Stearns bankruptcy The Terraclysm. A perpetual
JUNE: The CeFi Wars
In June a large wave of bankruptcies followed The Terraclysm. The ensuing conflict, known as The CeFi Wars, brought devastation to the land of Crypto. Members of the citizenry whose (admittedly totally justifiable) rage against their decades-long exploitation at the hands of the hated 1% had left them vulnerable to manipulation by pirates and evil sorcerers like Do Kwon and Alex Mashinsky spent the summer of 2022 watching their life's savings being gathered up and tossed unhesitatingly into bonfires built by the very men who had promised to protect the kingdom: The Crypto Bros. These bonfires of the fortunes of the non-billionaire class were regrettable but necessary, the Bros had explained. Heat and light were the only way to turn the tide of war, fire makes both heat and light, and what, praytell, were the Bros supposed to do other than set all the poor people’s money on fire? Burn their own money? Ridiculous - everyone knows that the kingdom could never survive without the protection of its Billionaire Bros. If The Bros were to set their own money on fire they wouldn't even be billionaires any more! It was hard for the average citizen of Crypto to counter this kind of advanced logic.
Sadly it was all for naught. The Bros were revealed to be basically making all this shit up as they went along and the fires did nothing to stave off disaster. City states like Celsius, Voyager, BlockFi, Vauld, and more rapidly fell one after the other into the jaws of a monstrosity called The Closening whose appetite for dollars seemed insatiable and from which no dollar has yet escaped.
A Hero Appears
Then, off in the distance, there appeared a savior. A wizard known as SBFarrived on the scene promising to unburn all the money by filling these bankrupt companies with cash he would create by flaying the flesh of the bros who had set the money on fire in the first place.
Needless to say this was a popular message and as word got out that SBF claimed to be able to create a nearly limitless amount of capital with this method he was soon met with fawning media coverage everywhere he went. He was on the cover of Fortune magazine with the tagline "The Next Warren Buffett?". He routinely gave his opinions to the false prophet James Joseph Cramer of CNBC, appeared in four page advertising spreads in the most esteemed publications in the landwith the fair damsel Gisele Bundchen of TronDAO at his side, and was given a level of hero worship generally reserved for Pony Stark and Satoshi Nakomoto himself. A Super Bowl ad about the virtues of the kingdom of FTX starring Matt Damon and/or Larry David was made as an offering from the rest of the land of Crypto to their new benefactor. SBF even became one the largest donors to the Biden presidential campaign, second only to an energy being known as The Soros.
The Weird Thing
There was one odd aspect of all this bailing out and hero worship: when people actually looked into the companies SBF was “bailing out” - like actually bothered to read the court documents or look at the chain data - it seemed to keep turning out that somehow the bankrupt company actually owed SBF more money than he was willing to lendthem. People were initially confused by this - why wouldn't SBF just, you know, forgive the loan? The bankrupt companies could take all this debt off their books and maybe even come back to life! But then they looked at the photos of the fair damsel Gisele Bundchen again and figured this man must be some kind of giga-chad who was way smarter than they could ever be if he could pay a modeling agency enough money to get Gisele Bundchen to stand in the same frame as he was standing in. "The SBF works in mysterious ways," they told themselves. Over in the Empire of Binance, however, this weirdness did not go unnoticed.
JULY: The Closening of the Voyager
In the course of one of these bankruptcies - that of The Voyager Digital - SBF made a fateful decision. A struggle had broken out over the corpse of The Voyager. Knowing that the small kingdom of FTX stood no chance against the much larger empire of Binance SBF turned in desperation to a forbidden text called Malleus Mensariorum. The tome, whose title roughly translates as “The Hammer of the Money Handlers”, was thought to be the creation of a long lost guild of wizards called “The SEC”. Legend had it that the wizards of The SEC, would, in times of trouble and/or excessive capital accumulation by the hated 1%, use the incantations contained in its pages to banish nightmarish creatures like The Madoff, The Enron, and The Ponzi to the depths of hell.
No one had seen hide nor hair of The SEC in centuries. Many citizens assumed that both The SEC and The Madoff were nothing more than fairy tales created to scare children away from thinking humanity could ever achieve anything by collective action ever again. But SBF had unearthed the book years ago in a place called An Introductory Class on Economics.
Reading from Malleus’s forbidden verbiage, SBF attempted to summon demonic forces known as “government regulators” to prevent Lord CZ, Emperor of Binance and Ruler of the Known Cryptoverse (peace be upon him), from making a bid on the wreckage of The Voyager. SBF was hoping to keep the price down so he could purchase the wreckage of The Voyager for himself on the cheap.
As SBF chanted Malleus Mensariorum's magic words apparitions emerged from the trees and the rocks. What first sounded like just the rustling of spirits slowly turned into whispers - whispers containing inconvenient truths such as the fact that the empire of Binance appears to have engaged in activities like:
Lying to the government.
Getting caught sending internal emails among the executive team about how lying to the government was a winning strategy.
Writing lies down on a piece of paper, signing it, and giving it to not just one but many major governments.
Enabling a monstrosity called “The North Korea” to steal money from indentured Filipino children and funnel it into a nuclear weapons program.
Allowing fentanyl smugglers and methamphetamine labs to move their money across the globe as freely as the wind.
Sending their Chief Compliance Officer to the guillotine roughly every three to six months.
SBF's efforts proved successful: Lord CZ was not allowed to make a bid for the wreckage of The Voyager Digital and GodEmperorSBF was able to lowball its desperate, bankrupt citizens with a deal that sort of has the shape of a 70% repayment when viewed from a sufficiently far away perspective but up close looks to be something closer to a 40-50% repaymentif they get lucky.
But while Lord CZ (peace be upon him) was prevented from bidding on the wreckage of The Voyager, everything did not go exactly as planned. SBF did not take the proper precautions as he chanted the magic words and the demonic regulators, after having deflected the bids of Lord CZ (peace be upon him) without actually destroying the empire of Binance, immediately set upon SBF himself, tearing his soul from his body and shredding his mind with a video involving Alan Greenspan, Ayn Rand, and an unnaturally large sex toy. As SBF’s physical form was twisted into the hideous shape we now know as GodEmperorSBF the government regulators disappeared into the depths and abandoned him to the predations of two far more powerful archfiends called Market Discipline and HΩraƬiΩ Ἃlger . These demons, whose faces are rumored to be in a continual state of melting between shapes resembling the death masks of Charles Koch, Peter Thiel, and Ronald Reagan in a process so abominable that merely gazing upon their visage immediately lobotomizes most mortals, were usually only loosed from hell to punish those ultimate traitors to capitalism: infants born to parents of small means.
What chance could a mere god emperor have?
Lord CZ, CEO of the Empire of Binance and Ruler of the Known Cryptoverse (peace be upon him), was now not only angry about being kept out of The Voyager auction but also jealous. Unlike GodEmperorSBF’s kingdom, his empire - the empire of Binance, the biggest, strongest, smartest
cryptocurrency exchange gambling parlor in the land - had neither the former head of the CFTC
NOVEMBER: A Game of Coins
A few weeks ago someoneleaked the balance sheet of the land of Alameda Research, GodEmperorSBF's other multi-billion dollar kingdom. The land of Alameda is a "crypto hedge fund" that does things like strip the assets of FTX's citizenry by actively trading against them using its insider knowledge of goings on in the kingdom of FTX. This balance sheet seemed to show that an enormous percentage of Alameda's assets were made out of a substance called “FTT” that GodEmperorSBF had quite literally shit out onto the floor as the demonic government regulators had torn his soul from the body of it’s original host (Sam Bankman-Fried) and twisted it into its current unspeakable form.
Despite having no actual utility the fecal matter of a god emperor was rumored by the citizens of FTX and Alameda to be incredibly valuable and soon FTT tokens were trading hands for prices in the $20-30 per turd range. GodEmperorSBF had made such voluminous bowel movements during the moulting process that this placed the notional value of the collective pile of GodEmperorSBF’s shit at around $7 billion. Alameda was able to use this fact to borrow actual real money (so called demonic "fiat") from various financial institutions - billions of dollars worth - putting up this incredibly valuable shit as collateral.
Now it so happened that at least a few people didn’t understand why a god emperor’s shit should trade hands at $22 per turd. “Surely it’s only worth $15” these people opined. A few of them were loud enough that the citizenry began to wonder aloud whether GodEmperorSBF and the land of Alameda would actually be able to turn their piles of shits back into enough actual money to repay those billions of dollars of loans. These people were of course quickly burned at the stake by the HODLers, whose willingness to deploy violence in the face of contradictory evidence is rivaled only by the most fanatical members of a fearsome death cult called The Antivaxxers. But the citizenry did not panic - obviously
THE DEATH BLOW
Right around the time rumors of this leaked financial statement were peaking and the citizens of Crypto were just about ready to start to moving on to thinking of other things like whether a house in a decent neighborhood was really worth an entire monkey JPG or if really an asset as valuable as a monkey JPG should only be traded for a house with a pool and a decent sized servant quarters given that WAGMI, it happened: Lord CZ went on Twitter and announced that he was going to sell a cool half a billion dollars ($550M) worth of god emperor turds on the open market:
This combination of rumors, high volume selling, and making sure everyone in the kingdom of FTX and the land of Alameda knew exactly what he was doing and why he was doing it was a strategy designed by Lord CZ (peace be upon him) to do one thing and one thing only: start a market panic that would drive the price of FTT turds right into the ground, which would in turn mean that the land of Alameda wouldn’t be able to sell enough of GodEmperorSBF’s shit to raise the money to pay back its loans, which would mean Alameda (and hopefully FTX, if he got lucky) would be bankrupt. Lord CZ (peace be upon him) would have vengeance for all the mean tweets GodEmperorSBF and the lords of FTX had made about his willingness to launder money for fentanyl manufactures and Iranian arms dealers.
His plan worked perfectly: the price of FTT dropped from $25 to $22within hours. Then it dropped to $15. Then $11. Last I checked it was trading somewhere around $2.25, placing Alameda and FTX in a multi-billion dollar hole. GodEmperorSBF capitulated and FTX succumbed to The Closening at around 9AM this morning (November 9th, 2022), repeating a now well known series of steps:
Tweet about how all the money is definitely there - we pinky swear! - so everyone should stop worrying about it.
Tweet some memes about how it's really just haters and competitors spreading FUD.
Refuse to send anyone any of the vast quantities of money you owe them at the same time as you refuse to answer any phone calls, emails, texts, DMs, or messages sent by carrier pigeon.
Observe panic in the mean streets of social media by your newly impecunious customer base. Hilarious! If you’re lucky maybe a few of your customers will even kill themselves when they find out you spent their retirement savings on a monkey JPG.
Delete your employees’ profiles off of LinkedIn. Sadly the whole joke gets a little less hilarious when some of your more, shall we say, motivated customers start to drive by your Director of Engineering’s place of residence conspicuously displaying their collection of automatic weapons after they scrape the LinkedIn site and public records for enough data to start figuring out where you might live.
Suddenly publicly acknowledge that everything you said before was a lie and actually there is no more money.
Protest that "it’s just a liquidity crunch" and the money will all be back “soon.”
(optional) Flee the country. This is a controversial step but if you’re really good you may be able to successfully make a power move like faking your own death or annoying the government for so long that you manage to negotiate a much lesser prison sentence (and one that lets you keep the money!) in exchange for your eventual surrender.
As he disappeared into the monster’s maw GodEmperorSBF was heard screaming something about how he definitely hadn’t been running a Ponzi scheme for years despite the fact that he had gleefully explained to Bloomberg’s Matt Levine just a few months prior that his business model was literally a Ponzi scheme.
THE BENDING OF KNEES
We’re not sure what happened to GodEmperorSBF inside TheClosening, but what we do know is that Lord CZ (peace be upon him) handled the final collapse of FTX basically exactly as any
Nasdaq trader gladiator at the colosseum would. First he dragged a shattered and disheveled GodEmperorSBF before the guillotine that had been prepared in the center of The Privatized Public Square. Then, in front of a laughing and jeering mob of hundreds of thousands of onlookers that had assembled for the spectacle, Lord CZ (peace be upon him) first publicly humiliated GodEmperorSBF:
Then he announced that if GodEmperorSBF could prove to the roaring crowds that he been on his knees for the last few hours furiously licking Lord CZ’s anus (peace be upon it) by explaining to everyone what Lord CZ (peace be upon him) had eaten for dinner last night he would think about maybe considering possibly saving GodEmperorSBF from the guillotine. A hopeful GodEmperorSBF did exactly that:
Then, having publicly humiliated his opponent, stripped him of his wealth, and made a public spectacle out of the whole thing, Lord CZ (peace be upon him) let out a laugh. He turned his back, clapped twice, and gave the signal to the executioners at the guillotine:
“Kill him. Throw his body on the garbage heap for the dogs.” A roar went up from the bloodthirsty mob.
“ALL HAIL THE ONE TRUE KING, CZ!”
There can be only one king.
UPDATE Nov. 10th, 9:30PM
Word has reached us that the heathen kingdom of BlockFi has become collateral damage of the fall of the kingdom of FTX. BlockFi’s ruler, King Bro, was not a true king at all, just a pretender to the throne who had legally changed his first name to “king”. But the rumors are that, upon hearing that The One True King of Crypto had finally been found and the prophesies fulfilled, the population of BlockFi started a revolution. King Bro himself was apparently thrown into an oven after being broken upon The Sacred Wheel of Polygons he had used to enslave his people for so long.
Further Reading for the Highly Motivated
A certain kind of person may be interested to look at a dashboard I put together over on Dune Analytics showing the on-chain wallets that sent and received the highest gross amounts of USD to and from wallets known or widely rumored to be controlled by FTX and Alameda.
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That’s it for this week folks. Stay tuned next week for more amazing tales from the crypto verse, like the one about the guy who got away with stealing $3 billion dollars for almost a decade and then called the cops on himself to help him recover the $3 billion he lost in his couch. Never a dull moment!
Those kind of bad days are so common that the citizenry has a nickname for them: “Tuesdays”.
FKA “SBF”, FKA “Sam Bankman-Fried”
FKA “Changpeng Zhao”
Something of a misnomer, given that a stablecoin is neither stable nor a coin.
Theoretically, at least, you could call it perpetual. That is if you had no idea how arithmetic, finance, or computers actually work.
Some people call the adherents of this philosophy “Republicans.”
At the time SBF had already undergone surgeries that enabled him to shed she skin of his initial humanoid host, a vegan altruist named Sam Bankman-Fried, but had not yet undergone the shredding of flesh and flaying of mind that would transform him into the hideous cyborg we now know as GodEmperorSBF.
The Wall St. Journal, The New York Times, The New Yorker, The Atlantic - their influence is easily gauged by their titular use of the definite article.
FKA “Elon Musk.”
Cryptocurrency has become a larger source of political donations than the defense, big tech, and big Pharma industries, almost bigger than those three put together. Mull that over for a minute.
At least to those who dare speak its name. Many who do not understand its true nature are superstitious about The Soros and will only speak of it indirect terms, fearful that if they speak its true name it will pervert their childrens’ minds with something called CRT¹.
¹ They don’t know what CRT is either but the fat and bloated town crier called Hannity has made them very afraid of it.
Not give. SBF does not giveth; SBF only taketh.
His ultimate goal was, of course, the same as Lord CZ’s (peace be upon him): enslave the population with addictive gambling software and extract its wealth into his own pockets
SBF also claimed publicly that the empire of Binance front runs its own citizens’ trades to strip them of their wealth, which many found mysterious given that SBF had come to power through the same means.
It was rumored that being the 2nd largest donor to the Biden campaign probably helped at least half as much as the glamour shots with the fair damsel Gisele Bundchen of TronDAO.
A splinter sect that claims to have inherited the spell books of the SEC but no one really believes them. After all the SEC was mythologized as having cut down legitimate financial master of the universe - the leaders of the hated 1% - on the regs. In comparison the CFTC’s ability to serve a death blow to some crazy Mormon dude in Kansas caught trying to shift the price of corn futures up or down by a fraction of a percent doesn’t seem so impressive.
Crypto for “Lamborghini”.
Lord CZ has assured the public that it definitely was not someone from The Empire of Binance who leaked the financial statement to Coindesk. Like he’s totally, absolutely sure. There is no doubt. Just keep looking the other way and move along. Seriously. He promised on the Bible, the Qur’an, and a pile of 6 copies of Atlas Shrugged. If you can’t trust the word of a man willing to swear on a copy of a book written by a true nutter of an old Russian lady who spent her entire life trying to explain to an unenthusiastic public that helping others in any way is not just time consuming but legitimately evil, what can you trust?
By bromance if not by blood.
Probably “was” by the time you read this.
If that sounds a lot like what GodEmperorSBF was accusing Lord CZ of doing, well, hey, that’s just crypto. Maybe try looking the other way or putting your head in the sand for a while. I’ve heard it works for most crypto investors.
The most fanatical members of the Antivaxx cult are widely rumored to worship a deity they call “Q” whom they apparently believe emerged from the internet to rid the world of pizza parlors, though it must be noted that no one is really sure because too much exposure to their speech patterns has been proven to lead directly to the halls of madness..
“We’re all gonna make it” is the crypto equivalent of the “fear is the mindkiller” chant in the legend of Paul Atreides, the guy who found a bunch of bitcoins in a giant worm on a desert planet and bought so many lambos that he was able to strap them together and make a rocket ship he rode right into the sun.
It may help at this point to understand that the sale of ~$20M of bitcoin, the world's largest and most stable cryptocurrency, will move the market by about ~4-5%, that shitcoin prices move a lot faster than bitcoin when people buy or sell, and that there's roughly 25 units of $20M in a half billion
Selling a security like a stock or bitcoin pushes the price down.
To be at least slightly fair to CZ it it also true that what SBF had been doing was obviously going to be cataclysmically bad for the industry in which CZ operates and thus bad for his business. With a hole $8 billion deep we were way past the point where anything could really be done other that ripping off the band-aid and diving into your bunker as crypto winter turns into crypto nuclear winter.
$22 was widely assumed to be the point at which Alameda, and maybe FTX, would be bankrupt.
One obvious question is, of course, “well why is it even worth $2.25?” to which all I can say is that the universe brings us many unanswerable mysteries.
Last I checked it was trading for something like $2.15, meaning the token of the world’s second largest crypto currency business lost over 90% of it’s value in a single day.
“FUD” refers to the four horsemen of the cryptocalypse: Fear, Uncertainty, and Doubt. ¹
¹ If you only can see three horsemen that’s probably because you succumbed to the FUD already. You’re going to have to work on that problem before you can get back into cryptocurrency investing.
The poetry of this last part was apparently initially invented by The Ponzi itself,
At some point he’ll probably make a claim on getting points for honesty.
A Chinese friend of mine commented on the very Red Guards/Cultural Revolution style in which this all went down.