Tokens are digital “coins” that anyone can create. They can be backed by anything. FTX’s tokens, called FTTs, were designed to give their holders a share of FTX’s future revenues, making them a little like shares in FTX, except with fewer rights and protections.
Tokens can be traded for other tokens or sold for “fiat currency” like dollars. FTX’s underlying business was to offer people to buy and sell these tokens as well as use other, more exotic financial instruments to bet on their future value.
In other words, FTX created a “currency,” FTT. Then FTX, which was based in the Bahamas, provided an “exchange” where FTT coins could be traded.
Not surprisingly, this setup gave FTX and Alameda, a hedge fund affiliated with FTX which Bankman-Fried also owned, powerful control over the price of the FTT tokens - at least in the short run.
Tokens for crypto – it’s a completely manipulated market… It’s a completely different world… He paid Tom Brady in these tokens, he gave out these tokens, but the tokens were a completely manipulated market.
FTX’s collapse highlighted the lack of protections for investors in cryptocurrencies, Cohodes says, a problem that runs deeper than a single bad company. American financial regulators are far from perfect, as the banking crisis of 2008 and the technology stock collapse of 2000 prove. But they offer some protection against outright fraud and theft.
You cannot trust any of the shit that’s offshore, I wouldn’t trust any offshore exchange.
But [FTX] was the biggest, the most unorganized, the most leverage… It wasn’t in my mind one thing, it was everything… Enron owned power plants, Sunbeam, which was a https://www.sec.gov/litigation/litreleases/lr17710.htm, the products worked… Normally the score is 8 to 3 or 8 to 5, it’s not 8 to 0. [With FTX], nothing worked.
[END OF PART 1] (6/6)
