Ripple CTO David Schwartz Reveals the Cause of FTX’s Crash
JAKARTA – Official of blockchain-based cross-border money payment company, Ripple, David Schwarts as Chief Technology Officer (CTO) explained a number of mistakes made by FTX that caused the crypto trading company to go bankrupt.
Schwartz details three key points regarding the error that crypto exchange company FTX made. Launching CryptoPotato, the three errors are:
- FTX customer fiat assets are left in Alameda accounts and used by Alameda.
- FTX customer deposits should only be held by FTX combined with assets used in riskier ways.
- Alameda should have followed a risk management strategy, almost delta-neutral. Somehow, positions are not tracked, risk is not managed at all, and strategy is anything but delta-neutral.
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On the other hand, Schwartz did not discuss the alleged corruption within FTX. He simply said the "deliberate blindness" in leadership at FTX was equally appalling.
Schwartz muses that "bad luck" during a prolonged bear market could cause many crypto companies to go out of business. But that is not the case for FTX and its partner trading firm, Alameda Research.
On the other hand, investor Kevin O'Leary strongly accused Bankman-Fried of having committed a financial crime. The investor claimed to have lost the US$15 million that had been paid to him to be the official FTX speaker.
Then, O'Leary also added that SBF should be treated innocent until he is proven guilty. In another interview, O'Leary made it clear that if the FTX founder opened a new company, he would invest in it.
Commenting on O'Leary's opinion, Ripple's CTO saw the irony. Schwartz judges: "Maybe the thought was "Hey, a lot of people lose a lot of money, but Sam made sure I was OK so I'll do business with him again". But if there's another possible explanation, I'd rather believe it. The thing is, I'm not sure there's another explanation."