FTX Chief Hunts for Crypto, Calls Controls ‘a Complete Failure’ (Cryptos Getting Creamed As Fed Tightens) Didn’t SBF See That Coming??

As I have said before, Sam Bankman-Fried and FTX exemplifies loose Fed monetary policy and its unintended consequences: shoddy investment practices by both sides and ridiculous claims that are unverified.

Like Sam Bankman-Fried tweeting that FTX and his team were held as paragons of running an effective company.


I am sure that SBF’s attorneys (like his parents) are telling Spam to stop tweeting ridiculous defenses. As in its all the fault of crypto volatility. We now know that at best SBF had a total lack of corporate controls and thought risk management was the Hasbro board game. And SBF while virtue signaling failed to mention his twisted relationship to Ukraine funding.

(Bloomberg) — Advisers now overseeing the carcass of Sam Bankman-Fried’s FTX Group are struggling to locate the company’s cash and crypto after finding poor internal controls and record keeping at the now-bankrupt company.

“Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information,” John J. Ray III, the group’s new chief executive officer who formerly oversaw the liquidation of Enron Corp., said in a sworn declaration submitted in bankruptcy court. 

“From compromised systems integrity and faulty regulatory oversight abroad, to the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals, this situation is unprecedented,” he added.

Advisers have located “only a fraction” of the digital assets of the FTX Group that they hope to recover during the Chapter 11 bankruptcy, Ray said. They’ve so far secured about $740 million of cryptocurrency in offline cold wallets, a storage method designed to prevent hacks. 

The company’s audited financial statements should not be trusted, Ray said. Advisers are working to rebuild balance sheets for FTX entities from the bottom up, he said.
 

FTX “did not maintain centralized control of its cash” and failed to keep an accurate list of bank accounts and account signatories, or pay sufficient attention to the creditworthiness of banking partners, according to Ray. Advisers don’t yet know how much cash FTX Group had when it filed for bankruptcy, but has found about $560 million attributable to various FTX entities so far. 

Although restructuring advisers have been in control of FTX for less than a week, they’ve seen enough to depict the crypto company as a deeply flawed enterprise. Lasting records of decision making are hard to come by: Bankman-Fried often communicated through applications that auto-deleted in short order and asked employees to do the same, according to Ray. 

Well, this story keeps getting worse and worse and makes Sam The Sham look like a common criminal rather than a Democrat Saint.

Didn’t SBF’s chief economist show this chart to him and his Alameda team? The one where crytpos soars at The Fed and Federal government go wild on stimulus, then back-off? As The Fed tightens, cryptos are getting crushed.

At least Bitcoin rallied a bit today to $16,564.21, but other cryptos are down … again. Litecoin is actually up 4.57% while Solana is down -4.35%.

SBF, like Janet Yellen, will claim he didn’t see it coming.

The Thrill Is Gone … From Cryptos? Bitcoin Resumes Downward Trend As Fed Tightens To Fight Inflation

The Thrill Is Gone … from cryptocurrencies.

The cryptocurrency market is getting hammered thanks mostly to two things: 1) Sam Bankman-Fried’s horrid failure with FTX (fraud, Enron, front-running, stupid investors, Democrat-Ukraine connection) and 2) Fed tightening to combat high inflation.

Bitcoin, the Mac Daddy of cryptos, is down another 2% today.

The rest of the story.

The NEW face of the US Federal government and why they will sweep the Bankman-Fried fiasco under the rug, just like Hunter Biden’s laptop fiasco.

Buying Typical US Home Now Requires Income of Over $100,000, Up 46% YoY (19 Straight Months Of Negative REAL Wage Growth Isn’t Helping)

Redfin had an interesting post where they showed that the “typical” US home now requires income of over $100,000.

Of course, it is easy to blame the figure on rapidly rising mortgage rates and Federal Reserve tightening.

But the rest of the story (as Paul Harvey used to say) is that US REAL wage growth has been NEGATIVE for 19 straight months. This alone makes housing unaffordable for the middle class and low wage workers.

Good day!

Again, why are Biden and Trudeau wearing Mao jackets in Bali? And why is Biden looking like a robot?? Biden does look like he is saying “Take me to my leader, Pei.”

US Mortgage Rates Drop Below 7% in Biggest Decline Since July (But MBA Purchase Applications Drop -9.52% WoW, Refi Apps Drop -11.44%)

US mortgage rates fell last week by the most since the end of July, slipping below 7% and helping generate a bounce in purchase applications that otherwise remain depressed, but only in the Seasonally Adjusted data. The NON-Seasonally Adjusted data show a hefty decline.

The contract rate on a 30-year fixed mortgage decreased 24 basis points to 6.9% in the week ended Nov. 11, according to Mortgage Bankers Association data released Wednesday. The group’s index of applications to buy a home rose 4.4% — the most since June — but is still near the weakest level since 2015. 

But the bounce was in Seasonally Adjusted data only. The NON-seasonally adjusted data remained depressed.

Mortgage applications decreased -10.0 percent SA from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending November 11, 2022. This week’s results include an adjustment for the observance of Veterans Day.

The Refinance Index decreased -11.44% percent from the previous week and was 88 percent lower than the same week one year ago. The unadjusted Purchase Index decreased -10 percent compared with the previous week and was 46 percent lower than the same week one year ago.

Mortgage purchase applications will continue to fall in NSA terms since it is the Winter and home buying season won’t really start until January. Refinancing applications actually dropped -11.44% even with the drop in mortgage rates.

The data. As my former students know, I like the “raw” data, better known as NON-seasonally adjusted (NSA) data and avoid seasonally-adjusted data (SA) since it hides what is going on.

And on The Fed Futures Front, The Federal Reserve is still looking a hiking their target rate from 4% to just under 5%.

Are Cryptos Like Bitcoin A By-Product Of Horribly Loose Monetary Policcie By The Fed? (Or Did Sam Blankmind-Fried Look At This Chart?)

We know that Federal Reserve monetary policy, with the exception of Paul Volcker, has been incredibly loose helping to produce asset bubbles. Particularly under Bernanke, Yellen and Powell.

But cryptos like Bitcoin saw an amazing run-up in price, once in 2017 which came to a halt as The Fed raised their target rate and started to let their balance sheet shrink. Then came Covid in early 2020 and The Fed’s massive overreaction by pushing their target rate to 0.25 basis points (again) and massively expanded their balance sheet. During the Covid “crisis” and the massive Fed response, we saw Bitcoin soar in price.

But starting in 2022, we saw The Fed counterattack inflation by raising their target rate and the expectation of future rate rose rapidly. With this tightening of rates, we saw Bitcoin come crashing back down. I can see Bitcoin crashing further to 7,000 as The Fed continues their counterattack.

My question is … did Sam Blankman-Fried and his team even notice that cryptos were plunging with Fed tightening? Or did he even care? And what were his models? Or Alameda Research’s models? I would love to look at them.

Inflation Nation! Producer Price Index (PPI) Final Demand At 8% YoY In October (Cryptos Rallying On Isolation Of FTX)

The US is an inflation nation.

Today, the PPI Final Demand YoY index printed for October was it was still agonizingly high at 8% YoY (The Fed likes to see 2% for inflation).

True, PPI Final Demand YoY is down from its recent peak of 11.7% YoY in March. But notice that M2 Money YoY (liquidity) has collapsed following the Covid surge (green line).

Then I have this update on Sam Bankman-Fried of FTX and Alameda Research notoriety.

As Sam Bankman-Fried’s crypto empire imploded last week, costing him effectively all of his $15.6 billion fortune, other digital-asset billionaires sought to make clear that their steep losses in 2022 wouldn’t be similarly fatal.

Cameron Winklevoss, 41, who along with his twin brother Tyler founded cryptocurrency exchange Gemini, posted an 11-part series of tweets emphasizing that Gemini “has no exposure to FTT tokens or Alameda and no material exposure to FTX,” referring to Bankman-Fried’s trading house and crypto exchange.

And despite Spam Bankman-Fried’s disaster for his investors like Tom Brady, Steph Curry and the Democrat party, the crytpo market has done some recovery with most cryptos this morning.

Here is an interesting interview with Jeffrey Tucker on SBF’s debacle.

And why is Joe Biden following Canada’s Justin Trudeau wearing a Chairman Mao jacket? And why did Biden select the same color Mao jacket as Dr. Evil?

Or like WEF’s Klaus Schwab (aka, Dr. Evil)?

Cryptos Rebound After Zhao Announces Plans An Industry Recovery Fund (Cronos UP 24% Overnight)

Major cryptocurrencies erased losses and turned higher after Binance Holdings Ltd.’s Chief Executive Officer Changpeng Zhao said the world’s largest digital-asset exchange plans to set up an industry recovery fund.

Zhao said Monday the goal was to “reduce further cascading negative effects” of the bankruptcy of rival exchange FTX, adding the fund will assist otherwise strong projects that are facing a liquidity squeeze. 

So, cryptos are up today with Cronos up 24% overnight. Of course, Cronos is trading near zero, so any upturns in price register as large turns.

But across the board, cryptos are up. Of course, if Zhao changes his mind, look out.

I am waiting for the list of pension funds that invested in Sam Bankman-Fried’s schemes.

Let’s see if Alameda Research’s CEO Caroline Ellison faces any wrath from the DOJ or SEC. I doubt it.

Is Sam Bankman-Fried Another Bernie Madoff? Buyer Beware Or Rely On Government For Protection? (FTX Held Less Than $1bn In Liquid Assets Against $9bn In Liabilities)

Like the disastrous Bernie Madoff debacle where investors lost millions of dollars, Sam Bankman-Fried has apparently cost investors like Steph Curry, Shaq and Tom Brady considerable sums as well.

What do Bernie Madoff and Sam Bankman-Fried have in common? Greedy investors who apparently didn’t bother to monitor what was going on.

Yes, had they monitored FTX, Bankman-Fried’s company, they would have noticed that FTX held less than $1bn in liquid assets against $9bn in liabilities.

Generally, with buyer beware, the onus falls on investors to monitor what is going on. But The Fed’s completely dropped the ball on Bernie Madoff where investors didn’t seem at all curious about earning supercharged returns. The same is the case for FTX.

FTX had partnered with Ukraine to process donations to their war efforts within days of Joe Biden pledging billions of American taxpayer dollars to the country. Ukraine invested into FTX as the Biden administration funneled funds to the invaded nation, and FTX then made massive donations to Democrats in the US.

The SEC’s Gary Gensler blew it again. After his agency failed to warn investors about Terra and Celsius—whose collapses this spring sparked a trillion-dollar investor wipeout—the Securities and Exchange Commission chair allowed an even bigger debacle to unfold right under his nose. I’m talking, of course, about the revelation this week that the $30 billion FTX empire was a house of cards and that its golden boy founder, Sam Bankman-Fried, is the crypto equivalent of Theranos’s Elizabeth Holmes (Stanford University is where Holmes was an MBA student and Stanford Law School is where both SBF’s parents are professor).

To be fair, Gensler was not the only one suckered by SBF. Nearly everyone else fell for the narrative that SBF, with his cute afro and aw-shucks demeanor, was exactly the savior crypto needed to shake off its dodgy reputation and emerge as part of the mainstream financial system. The problem is that cop-on-the-beat Gensler not only failed to spot the crime—he appeared set to go along with a legislative strategy that would have given SBF a regulatory moat and made him king of the U.S. crypto market.

While it is easy to blame Gensler, the onus still falls on investors (and their managers) to MONITOR. Buyer beware.

What will happen to Sam? Likely nothing. He is a golden child of Democrats and was the second biggest donor to Biden and the Democrats after America-hating George Soros. Just like Biden’s son Hunter will never pay for his many inappropriate antics, I doubt that Merrick “Double Standard” Garland will do much to Sam.

Steph Curry, Shaq and Tom Brady should fire their investment advisors and possibly sue then for failure to monitor. No one noticed $1bn in assets against $9bn in liabilities??

Gary Genslar is more like Inspector Clouseau than a serious regulator.

Here is the SEC’s Gary Genslar interviewing Sam Bankman-Fried about FTX.

Maybe Sam’s Stanford law school professor parents didn’t tell him that it is against the law.

Larry Summers Says FTX Meltdown Has ‘Whiffs’ of Enron-Like Scandal (Or Solyndra, A Democrat Boondoggle) Bitcoin Falls Another -6%

Former Obama economist and Harvard University President Lawrence Summers says that the FTX meltdown whiffs on an Enron-like scandal.

“A lot of people have compared this to Lehman. I would compare it to Enron,” Summers told Bloomberg Television’s “Wall Street Week” with David Westin. “The smartest guys in the room. Not just financial error but — certainly from the reports — whiffs of fraud. Stadium namings very early in a company’s history. Vast explosion of wealth that nobody quite understands where it comes from.”

Lehman, Enron? How about Solyndra, one of the biggest political boondoggles in US history.

About two years after the Obama administration co-signed $535 million loans to Solyndra, the company filed for bankruptcy on September 1, 2011. A 2015 report from the Department of Energy found major flaws in Solyndra’s business practices and claimed the company made “inaccurate and misleading” statements to obtain the loan guarantees, and also found fault with Department of Energy oversight.

Which brings us to FTX and Sam Bankman-Fried (the son of Stanford law professor Barbara Fried and co-founder of the political fundraising organization Mind the Gap, which advocates for progressive political candidates and funds get-out-the-vote groups). Sam Bankman-Fried was a big Biden donor. What are the odds that The Federal government will impartially investigate SBF and the FTX fiasco? ZERO!

Why did FTX run into trouble?

FTX has a native cryptocurrency token called FTT, which traders use for operations like paying transaction fees. Last year, Mr. Zhao sold his stake in FTX back to Mr. Bankman-Fried, who paid for it partially with FTT tokens.

On Nov. 2, the crypto publication CoinDesk reported on a leaked document that appeared to show that Alameda Research, a hedge fund run by Mr. Bankman-Fried, held an unusually large amount of FTT tokens. FTX and Alameda are meant to be separate businesses, but the report claimed that they had close financial ties.

Binance announced on Nov. 6 that it would sell its FTT tokens “due to recent revelations.” In response, FTT’s price plummeted and traders rushed to pull out of FTX, fearful that it would be yet another fallen crypto company.

FTX scrambled to process requests for withdrawals, which amounted to an estimated $6 billion over three days. It seemed to enter a liquidity crunch, meaning it lacked the money to fulfill requests.

How did Binance intervene?

On Tuesday, Binance said it had reached an agreement to bail out FTX by buying the company. But, Mr. Zhao added in the announcement, “Binance has the discretion to pull out from the deal at any time.”

In a concurrent announcement, Mr. Bankman-Fried said the deal would protect customers and allow FTX to finish processing their withdrawals. He attempted to dispel rumors of conflict between FTX and Binance, adding, “we are in the best of hands.”

His last quote made me laugh.

Bitcoin plunged another -6% today as gold (gold line) and the S&P 500 (yellow line) rose. Moral to the story? Nothing has been the same since The Fed started tightening.

All cryptos are down today (except Litecoin). The three biggest, Bitcoin, Ethereum and Binance Coin are all down over 5%.

Why does Sam Bankman-Fried remind me of the late John Belushi?

Here is Sam Bankman-Fried defending his actions to his law professor Mom.

The Fed’s BIG Green Bag (Of Money)! Goldman Sees Fed Rate Peaking In March At 5%, Core Inflation Rate UP > 400% Under Biden (US Yield Curve Inverted Prior To Nov 2nd FOMC Meeting)

The next Federal Reserve Open Market Committee (FOMC) meeting in on Wednesday, November 2nd. Let’s see what The Fed does with its BIG GREEN BAG … OF MONEY.

As I set here on Sunday morning waiting to see how the Cleveland Browns will lose to cross-state rival Cincinnati Bengals, I see that both the US Treasury 10yr-2yr and 10yr-3mo yield curves are inverted (below zero).

Core inflation (CPI less food and energy) YoY (blue line) was only 1.3% in February 2021 shortly after Biden was sworn-in as President and is now 6.6% in September 2022. That is over a 400% increase in core inflation!

We have this tantalizing headline on Bloomberg:

Goldman Sachs Now Sees Fed Rates Peaking at 5% in March By Simon Kennedy(Bloomberg) — 

Goldman Sachs Group Inc. economists said they now expect the US Federal Reserve to raise interest rates to 5%, higher than previously predicted.

The central bank will lift its benchmark rate to a range of 4.75% to 5% in March, 25 basis points more than earlier expected, economists led by Jan Hatzius wrote in an Oct. 29 research report.

The route to the new peak includes increases of 75 basis points this week, 50 basis points in December and 25 basis points in February and March, they said.

The economists cited three reasons for expecting the Fed to hike beyond February: “uncomfortably high” inflation, the need to cool the economy as fiscal tightening ends and price-adjusted incomes climb, and to avoid a premature easing of financial conditions.

Well, not exactly earth-shattering. Fed Funds Futures data point to a peak of near 5% (4.905%) for the May 2023 FOMC meeting, so Goldman Sachs is calling for an earliest peak at the March 2023 FOMC meeting,

Regardless of what Goldman Sachs thinks, Fed officials are expecting a peak in 2023 followed by a decline to 2.5%.

Brainard and Bostic are the only “doves.” Which is silly because Chicago’s Evans is a perma-dove. Let’s see how the Dots Plot changes at the November 2nd meeting.

America’s distressed debt pile is biggest since September 2020.