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From Crypto To Catch: Disgraced FTX Founder Turns To Trading Fish In Prison

According to a report by Business Insider, Sam Bankman-Fried (SBF), co-founder and former CEO of FTX, has adapted to the economic system of New York’s Metropolitan Detention Center (MDC), where he is currently awaiting sentencing on multiple felony counts. 

The disgraced crypto-billionaire has reportedly been bartering, using food as currency in exchange for various services within the prison.

Former FTX CEO SBF Trades Fish For Services

Per the report, mackerel, a fish commonly referred to as “macks” among inmates, emerged as the currency of choice in federal prisons after cigarettes were banned. The fish’s popularity stems from its stability and value within the prison economy. 

Formerly incarcerated individuals like attorney Larry Levin have accepted mackerel as payment from fellow prisoners, using it to acquire services such as beard trims and shoe shines. 

The demand for mackerel became so significant that suppliers, including Global Source Marketing, witnessed increased sales, according to Business Insider.

In a prison environment where inmates lack access to traditional or digital currency, products with steady value, such as certain food items and stamps, serve as substitutes for money. 

Mackerel and other stable commodities like tuna become a means of exchange, with their value pegged to the dollar. This economic logic allows inmates to engage in various transactions while maintaining a semblance of a barter system.

The use of fish as a medium of exchange in federal prisons has been widespread since 2004, following the cigarette ban. 

Sam Bankman-Fried faces sentencing on March 28, 2024, for charges that include wire fraud and conspiracy to commit money laundering, with a potential prison term of up to 110 years. Additionally, SBF is set to stand trial for separate counts related to political bribery.

 FTT Surges with Impressive Gains

FTT, the native token of the FTX cryptocurrency exchange, has seen a remarkable surge in value in recent weeks. With substantial gains across various timeframes and an impressive market capitalization of 1.5 billion, FTT has cemented its position among the top 50 tokens in the crypto market. 

Over the past 24 hours, FTT has experienced a significant increase of 21%, showcasing the token’s upward momentum. This short-term surge is complemented by a strong performance over the past week, with a notable rise of 26%. 

FTX

However, the real standout lies in FTT’s gains over the past 14 and 30 days. Within the last two weeks, FTT has skyrocketed by an impressive 100%, while the 30-day timeframe has seen an astounding surge of 315%. 

These gains highlight the growing demand and investor interest in FTT as rumors of a possible reboot of the exchange circulate within the crypto community.

Featured image from Bloomberg, chart from TradingView.com 

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Is Binance CEO Changpeng Zhao To Blame For FTX Collapse?

In the space of one week, FTX had gone from being the second-largest crypto exchange by trading volume to being bankrupt. This swift move from being ‘okay’ to being in ‘hot water’ has shown just how uncertain things can be in the crypto market. Since it happened, there has been some finger-pointing as participants in the space look for someone to blame, and some of those fingers have been pointed at Changpeng Zhao.

Is CZ The Cause?

The bank run on the FTX crypto exchange had actually started when Binance CEO Changpeng “CZ” Zhao made it public that the exchange was planning to sell its FTT holdings. What would follow was a rollercoaster couple of days that would end in a bankruptcy filing on the part of FTX. But the question remains, did CZ really cause this?

At first glance, it would look as if CZ had actually intended to trigger a bank run on FTX, especially given their public Twitter beef. However, with recent developments, the only thing that could be remotely true is that CZ had accelerated an inevitable collapse.

With an around $9 billion hole, there were bound to be issues with the company sooner or later. Add in the fact that there were already red flags such as Sam Bankman-Fried trying to raise more funds for the exchange and Alameda hemorrhaging money, the die was already cast.

As for CZ, the decision to sell FTT tokens was always a double-edged sword. Yes, the CEO could have quietly sold the tokens but it would have eventually been made public and Binance would be accused of dumping on retail secretly. The second option, which was to openly sell the tokens, was just the last nail in the coffin for an already dying FTX. It was a lose-lose situation.

FTX Token price chart from TradingView.com

FTX Not Doing Any Favors

The newly appointed CEO of FTX, John Ray III has already gone to work and the findings have been nothing short of catastrophic. Ray, who had helped energy trader Enron navigate bankruptcy in the early 2000s would go on to say that he had never seen anything like FTX in his career. The level of incompetency at the crypto exchange apparently shocked the Wall Street lawyer so much that he tagged it ‘unprecendented.’

As more information about FTX emerges, it is not hard to see why Ray would say that. From house-buying sprees for FTX employees to executives taking personal loans worth billions of dollars from Alameda Research, how FTX was run is nothing short of a fraudulent company.

Currently, there are reportedly more than 1 million creditors who have been unable to get their funds from FTX. The billions of dollars are nowhere to be found as the exchange enters into full bankruptcy mode. It has also drastically reduced trust in the crypto market. Self-custody is now more popular than ever as investors scramble to put their coins in cold storage.

Featured image from Bloomberg, chart from TradingView.com

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Coin Metrics Analyst: “FTX Might Have Provided Massive Bailout For Alameda In Q2”

Did this Coin Metrics analyst uncover the key to the whole Alameda/ FTX story? Because let’s face it, it doesn’t make sense. Both of Sam Bankman-Fried’s businesses were extremely profitable. FTX was the world’s third-biggest exchange and growing, why would anyone risk killing that golden goose? There must have been an underlying cause. Did this Coin Metrics analyst uncover it in the on-chain data? He might have.

The Head of R&D at Coin Metrics, Lucas Nuzzi, ends his thread with a warning: “Important to note that this is my own personal highly-speculative take on what happened based on these on-chain artifacts.” The case the Coin Metrics analyst is making rests on solid on-chain data, but the interpretation of what said data means is “highly-speculative.” So, take it with a grain of salt and don’t go around saying this is exactly what happened, because it might not be. 

That being said, yikes! 

The Coin Metrics Analyst Makes The Case

Lucas Nuzzi starts with a statement of fact, “I found evidence that FTX might have provided a massive bailout for Alameda in Q2 which now came back to haunt them.” And then, he poses a mystery. “40 days ago, 173 million FTT tokens worth over 4B USD became active on-chain.” Where did those tokens go? You guessed it, Alameda Research. The day was September 28th. A record-breaking $8.6B in FTT moved that day.

“That was by far the largest daily move of FTT in the token’s existence and one of the largest ERC20 daily moves we ever recorded at Coin Metrics,” Nuzzi tweeted. What was happening around Alameda and FTX near that time? Nothing special, really.

  • On August 24th, Sam Trabucco stepped down from the Co-CEO position at Alameda Research. “I will stay on as an advisor, but otherwise will not continue to have a strong day-to-day presence at the company,” Trabucco tweeted.
  • On September 27th, Brett Harrison stepped down from the CEO position at FTX. “Over the next few months I’ll be transferring my responsibilities and moving into an advisory role at the company,” Harrison tweeted.
  • This one is the kicker. On September 28th, Sam Bankman-Fried tweeted, “Heads up: rotating a few FTX wallets today (mostly non-circulating); we do this periodically.  Might be a few more coming, won’t have any effect.”

If all of this is true, that last SBF tweet will probably make an appearance in court.

FTTUSD price chart - TradingView

FTT price chart for 11/09/2022 on FTX | Source: FTT/USD on TradingView.com

So, What Did Alameda Do With The Money?

Believe it or not, the FTT tokens came directly from the original ICO smart contract. The Coin Metrics analyst “found a peculiar transaction that interacted with a contract from the FTT ICO. This 2019 contract *automatically* released 173 Million FTT from the token’s ICO.” Strange, but both organizations are joined at the hip. There might’ve been legitimate reasons.

Then, things took a bizarre turn. “Alameda then sent that *entire* balance to the address of the deployer (creator) of the FTT ERC20, which is controlled by someone at FTX.”

WHAT?

 

The Coin Metrics Analyst’s Theory

According to Lucas Nuzzi, Alameda Research wasn’t immune to the crypto contagion that plagued the space in Q2. In fact, the company might’ve blown up with 3AC, Voyager, and Celsius. “It ONLY survived because it was able to secure funding from FTX using as “collateral” the 172M FTT that was guaranteed to vest 4 months later.” That’s an extremely risky move. It almost seems like FTX didn’t have a choice.

They didn’t, because “the FTT ICO contract vests automatically. Had FTX let Alameda implode in May, their collapse would have ensured the subsequent liquidation of all FTT tokens vested in September.” If the scenario the Coin Metrics analyst poses is real, SBF and company had to do it. And they paid a heavy price for it. “The Alameda bailout likely put a dent on FTXs balance sheet to the point where it was no longer solvent. This would have been fine if the price of FTT didn’t collapse and a bank run ensued.”

This Is Where CZ And Binance Come In

In this scenario, CZ And Binance somehow found out about the deal. And the biggest cryptocurrency exchange by trading volume had a heavy FTT bag. “As part of Binance’s exit from FTX equity last year, Binance received roughly $2.1 billion USD equivalent in cash (BUSD and FTT),” CZ tweeted when he announced they were liquidating their position.

What did this heavy FTT bag mean? The Coin Metrics analyst explains, “As large holders of FTT, they could start deliberately tanking that market to force FTX to face a liquidity crunch.”

And they did.

And then, Binance offered to buy FTX and relieve them of their problems.

Presumably for pennies on the dollar.

A master stroke by CZ and team, if true.

But remember the Coin Metrics’ analyst warning, “Important to note that this is my own personal highly-speculative take on what happened based on these on-chain artifacts.” Don’t go around saying this is exactly what happened, because it might not be. 

Featured Image by Gerd Altmann from Pixabay | Charts by TradingView