The funny thing is for six months I have been checking FTX for open developer positions. Thinking surely, the best place in crypto must be hiring good devs like me. And there have been no postings at all! And word on the street is their devs actually building the exchange made a middling salary with zero stock. I always found it odd, how could they not be hiring? even during the downturn? And now I know why, it was all a scam.
That's not what I have heard. Specifically know people who have gotten offers, mostly in the 150k range with zero stock. Alameda research is also just random devs that went to MIT with a few years experience. Impressive to go to that school, but clearly not experienced enough to run a real finance operation. Zero real finance people.
If they were serious they would have hired portfolio managers with decades of experience.
Its the same thing as three arrows capital, random people ending up with a bunch of capital, overestimating their intelligence due to a bull market run, and ending up with nothing
Debate old as time. I agree with you but this happens every cycle. RenTech doesn't have "real finance people" either. Maybe the problem was that they just had the wrong people, not their level of realness.
And Alameda seemed to be mainly people from Jane Street? There is a difference between trading firms with good tech (Jane Street) and firms taking prop risk (DE Shaw)...just based on what has been released, I agree that they didn't seem to know what they were doing. Unfortunately, the market doesn't know you went to MIT.
And they wouldn't have hired PMs with decades of experience, because no PM with decades of experience would have worked there.
DE Shaw takes directional risk. They have a lot of conventional strategies iirc (distressed debt, credit, etc.). Jane Street does a lot of ETF AP and other strategies that optimize for technology (afaik).
Alameda is/was strategies that optimize for technology, arbitrage etc. But with a massive one way directional long bet over the top.
Run by people with 1-2 years experience in shops that run a market neutral profile , in an environment where they believed the underlying asset goes up every single day.
I've worked with a crypto trading firm before, one of FTX's otc clients. In that industry we hire based on referrals and rarely on credentials. A trustworthy person who earns the company $0 is worth more than an unvetted one that could stab the company in the back anytime in the future.
Is NYSE a scam? Is Euronext a scam? The exchange was a legit business that was profitable...outside of fixed costs, it isn't possible to lose money with an exchange. But they were doing other stuff (broking) that did lose them money. These are two completely distinct operations though (in real finance, they are largely distinct).
As Matt Levine mentioned in his article today, no responsible bank would allow you to borrow money and give them shares of their own stock as collateral. In some cases it's illegal to do so, but even when it's legal, banks would not want the risk.
FTX, on the other hand, pretty much did just that.
Does that make FTX a scam? No. But when they told their customers they don't gamble with customer deposits, that was at least incomplete and misleading, and may have crossed the line into being intentionally deceptive.
Of course, even if people knew about this, they probably would have used FTX anyway because people do crazy things in a bubble market.
Right, but irresponsible banks have done that before and, at the very least, that is self-liquidating on the way down (the same with companies issuing stock to employees).
And whether they are gambling with your money or not, they were a mix of a bank and an exchange...so the comparison with a bank isn't complete. They were booking derivatives trades so your money is 100% at-risk, irregardless of what they do with customer deposits. This is what prime brokers do (as Levine says in that article).
The reason you don't lend against your own shares is because you won't be able to get financing and are exposed to runs. It is unrelated to the point about customers who were already at risk because they were trading derivatives issued by FTX.
FTX fucked up big time, but if they didn’t allow alemeda to siphon all the customer funds away they’d still be chugging along just fine. The issue is Sam used it as his hedge funds piggy bank.
> outside of fixed costs, it isn't possible to lose money with an exchange
It is, e.g., if the fees on the average transaction are lower than your variable costs. It is just extremely improbable for that to occur accidentally.
They just hire people from other places, cheaper labor, I know at least 4 southamericans who worked for them in the past, 100% remote, same talent as an US dev, and 1/4 of the cost
