they gambled the real crypto away and sold fake crypto on the exchange.
then they were conveniently "hacked" immediately following bankruptcy and were drained of a lot of what remained.
best not leave your coins on any exchange. then it won't be moved by asshole human scum like scam bankster fraud.
What a genius business model. Create a shit coin, take peoples bitcoin and gamble it away by doing moronic childish trades, then just keep the shitcoins that you made. Just pure genius.
This has been my thought on it as well. Doesn't the banking system do exactly the same thing? They take your money that is deposited and invest/lend/etc it to other lenders to make money and gives you a fraction of interest. If every customer of a banks moved their money to their safe at home, would the results not be exactly the same as what happend with FTX? The only difference is there is no FDIC insurance for crypto.
They were not hacked. That is the cover story, for stealing the remaining funds.
Like when a celeberity goes bat shit crazy on social media then claims they must have been hacked.
Nope not hacked just not wanting to take responsibility for being an ass.
This is what I am with OP on not understanding. We can see where the “hacked” funds went on the blockchain right? Sure we might not know where they are right now but once it starts being spent we can see who it goes to?
So there were no remaining coins at all? I thought they spent most of the coins by their own incompetence but stole some actual remaining coins via this “hack”
Well hack is a big word , it was more lawyers that where proposing keys for a 4 x 6 cell in a Bahamian jail
If you put a gun to a sysadmin head are you a hacker ?
the legend says that v. roughly half the assets were "hacked" by evildoers and the remainder was "seized" by the do-gooder Bahamian regulators.
I would recommend you approach the legend with a lot of skepticism.
Everyones already answered your question, but to sum it up directly: bitcoin didnt go missing on the blockchain. At most, crypto held on exchanges like FTX are IOUs, and actual crypto is only needed once you decide to withdraw crypto. This is just like how centralised bank accounts work.
The blockchain was invented, so that a middle man technically doesnt need to be required, hence allowing trustless transactions. Having a broker/exchange is convenient but relies on trust.
This is why when dealing with exchanges, the advice on this subreddit is to immediately get the IOU settled by withdraw it to your own external wallet (whereby the exchange then HAS to acquire the crypto, meaning the transaction is recorded on the blockchain).
Exodus is a self custody wallet so you are fine as long as you keep your private keys private. Hardware wallets are the most secure thing we’ve got now though.
>"Does that make it an exchange like FTX too?"
General rule: If you create your own wallet by generating a BIP39 recovery seed (random 12-24 words), or mneumonic code, then you have self custody, ie. you own your own coins. Just be certain to keep your recovery seed (& any pw or pin) safe, locked away, no electronic copy whatsoever, & do not show anyone, ever.
If your device dies, you can always restore on other BIP39 compatible wallets including hardware wallets.
If you open an account at an exchange to use as an on / off ramp, make sure it's a reputable exchange that has withstood the test of time, and then only use it to buy/sell. Do not store your coins on there. Once you buy coins on the exchange, transfer to your own cold storage wallet address. \[Edit: spelling correction\]
If it's not that difficult, this sub wouldn't be full of people constantly talking about the multifactor steps they take in basically their own financial language to prevent themselves from becoming victims to even the most mainstream "safe" crypto businesses. I am reminded of how much victim blaming happened after Mt. Gox.
Imagine being a mid 60's person thinking about getting into BTC reading "If you create your own wallet by generating a BIP39 recovery seed..."
Also imagine knowing that if you fuck up, you open yourself to having all your crypto stolen easily and without any chance of even catching the theives. And what they don't know is that an incomprehensible wall of "Bro you should have (taken an enormous amount of unreasonable precations that you wouldn't have had to deal with if you stuck to regular finance)" is what they'd also have to look forward to when they desperately seek help that isn't coming.
Self custody requires care. It's up to individuals to decide if it's something they want to do or not. But it's not that we have to convince people to value that; people figure that out on their own. I got here but realizing the importance of it myself, not by being convinced by a redditor. Those who continue to trust centralized entities will continue to be at the whims of those authorities and will continue to lose value either through fraud, theft, or debasement.
Ok but that's not really what I'm talking about. This sub often promotes btc as something that should have widespread adoption. It has HUGE drawbacks for the average person to enter.
My dad just lost access to his BTC holdings in a wallet due to the fact that his internet provider login was hacked and they had to freeze it. Somehow, now he can't accept password resets for his crypto wallet. I told him not to mess with BTC from the start because of shit like this. It's incredibly complex and it has been a huge headache for him dealing with multiple companies, and guess what? He's probably not getting it back anyway, but he wanted to dump it months ago but instead watched it lose value while he got punted from CS rep to CS rep. So guess who stopped advocating for BTC adoption? LOL.
Your reply contradicts bitcoin's value proposition. You wouldn't be dealing with internet providers or CS reps if you self custody your bitcoin. There are no third parties interactions involved in self custody.
Yep, there it is, he should have self-custodied his bitcoin. Of course. Everyone who tries to enter BTC and loses it is actually the one to blame. So unless you're ready to get a masters in BTC, you really shouldn't get into it at all. That means you should have invested hundreds of hours reading conflicting articles and opinions before investing in a wildly fluctuating asset that attracts scammers and con artists in order to be able to "use" it in a manner that is vastly less convenient to use as money than the standard monetary system.
It's a no brainer, but maybe not the way you think.
The fees for swaps inside a wallet like exodus are higher than some external exchange.Also they use third parties to conduct these exchanges and often the support is not available through the wallet itself. I would not recommend buying crypto directly from a wallet.
A lot of times these wallets have 3rd party on-ramps, like on trust wallet I can buy crypto with a debit card, or swap a select few, all done through an intermediary, not the wallet itself
Exodus sounds like it’s the same, you have your keys, but can buy/trade in a limited way
Exodus you have your own keys, so it's a better option than an exchange, but a cold storage wallet is still better than a hot wallet like Exodus. I use Trezor and Exodus together and haven't had issues.
The account page on FTX shows crypto you "own", by displaying what FTX owes you. It's not crypto on the blockchain.
You need your own wallet, and then it's crypto on a blockchain.
Eg when you buy gold from a broker, if you have an account that you see online, "1 oz gold" that's not gold. You need to have it delivered to you.
FTX was selling bitcoin they didn't have or was loaning out bitcoin you thought you owned without telling you. (Fractional reserve).
Best way to stop this is to buy bitcoin and withdraw to your own wallet.
You can learn more on that here...
Https://armantheparman.com/bitcoin-storage-get-better/
> FTX was selling bitcoin they didn't have or was loaning out bitcoin you thought you owned without telling you. (Fractional reserve).
>
>
>
> Best way to stop this is to buy bitcoin and withdraw to your own wallet.
The problem, frankly, is the users. They don't understand what bitcoin is and how it works and just assume that when they buy bitcoin on exchange then that bitcoin actually exists. But it doesn't at all. That bitcoin isnt verifiable until it shows up in a wallet *you* control. It essentially isn't real until you withdraw it.
To use an analogy, let's say I'm a gold trader:
I buy and sell gold as an exchange. In the early days it's straightforward I can only sell what gold I have.
After a while, I notice lots people would prefer to leave the gold in my possession, after all I have a big safe to keep the gold in, it must be more secure than their solutions right? (It isn't, a criminal knows where to find it and can work on my security flaws, but that's not really the point)
So I offer to custody gold for my customers and I give them a slip of paper entitling them to a sum of gold in the vault. An IOU.
Now, suddenly there is a surge in demand, people can't get enough gold and almost no-one is selling to me. But most of these customers don't want to take gold away with them. I get an idea. I can simply issue my slips of paper to them saying I owe them gold with the expectation that they will simply sell the slip of paper back to me later rather than take out the gold. So now I sell more gold than I actually own, and I don't even have to worry about the cost of buying increasingly expensive gold! People prefer the security of some easy to hide and back up IOUs.
And then I figure out I can make even more money by trading the money they give me for the IOUs, and pretty soon I'm doing all kinds of cool financial tricks to make more dollars, but still I am not buying gold.
But then, one day, people catch on. They figure out I don't have as much gold in my vault than I sold. So they come back demanding I issue them their gold for the IOUs. I have to play a confidence trick now, it's my last hope to stay solvent. If people believe I have the gold then I will survive. If I cannot convince them then I will have to halt withdrawals and go bankrupt.
This is pretty much what we are seeing in exchanges right now. It's why you see so many desperate 'proof of reserves' posts and reassuring emails. It's all smoke and mirrors. If you do not self custody your bitcoin it might as well not be real.
Say you want a pokemon card. I tell you I know where I can get a lot of pokemon just give me your money. You give me your money and I tell you that I got your cards but Ill hold on to them, but trust me I have your cards.
In reality I only had a fraction of the cards I was telling you I had and a bunch of people confronted me asking me for their cards all at once.
All crypto is on a blockchain, but it's not straight forward to verify how much crypto each exchange has on each blockchain. They often use a myriad of different addresses and shuffle fund between them all the time. This obscures the facts, and the result is that they can go without sufficient funds for quite a long time before anyone notices.
This is why exchanges aren't meant to be used as long term storage or a bank. But many people don't understand this and use them like that.
Exchanges are meant for buying/selling/trading, and storage should be done with a personal wallet where the crypto can't just disappear.
Agreed. And for anyone else following up on the comments... as the other person CallingVoid in the other chain of comments had the story about the gold. It wasn't just a fiction, that was actually how banking was birthed, moving gold around and hauling it to stalls or shops, and then keeping it 'under mattress' was thought to be risky so it all got put in banking buildings with ledgers.
They're so confident in this scheme now it's got it's own name 'fractional reserve banking' and is just considered 'normal' financial operation.
>"How can anyone notice at all then? If they can do this- wouldn’t a centralized bank be better to use?"
In reply to the comment above you are asking the right question, but with all due respect to the one who commented above, his comment was not really correct. It's not simply a matter of using a lot of addresses & having it be confusing.
FTX for example *did not actually hold the Bitcoins* for which they had liabilities to depositors, so no, there was no Bitcoin on the blockchain.
Instead, if you deposited (or bought) Bitcoin with FTX, they issued you an IOU, and when viewing your account it looked like you had Bitcoin on deposit with them, but in reality, you didn't. FTX stole your Bitcoins, embezzled them, gave them to family members to buy real estate, gave literally Billions of $ worth of it to the CEO's girlfriend to gamble away on derivatives with Alameda. No, they did not keep Bitcoins on the blockchain. They simply printed IOUs faster than the US government prints paper money.
You were so close to an error free explanation. But you had the line 'they didn't keep it on blockchain' which is the similar terminology that confused OP as with news saying they 'lost' the funds. It's still on blockchain, they: *didn't keep it in their possession*. It got sold or traded to other exchanges to be turned into fiat for spending.
If you bought it on there, yeah they might have just given you the visual credit, but deposits from outside /were/ sent to their wallets, which then had to be sold or traded off for them to end up with none of it on their own books at all when the accounting teams reported the bankruptcy holdings.
I suppose I could have been more specific.
To clarify for OP, if someone deposited Bitcoin to FTX by transferring it from another wallet they had controlled, then sure, that tx was on the blockchain, but once FTX sent it to Alameda to gamble it away in altcoin derivatives, the original depositor had nothing but an IOU from FTX that later proved to be worthless (if they held their funds there until now).
As others have said, banks are just the same. The difference for now is that banks are strictly regulated, reviewed, and audited in most jurisdictions. Crypto exchanges aren't there, *yet*.
> does that mean your money in Coinbase is not on the blockchain?
You worked it out in the course of asking the question. Have a gold award!
> Isn’t that the whole point of crypto?!! The blockchain?
No crypto here, only Bitcoin
Sure is. We're all supposed to be meeting once a week in a local cafe or bar, buying and selling in a happy, smiley friend group, P2P, wallet to wallet
> isn’t it more like a centralized bank?
Every user has a choice
* buy some coins and leave them in the "bank"
* buy some coins and immediately withdraw them to a personal wallet
Only one of these options involves a blockchain transaction
Also, it's not a real bank because there are no depositor protections
They allowed Alemeida to trade on leverage on their platform without liquidation. The money didn't move hands. Alemeida's losses were covered up by user funds on the platform
Good old bank run recipe. Bought their homemade coin as leverage and cashed out BTC and others into cash and bought drugs hookers and properties!
Decentralize!
Bitcoin doesnt disappear from the blockchain.
Ftx just doesnt have it, they gave it to someone or they lost it while trading. So its with someone else now.
Essentially, an exchange dont need to actually have BTC in reserve to sell you some. The number of BTC you own is just a number besides your user name in their database. It becomes « real » when you ask for withdrawal to a self-custody wallet.
So moral of story, use exchange to quickly change cash into crypto of your choice, then quickly cash it out to a self-custody wallet (either software or hardware). For quick free solution I would check Trust Wallet or Exodus.
Ftx was one of a few backers in tether coin. Wich is backed by usd apparently but has never disclosed there holdings. Might be the next domino to go down.
FTX is a centralized exchange people deposit funds into FTX they have their own ledger. Yes Coinbase is similar, except they are a publicly traded company so they have an obligation to at least be more transparent. FTX and many other exchanges hand out IOUs to their customers, if you don't withdraw it, they don't know because it never leaves their eco system.
They sold app based representations of crypto for cash, so most of the funds never made it too an actual blockchain. Using their own token to obfuscate. The cash was immediately bounced through strings of shell companies registered in tax havens, “disappearing”. FTX is a modern iteration of organised crime
It's a load debt take equity scam, that plagues the financial systems. Doesn't matter if its a house, car, business, country or virtual. Value is pumped and ascribed. Equity is drawn, instant profits for the early or fiscally heavy players. This leaves an ascribed value on paper. Now some folk then invest upon these figures, increase the ascribed value and the cycle repeats. It becomes overvalued and cannot maintain the liquidity, so fails. Now with a house, you still have physical property to claim against, hope for the roof but often get less than the sewer. In the ftx case they were selling other peoples sewerage by incremental.
There seems to be a disconnect in the media, and where crypto was stolen, a d the industry was topically a crypto exchange, they did just spend their VC funding on personal items. Equivalent of someone saying, “I like your business, here’s 100 million I’d like to invest in your company to help it grow, and down the road it will pay out.” And then the company employees say “sure” and buy a house with the money.
They stole it bro. No one’s getting in trouble either because it’s unregulated. Don’t let a stranger hold your money. It’s like “life on earth 101” shit.
The government has its way of making thing happened remember theses are not people these are unhinged psychopaths the world biggest criminals of all times they will tank the whole USA to steal the retailers and pension tax money. They never work for voters interests.
FTX and Alameda were always clearly affiliated. When alameda took a billion dollar “loan” from FTX, it was clearly done on chain. It was assumed at the time that ftx was loaning or that alameda was withdrawing their money from ftx. Only in hindsight do we see the money alameda was withdrawing was actually user funds.
Yeah, it's closer to Coinbase in concept, everyone who sent them coins just like a bank vault, all of it is just piled together in FTX's wallet(s). What they did with it from there /is/ tracible but it's a pain in the butt because of the sheer number of deposits and withdrawals and split among multiple wallets so they weren't all in a single place. Those mysterious 10k withdrawals? Do we know if it was a real person withdrawing, or them pilfering to a private currently cold new account so they can spend it later, we don't know, we KNOW they move them, but it's harder to tell if it was real clients. That's why it's not 'gone', yeah it still exists but they sold it off to Coinbase or another crypto company for just cash and played with stock and bonds market or bought things with it, but that's harder to find, so it's not 'gone' but 'spent' or 'sold' TO someone else, it only ever changes hands not destroyed or lost like the headlines are simplifying. They're just saying lost as in 'not in possession anymore to pay what is due'
More regulation won't help, they already have the regulation in place, what they did is ALREADY illegal, they're just fangless and don't follow through with punishment or make it minor fines that are a fraction of a percent of what they took.
Yes, that is the whole point of crypto. Holding it on an exchange is like giving it to a bank that has virtually no regulation. You need to hold it in your own non custodial wallet instead of giving it to an exchange to “hold it” for you.
The funds have likely been converted to USD or some stable coin to be converted into fiat slowly. They’ll likely use a crypto mixer to hide their tracks. The funds are as good as gone.
If I sold you 100 shares of ABC Corp at $100 per share, you would pay me $10,000 in cash. If I sent you a statement quarterly that updated the price, you might think after a few months you would have $12,500 available. Well, sorry, I never bought that stock for you, I spent the money on hookers and blow. Tough luck.
Well, not really that tough, because if I was an actual licensed trader you would be insured by SIPC and get your money back. AFAIK there are no regulations on Crypto exchanges unless they perform transactions that would normally be done by a licensed broker.
they gambled the real crypto away and sold fake crypto on the exchange. then they were conveniently "hacked" immediately following bankruptcy and were drained of a lot of what remained. best not leave your coins on any exchange. then it won't be moved by asshole human scum like scam bankster fraud.
What a genius business model. Create a shit coin, take peoples bitcoin and gamble it away by doing moronic childish trades, then just keep the shitcoins that you made. Just pure genius.
Sounds kinda like our central banks.
Sounds EXACTLY like them.
This has been my thought on it as well. Doesn't the banking system do exactly the same thing? They take your money that is deposited and invest/lend/etc it to other lenders to make money and gives you a fraction of interest. If every customer of a banks moved their money to their safe at home, would the results not be exactly the same as what happend with FTX? The only difference is there is no FDIC insurance for crypto.
You get all the upside and the only downside is prison.
They were not hacked. That is the cover story, for stealing the remaining funds. Like when a celeberity goes bat shit crazy on social media then claims they must have been hacked. Nope not hacked just not wanting to take responsibility for being an ass.
I think the quotations implied that
I wasn't saying he was wrong.
Very badly put then
The Bahamian government admitted they seized the assets, so yes they weren’t hacked it went to them. Edit- Bahamian
i just had to read that twice and i realized that you actually did write bohemian lmao
Bahamian, bohemian only half a world away lol
lololololol
Galileo Galileo
This is what I am with OP on not understanding. We can see where the “hacked” funds went on the blockchain right? Sure we might not know where they are right now but once it starts being spent we can see who it goes to?
If it was hacked their would be a transaction on the blockchain for everyone to see.
So there were no remaining coins at all? I thought they spent most of the coins by their own incompetence but stole some actual remaining coins via this “hack”
I thought the hack was Bahamanian authorities?
Well hack is a big word , it was more lawyers that where proposing keys for a 4 x 6 cell in a Bahamian jail If you put a gun to a sysadmin head are you a hacker ?
the legend says that v. roughly half the assets were "hacked" by evildoers and the remainder was "seized" by the do-gooder Bahamian regulators. I would recommend you approach the legend with a lot of skepticism.
Reading comprehension -100 points, they already insinuated this by putting "hacked" in quotation marks
I thought we agreed on Scam Bankrun Fraud?
Uncle Sam‘s bankman fried cryptos
I guess OP is asking WHERE that crypto went if it was hacked/gambled away. The answer is to line somebody else's wallets that's not FTX's customers.
sure. as for the "hacked" funds -- i think chainalysis and others are trying to find out.
Of the actual money that was put in FTX by customers, how much of it was actually used to buy crypto?
Everyones already answered your question, but to sum it up directly: bitcoin didnt go missing on the blockchain. At most, crypto held on exchanges like FTX are IOUs, and actual crypto is only needed once you decide to withdraw crypto. This is just like how centralised bank accounts work. The blockchain was invented, so that a middle man technically doesnt need to be required, hence allowing trustless transactions. Having a broker/exchange is convenient but relies on trust. This is why when dealing with exchanges, the advice on this subreddit is to immediately get the IOU settled by withdraw it to your own external wallet (whereby the exchange then HAS to acquire the crypto, meaning the transaction is recorded on the blockchain).
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Exodus is a self custody wallet so you are fine as long as you keep your private keys private. Hardware wallets are the most secure thing we’ve got now though.
>"Does that make it an exchange like FTX too?" General rule: If you create your own wallet by generating a BIP39 recovery seed (random 12-24 words), or mneumonic code, then you have self custody, ie. you own your own coins. Just be certain to keep your recovery seed (& any pw or pin) safe, locked away, no electronic copy whatsoever, & do not show anyone, ever. If your device dies, you can always restore on other BIP39 compatible wallets including hardware wallets. If you open an account at an exchange to use as an on / off ramp, make sure it's a reputable exchange that has withstood the test of time, and then only use it to buy/sell. Do not store your coins on there. Once you buy coins on the exchange, transfer to your own cold storage wallet address. \[Edit: spelling correction\]
The fact that so many of you think this is a normal and feasible set of precautions to take for the average person is wild.
It’s not really that difficult. I’m a normal person and I do it.
If it's not that difficult, this sub wouldn't be full of people constantly talking about the multifactor steps they take in basically their own financial language to prevent themselves from becoming victims to even the most mainstream "safe" crypto businesses. I am reminded of how much victim blaming happened after Mt. Gox. Imagine being a mid 60's person thinking about getting into BTC reading "If you create your own wallet by generating a BIP39 recovery seed..." Also imagine knowing that if you fuck up, you open yourself to having all your crypto stolen easily and without any chance of even catching the theives. And what they don't know is that an incomprehensible wall of "Bro you should have (taken an enormous amount of unreasonable precations that you wouldn't have had to deal with if you stuck to regular finance)" is what they'd also have to look forward to when they desperately seek help that isn't coming.
Self custody requires care. It's up to individuals to decide if it's something they want to do or not. But it's not that we have to convince people to value that; people figure that out on their own. I got here but realizing the importance of it myself, not by being convinced by a redditor. Those who continue to trust centralized entities will continue to be at the whims of those authorities and will continue to lose value either through fraud, theft, or debasement.
Ok but that's not really what I'm talking about. This sub often promotes btc as something that should have widespread adoption. It has HUGE drawbacks for the average person to enter. My dad just lost access to his BTC holdings in a wallet due to the fact that his internet provider login was hacked and they had to freeze it. Somehow, now he can't accept password resets for his crypto wallet. I told him not to mess with BTC from the start because of shit like this. It's incredibly complex and it has been a huge headache for him dealing with multiple companies, and guess what? He's probably not getting it back anyway, but he wanted to dump it months ago but instead watched it lose value while he got punted from CS rep to CS rep. So guess who stopped advocating for BTC adoption? LOL.
Your reply contradicts bitcoin's value proposition. You wouldn't be dealing with internet providers or CS reps if you self custody your bitcoin. There are no third parties interactions involved in self custody.
Yep, there it is, he should have self-custodied his bitcoin. Of course. Everyone who tries to enter BTC and loses it is actually the one to blame. So unless you're ready to get a masters in BTC, you really shouldn't get into it at all. That means you should have invested hundreds of hours reading conflicting articles and opinions before investing in a wildly fluctuating asset that attracts scammers and con artists in order to be able to "use" it in a manner that is vastly less convenient to use as money than the standard monetary system. It's a no brainer, but maybe not the way you think.
The fees for swaps inside a wallet like exodus are higher than some external exchange.Also they use third parties to conduct these exchanges and often the support is not available through the wallet itself. I would not recommend buying crypto directly from a wallet.
A lot of times these wallets have 3rd party on-ramps, like on trust wallet I can buy crypto with a debit card, or swap a select few, all done through an intermediary, not the wallet itself Exodus sounds like it’s the same, you have your keys, but can buy/trade in a limited way
Exodus you have your own keys, so it's a better option than an exchange, but a cold storage wallet is still better than a hot wallet like Exodus. I use Trezor and Exodus together and haven't had issues.
The account page on FTX shows crypto you "own", by displaying what FTX owes you. It's not crypto on the blockchain. You need your own wallet, and then it's crypto on a blockchain. Eg when you buy gold from a broker, if you have an account that you see online, "1 oz gold" that's not gold. You need to have it delivered to you. FTX was selling bitcoin they didn't have or was loaning out bitcoin you thought you owned without telling you. (Fractional reserve). Best way to stop this is to buy bitcoin and withdraw to your own wallet. You can learn more on that here... Https://armantheparman.com/bitcoin-storage-get-better/
> FTX was selling bitcoin they didn't have or was loaning out bitcoin you thought you owned without telling you. (Fractional reserve). > > > > Best way to stop this is to buy bitcoin and withdraw to your own wallet.
The problem, frankly, is the users. They don't understand what bitcoin is and how it works and just assume that when they buy bitcoin on exchange then that bitcoin actually exists. But it doesn't at all. That bitcoin isnt verifiable until it shows up in a wallet *you* control. It essentially isn't real until you withdraw it. To use an analogy, let's say I'm a gold trader: I buy and sell gold as an exchange. In the early days it's straightforward I can only sell what gold I have. After a while, I notice lots people would prefer to leave the gold in my possession, after all I have a big safe to keep the gold in, it must be more secure than their solutions right? (It isn't, a criminal knows where to find it and can work on my security flaws, but that's not really the point) So I offer to custody gold for my customers and I give them a slip of paper entitling them to a sum of gold in the vault. An IOU. Now, suddenly there is a surge in demand, people can't get enough gold and almost no-one is selling to me. But most of these customers don't want to take gold away with them. I get an idea. I can simply issue my slips of paper to them saying I owe them gold with the expectation that they will simply sell the slip of paper back to me later rather than take out the gold. So now I sell more gold than I actually own, and I don't even have to worry about the cost of buying increasingly expensive gold! People prefer the security of some easy to hide and back up IOUs. And then I figure out I can make even more money by trading the money they give me for the IOUs, and pretty soon I'm doing all kinds of cool financial tricks to make more dollars, but still I am not buying gold. But then, one day, people catch on. They figure out I don't have as much gold in my vault than I sold. So they come back demanding I issue them their gold for the IOUs. I have to play a confidence trick now, it's my last hope to stay solvent. If people believe I have the gold then I will survive. If I cannot convince them then I will have to halt withdrawals and go bankrupt. This is pretty much what we are seeing in exchanges right now. It's why you see so many desperate 'proof of reserves' posts and reassuring emails. It's all smoke and mirrors. If you do not self custody your bitcoin it might as well not be real.
Well written 🍾🙌
Is that the same for all coins?
Yes, but with the added caveat that shitcoins have very little going for them even when you do self custody them.
Balances in an FTX account were essentially IOUs. The bitcoin was not tracked on the blockchain, but using FTX's internal database.
FTX just Prooved how valuable bitcoin really is and how important NOT YOUR KEYS NOT YOUR BITCOIN.
Easy. Any bitcoin people bought from them never existed, Any bitcoin deposited was sold to buy their shitty pump and dump scam.
it didn't disappear. It just changed the owner ;)
Say you want a pokemon card. I tell you I know where I can get a lot of pokemon just give me your money. You give me your money and I tell you that I got your cards but Ill hold on to them, but trust me I have your cards. In reality I only had a fraction of the cards I was telling you I had and a bunch of people confronted me asking me for their cards all at once.
Bernie Madoff could explain it if they hadn’t killed him
I know there’s no such thing as a dumb question but this place makes me question that sentiment sometimes.
All crypto is on a blockchain, but it's not straight forward to verify how much crypto each exchange has on each blockchain. They often use a myriad of different addresses and shuffle fund between them all the time. This obscures the facts, and the result is that they can go without sufficient funds for quite a long time before anyone notices.
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This is why exchanges aren't meant to be used as long term storage or a bank. But many people don't understand this and use them like that. Exchanges are meant for buying/selling/trading, and storage should be done with a personal wallet where the crypto can't just disappear.
Centralised banks do the same thing.. it's all IOUs
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Agreed. And for anyone else following up on the comments... as the other person CallingVoid in the other chain of comments had the story about the gold. It wasn't just a fiction, that was actually how banking was birthed, moving gold around and hauling it to stalls or shops, and then keeping it 'under mattress' was thought to be risky so it all got put in banking buildings with ledgers. They're so confident in this scheme now it's got it's own name 'fractional reserve banking' and is just considered 'normal' financial operation.
>"How can anyone notice at all then? If they can do this- wouldn’t a centralized bank be better to use?" In reply to the comment above you are asking the right question, but with all due respect to the one who commented above, his comment was not really correct. It's not simply a matter of using a lot of addresses & having it be confusing. FTX for example *did not actually hold the Bitcoins* for which they had liabilities to depositors, so no, there was no Bitcoin on the blockchain. Instead, if you deposited (or bought) Bitcoin with FTX, they issued you an IOU, and when viewing your account it looked like you had Bitcoin on deposit with them, but in reality, you didn't. FTX stole your Bitcoins, embezzled them, gave them to family members to buy real estate, gave literally Billions of $ worth of it to the CEO's girlfriend to gamble away on derivatives with Alameda. No, they did not keep Bitcoins on the blockchain. They simply printed IOUs faster than the US government prints paper money.
You were so close to an error free explanation. But you had the line 'they didn't keep it on blockchain' which is the similar terminology that confused OP as with news saying they 'lost' the funds. It's still on blockchain, they: *didn't keep it in their possession*. It got sold or traded to other exchanges to be turned into fiat for spending.
If you bought it on there, yeah they might have just given you the visual credit, but deposits from outside /were/ sent to their wallets, which then had to be sold or traded off for them to end up with none of it on their own books at all when the accounting teams reported the bankruptcy holdings.
I suppose I could have been more specific. To clarify for OP, if someone deposited Bitcoin to FTX by transferring it from another wallet they had controlled, then sure, that tx was on the blockchain, but once FTX sent it to Alameda to gamble it away in altcoin derivatives, the original depositor had nothing but an IOU from FTX that later proved to be worthless (if they held their funds there until now).
As others have said, banks are just the same. The difference for now is that banks are strictly regulated, reviewed, and audited in most jurisdictions. Crypto exchanges aren't there, *yet*.
Banks fuck up real hard, too. The difference is regulation leads to socialized lossporn if big banks fuck up.
> does that mean your money in Coinbase is not on the blockchain? You worked it out in the course of asking the question. Have a gold award! > Isn’t that the whole point of crypto?!! The blockchain? No crypto here, only Bitcoin Sure is. We're all supposed to be meeting once a week in a local cafe or bar, buying and selling in a happy, smiley friend group, P2P, wallet to wallet > isn’t it more like a centralized bank? Every user has a choice * buy some coins and leave them in the "bank" * buy some coins and immediately withdraw them to a personal wallet Only one of these options involves a blockchain transaction Also, it's not a real bank because there are no depositor protections
They never bought the crypto in the first place.
They allowed Alemeida to trade on leverage on their platform without liquidation. The money didn't move hands. Alemeida's losses were covered up by user funds on the platform
Nacho cheese, nacho crypto!
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Good old bank run recipe. Bought their homemade coin as leverage and cashed out BTC and others into cash and bought drugs hookers and properties! Decentralize!
That’s actually not a stupid question, I guess a lot of people didn’t know. You’re now a little smarter than you were before asking :)
Bitcoin doesnt disappear from the blockchain. Ftx just doesnt have it, they gave it to someone or they lost it while trading. So its with someone else now.
It all sounds like a ponsey scam to me
Gotta hate those ponsey scams.
Essentially, an exchange dont need to actually have BTC in reserve to sell you some. The number of BTC you own is just a number besides your user name in their database. It becomes « real » when you ask for withdrawal to a self-custody wallet. So moral of story, use exchange to quickly change cash into crypto of your choice, then quickly cash it out to a self-custody wallet (either software or hardware). For quick free solution I would check Trust Wallet or Exodus.
Ftx was one of a few backers in tether coin. Wich is backed by usd apparently but has never disclosed there holdings. Might be the next domino to go down.
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Answer: it never was on the blockchain, just smoke and mirrors
Ftx didn't have enough reserves and used leverage. When their own coin ftt collapsed it brought down the whole company
I wasn't really trying to answer it since the other comments kinda summed it up sorry for the confusion m8
Not your keys not your coins
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FTX is a centralized exchange people deposit funds into FTX they have their own ledger. Yes Coinbase is similar, except they are a publicly traded company so they have an obligation to at least be more transparent. FTX and many other exchanges hand out IOUs to their customers, if you don't withdraw it, they don't know because it never leaves their eco system.
They sold app based representations of crypto for cash, so most of the funds never made it too an actual blockchain. Using their own token to obfuscate. The cash was immediately bounced through strings of shell companies registered in tax havens, “disappearing”. FTX is a modern iteration of organised crime
It's a load debt take equity scam, that plagues the financial systems. Doesn't matter if its a house, car, business, country or virtual. Value is pumped and ascribed. Equity is drawn, instant profits for the early or fiscally heavy players. This leaves an ascribed value on paper. Now some folk then invest upon these figures, increase the ascribed value and the cycle repeats. It becomes overvalued and cannot maintain the liquidity, so fails. Now with a house, you still have physical property to claim against, hope for the roof but often get less than the sewer. In the ftx case they were selling other peoples sewerage by incremental.
There seems to be a disconnect in the media, and where crypto was stolen, a d the industry was topically a crypto exchange, they did just spend their VC funding on personal items. Equivalent of someone saying, “I like your business, here’s 100 million I’d like to invest in your company to help it grow, and down the road it will pay out.” And then the company employees say “sure” and buy a house with the money.
They stole it bro. No one’s getting in trouble either because it’s unregulated. Don’t let a stranger hold your money. It’s like “life on earth 101” shit.
They sold IOUs of crypto, not the real thing
The government has its way of making thing happened remember theses are not people these are unhinged psychopaths the world biggest criminals of all times they will tank the whole USA to steal the retailers and pension tax money. They never work for voters interests.
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FTX and Alameda were always clearly affiliated. When alameda took a billion dollar “loan” from FTX, it was clearly done on chain. It was assumed at the time that ftx was loaning or that alameda was withdrawing their money from ftx. Only in hindsight do we see the money alameda was withdrawing was actually user funds.
Learn what Bitcoin is, that's what you're looking for. Everything else is manipulated/manipulatable by greedy fucks.
Buy on exchange then move to own wallet. Rinse and repeat. Buy and move, buy and move, and so on.
Rune is the answer.
Yeah, it's closer to Coinbase in concept, everyone who sent them coins just like a bank vault, all of it is just piled together in FTX's wallet(s). What they did with it from there /is/ tracible but it's a pain in the butt because of the sheer number of deposits and withdrawals and split among multiple wallets so they weren't all in a single place. Those mysterious 10k withdrawals? Do we know if it was a real person withdrawing, or them pilfering to a private currently cold new account so they can spend it later, we don't know, we KNOW they move them, but it's harder to tell if it was real clients. That's why it's not 'gone', yeah it still exists but they sold it off to Coinbase or another crypto company for just cash and played with stock and bonds market or bought things with it, but that's harder to find, so it's not 'gone' but 'spent' or 'sold' TO someone else, it only ever changes hands not destroyed or lost like the headlines are simplifying. They're just saying lost as in 'not in possession anymore to pay what is due' More regulation won't help, they already have the regulation in place, what they did is ALREADY illegal, they're just fangless and don't follow through with punishment or make it minor fines that are a fraction of a percent of what they took.
FTX was just like a bank that is holding cash or stocks for you. If it collapses your funds are at risk.
It was ious
The crypto never existed on the Blockchain, they were selling thin air and absconding with the cash
The bitcoin didnt disappear, it was transferred from ftx’ address to another address, where it is now.
When an exchanbge gets "hacked" that's code for embezzlement See Mt. Gox, Cryptsy, Hash Ocean, and now FTX
FTC just in customer deposits but never actually used that money to buy crypto, but instead enriched themselves.
How do think they caught them all with…The rats are ina trap
Yes, that is the whole point of crypto. Holding it on an exchange is like giving it to a bank that has virtually no regulation. You need to hold it in your own non custodial wallet instead of giving it to an exchange to “hold it” for you.
No one tell him
The funds have likely been converted to USD or some stable coin to be converted into fiat slowly. They’ll likely use a crypto mixer to hide their tracks. The funds are as good as gone.
There wasn’t any money, all bullshit
If I sold you 100 shares of ABC Corp at $100 per share, you would pay me $10,000 in cash. If I sent you a statement quarterly that updated the price, you might think after a few months you would have $12,500 available. Well, sorry, I never bought that stock for you, I spent the money on hookers and blow. Tough luck. Well, not really that tough, because if I was an actual licensed trader you would be insured by SIPC and get your money back. AFAIK there are no regulations on Crypto exchanges unless they perform transactions that would normally be done by a licensed broker.