So …. Must Read WallStreetOnParade gets into the FTX short and curlies
Big Law Firm, Sullivan & Cromwell, Did Significant Legal Work for Bankrupt Crypto Exchange, FTX
Bankman-Fried was replaced as FTX CEO with John J. Ray III to replace him, a lawyer serving as the chief counsel at Greylock Partners LLC, who previously oversaw the liquidation of Enron.
Ryne Miller, Former Sullivan & Cromwell Partner; Now General Counsel of FTX.US
Sullivan & Cromwell has been named as one of the advising law firms to the disgraced crypto exchange, FTX, in its bankruptcy proceedings. Sam Bankman-Fried, the co-founder and CEO of FTX, vaporized the high-profile crypto firm from a $32 billion valuation to smoldering ashes last week.
Reuters reported that Bankman-Fried had moved as much as $10 billion of FTX customers’ money to his separate hedge fund, Alameda Research, through a “backdoor” in its software. Alameda had lost much of the money on wild bets while $1 billion to $2 billion had just “disappeared,” according to Reuters. The Financial Times reported that FTX held just $900 million “in easily sellable assets” against $9 billion “of liabilities the day before it collapsed into bankruptcy.”
The General Counsel of FTX.US, the FTX exchange serving customers in the U.S., is former Sullivan & Cromwell partner, Ryne Miller, who had co-chaired the law firm’s commodities, futures and derivatives group and worked at the law firm for eight years prior to joining this speculative, upstart crypto exchange. Miller had previously served as legal counsel for the current SEC Chair, Gary Gensler, when Gensler was Chair of the Commodity Futures Trading Commission. FTX.US is also included in the recent bankruptcy filing of FTX, despite Bankman-Fried Tweeting that the firm was fine just days before the bankruptcy filing.
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Visa ends global card partnership with FTX.
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Ryne Miller @_Ryne_Miller Nov 12
1/ Statement from John Ray, Chief Restructuring Officer and CEO of @FTX_Official
— Consistent with their obligations as Chapter 11 Debtors-in-Possession, FTX US and FTX [dot] com continue to make every effort to secure all assets, wherever located.
2/ Among other things, we are in the process of removing trading and withdrawal functionality and moving as many digital assets as can be identified to a new cold wallet custodian. As widely reported, unauthorized access to certain assets has occurred.
3/ An active fact review and mitigation exercise was initiated immediately in response. We have been in contact with, and are coordinating with law enforcement and relevant regulators. (Statement from John Ray, Chief Restructuring Officer and CEO of @FTX_Official)
Ryne also recommends everyone read:
@zachdex
Ready for a spooky story? 👻🧵
CEO of LedgerX LLC (d/b/a FTX US Derivatives), a subsidiary of FTX US offering derivatives. previously cto & co-founder @ledgerx; backend lead @getthemirror
Ghost leverage is a little-known practice where US futures brokers offer US retail investors substantial leverage levels (100x or more) during day and/or night sessions, and auto-liquidate everyone trading on that leverage before market close
1) Ghost leverage creates material volumes for the two futures exchanges that dominate US markets, allowing risk-seeking traders to get around traditional margin levels, often with limited customer protections.
4) FTX research into the practice found intraday margin levels up to 8x lower than the required clearinghouse margin levels (or roughly 110x leverage) – all the way back in 2004.
6) As shown above, equity index futures products regularly trade on 100-500x leverage.
What’s even lesser-known: Customers can obtain an account – in minutes, with no knowledge tests or real suitability questions – that immediately permits these leverage levels.
7) The suitability question is typically something like, “is the trading of futures suitable for you?”
Click yes, and you’re in, at a typical range of 100-500x leverage. For US-regulated futures. The highest level our research found was 766x, shown above.
all the way to
30) The combination of extreme leverage for US retail futures traders, and the lack of transparency in the traditional clearing model around segregation of customer funds, is a dangerous mix for retail investors.