Jump Trading, a well-known trading firm, suffered an astounding $206 million loss in the wake of the FTX exchange collapse. According to “Going Infinite,” a book by Michael Lewis, these figures come from confidential documents disclosed by Constance Wang, FTX’s former COO. Notably, Jump Trading’s loss accounts for a significant portion of the overall financial damage that swept through the industry. Additionally, Wang herself lost a staggering $25 million, retaining only a meager $80,000 in a separate bank account.
The FTX meltdown didn’t just stop at Jump Trading and Wang. Moreover, Virtu Financial Singapore also reported a loss exceeding $10 million. Michael Lewis wrote in Going Infinite that the catastrophe primarily revolved around a concentrated risk, with nearly half of the $8.7 billion owed to FTX’s 10 million account holders sitting in just 50 major accounts. However, the real identities of these high-stake accounts remain shrouded in mystery, with some even tracing back to FTX employees.
Financial backdoors and questionable deals
While Wang had been overseeing the sales team at FTX, she became privy to the skeptical gaze of high-frequency traders. These traders had been questioning the undisclosed relationship between FTX and Alameda Research. Although no evidence confirmed Alameda’s suspected unfair trading advantage, the revelation came that FTX had been lending these traders’ deposits to Alameda at no cost, Lewis wrote.
Furthermore, Wang exposed an internal spreadsheet detailing FTX’s high-cost endorsement deals. Among the figures that raised eyebrows were a $162.5 million five-year deal with Major League Baseball and a seven-year, $105 million agreement with video game developer Riot Games. Deals with Coachella, Steph Curry, and Mercedes’s Formula 1 team also came into the spotlight, costing millions of dollars each. In a twist, another document that Wang discovered revealed a questionable balance sheet for Alameda Research, starkly differing from its previous versions.
Where did all the money go?
Sam Bankman-Fried, the face behind FTX, had private investments showcased in internal documents that totaled over $4.7 billion. On the liabilities side, however, there was an overhang of $10 billion in customer deposits. These deposits were supposed to be securely custodied by FTX but ended up in Sam’s private trading fund. In light of this, only $3 billion in liquid assets were left. Hence, the financial quagmire raised an unsettling question that remains unanswered: Where had all the money vanished?
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