I'm Phil Rosen, a senior reporter at Insider. I've been covering the FTX collapse and its impact on the broader market - AMA!

Submitted by BusinessInsider t3_10ay0by in IAmA

I'm the author of Insider's daily newsletter, 10 Things Before the Opening Bell, and I cover a broad range of assets, commodities, and investment strategies. You can see my work here, and my Twitter here.

I wrote a story comparing FTX to Lehman Brothers, interviewed Shark Tank star and FTX spokesperson Kevin O'Leary, and broke down an easy-to-read timeline of the crypto saga. When I'm not writing, I'm on the phone with Wall Street experts, executives, and crypto founders. AMA!

PROOF: https://i.redd.it/bqeg4fw2igba1.jpg

EDIT: That's my time. Thanks so much for all the questions!

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enigmahack t1_j46ytmo wrote

Do you think there's a realm of possibility that the FTX-wrapped stocks were used as 'reasonable locates' for the shares they wrapped? If so, what would the unwinding of that during bankruptcy look like?

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robot_tron t1_j47adgr wrote

Furthermore, were any tokens that were not actually backed by a real share used as reasonable locates?

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warlocktx t1_j46xzag wrote

This story broke in early November. 6 weeks later Ellison and Wang plead guilty. How/why did this happen so quickly? Complex financial cases never move this quickly.

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BusinessInsider OP t1_j475pam wrote

Great point. I was talking to a lawyer about this exact thing recently, and he said he's never seen a financial case move this fast, let alone one this massive and complicated.

I don't know why or how it happened so quickly, but it's unprecedented in many aspects. -PR

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jonnohb t1_j471iqi wrote

What is going on with the tokenized stocks? Do you think they actually backed these in any way shape or form with legitimate securities?

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BusinessInsider OP t1_j47952n wrote

I'm actually not too sure here. I'll have to do more digging before I can give a coherent response to this. - PR

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jonnohb t1_j47emhv wrote

Please do. I think it's certainly possible that they have used these tokenized shares as a way to hide idiosyncratic risk that arose from the events of Jan 21.

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FatPug655 t1_j49mmq6 wrote

I’m idiosyncratic too. It’s not that bad, there are support groups. One day at a time…

I would like to know the answer to this question also.

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ChefCheKwon t1_j4705u4 wrote

Have you researched the tokenized stocks ftx offered that we're supposedly backed one to one with actual stocks? Turns out it wasn't. Could those have been used as locates for short hedge funds? Thanks 🙏

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tallcan710 t1_j473ts9 wrote

Have you stumbled upon any of the connections between ftx and Ken griffin??

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ChefCheKwon t1_j4723kq wrote

Can you answer about the tokenized stocks please? It's been asked over and over in here. The silence is deafening.

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BusinessInsider OP t1_j476i38 wrote

I'm actually not too sure about tokenized stocks. There's not been that much reporting done on it, but it's possible more intel emerges over time. stay tuned. -PR

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ChefCheKwon t1_j4771l9 wrote

You could break a huge story if you just dig in a little. Hopefully you have the balls to do it.

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BusinessInsider OP t1_j46ybay wrote

Hello! Phil Rosen here - I'll be answering questions for the next ~1 hour about the FTX saga, crypto, and markets. I'll sign my initials, "PR," on all my responses -- AMA!

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Alterscapes t1_j472le1 wrote

Do you think FTX began with good intentions from inexperienced businesspeople, or was it a nefarious endeavour from the start?

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BusinessInsider OP t1_j474pe9 wrote

Regulators have accused SBF of orchestrating a years-long fraud, so the experts and legal teams seem to say there was bad intent there.

The new leadership at FTX, John Ray III in particular, has leveled claims at SBF and co. that they were wildly inexperienced in management and bookkeeping, which seems to make sense considering how young they were, relative to the ages of other financial firm's CEOs.

To me, it's hard to think that a math genius from MIT with Stanford professor-parents was unaware of so much that happened in his own company. No one has accused SBF of a lack of intellect. The guy is very smart. - PR

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TheDadThatGrills t1_j46wt2d wrote

What broader downstream effects do you predict within the next six months? It appears that most of these CEX's were in bed with one another, and I'm curious how many will shut down due to FTX related exposure.

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BusinessInsider OP t1_j472guz wrote

One downstream impact is likely to be fewer Wall Street firms/banks getting involved with crypto. Already, we have seen the repercussions of FTX's collapse hit other crypto exchanges, and that gives a cautionary tale for traditional finance. The Federal Reserve recently warned financial institutions about investing in crypto, and though they didn't mention FTX by name, they said "contagion risk" stemming from poor oversight among crypto companies pose a risk to banks.

Increasingly, investors and users are questioning the safety and trust of companies and tokens, even companies that have been around for a relatively long time. FTX was so embedded with so many different crypto companies, it's hard to know where its financial influence stopped.-PR

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typing t1_j46vbsm wrote

Hi Phil,

What's your take on why Sam was so easily trusted? Did his parents really play such a huge role in people's perspective of Sam?

Additionally, appearing on many youtube videos, giving interviews - he had been called out that his methodology was obtuse and quite obviously a ponzi how even sam described it, without naming it. Quite frankly it appeared incredibly obvious that this kid had no actual concept of how these financial companies should function let alone be managed. Is hindsight that obvious, or did he truly trick so many people?

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BusinessInsider OP t1_j46zw41 wrote

Think about this: Sam was this wunderkind MIT math wiz, who got a job at the highly competitive trading firm Jane Street after college, and his parents were high profile professors at Stanford. So the intellectual belief was there, no one doubted his capacity to think and solve problems.

Add in that he was a vocal proponent of the Effective Altrusim philosophy, more regulation for the crypto industry, and that he simply came off as a friendly, young guy who liked video games, there wasn't much in his public image that hinted he wasnt someone to be trusted.

So that whole persona he built, it seems, made people overlook red flags, and they didn't do as much homework on FTX/SBF as they should have. Big institutions bought into it, media outlets wrote glowing profiles of him -- so everyday retail traders especially really had no reason to not believe Sam. They likely assumed that if the major corporations believed in him, they surely did their due diligence.

-PR

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JPWRana t1_j470645 wrote

What red flags were there in the beginning? Wasn't EVERYONE getting into the crypto frenzy? I stayed out of it myself.

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PeanutSalsa t1_j46wfp5 wrote

Do you think cryptocurrency is here to stay? What challenges do you see it facing as time progresses, and do you see it having to go through any changes?

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BusinessInsider OP t1_j470iy8 wrote

Cryptocurrency just had a brutal year. And this FTX debacle has only harmed the public perception of it. Proponents of crypto seem to focus on the merits of blockchain technology - transparency, decentralized, safety features etc - but then you have critics who say the whole concept of the actual tokens is built upon the so-called Greater Fool theory (there's always someone else who will be willing to spend more money on a token that you just bought).

It seems like crypto isn't going anywhere in terms of the technology, but i think its ceiling as an asset class has been lowered dramatically over recent months. Many people have lost trust (and money) by believing in it. Rebuilding that public trust I think poses the biggest challenge, more than any technological obstacle. - PR

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fasttrackxf t1_j473cjg wrote

On a scale of 1-10, with 10 being Madoff, how does FTX compare to that?

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BusinessInsider OP t1_j476wol wrote

Hard to pin a number on it. But Bankman-fried faces a potential 115 years in prison if he's convicted on all charges. Compare that to Madoff, who faced 150-year sentence.-PR

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africanasshat t1_j476ilv wrote

Do the people that investigate these matters have any block chain expertise? For example I haven’t seen a single person accurately describe how people like Safemoon had so much access to liquidity that was locked. Everyone seems to think they took from locked liquidity while there’s something completely else going on.

Best kept secret I’ve ever seen myself. This type of thing has being going on since 2017 since that’s where those types of contracts came from.

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PopularArgument t1_j46ws7y wrote

What can be done differently to ensure that something like this never happens again?

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BusinessInsider OP t1_j471ftm wrote

There's been a recent push for "proof of reserves" audits among crypto companies, but that's been criticized quite a bit because it mainly provides a snapshot of a firm's finances at 1 specific point in time, and it also doesn't include intel on liabilities, which can make it look misleading.

And, it doesn't show anything about whether customer funds have been commingled with company funds, which I think is a key part of your phrasing, "something like this," with FTX.

Industry experts are still trying to figure out what can be done differently. The ones I've spoke to recently tell me they are doubling down on transparency (i.e. proof of reserves) but I don't really think that's reassuring in terms of public trust.

As far as institutions go, like Wall Street firms, one hopes that they will certainly be doing greater due diligence before getting involved with a crypto exchange. And that goes for media outlets too -- hopefully more homework happens before we see any more glowing profiles of young founders who take high profile meetings while wearing shorts and playing video games.-PR

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mattyblaze420 t1_j474w1k wrote

Hi Phil. I have been wondering about this and would love to hear your thoughts. FTX got so involved in the public realm (arenas, World Series, world famous spokespeople, etc.). What could their involvement be in the dark alleys of Wall Street? Who could they have partnered with behind the scenes? With their infinite liquidity it stands to reason that they could have leveraged this fact to conduct financial crimes in the US markets at a unbelievably large scale. Is anyone ever going to investigate this? Thanks

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BusinessInsider OP t1_j476an0 wrote

Good question. FTX had their investments in an extremely broad and diverse range of companies, and they (meaning SBF) also had deep ties across Washington DC's political landscape, on both sides of the aisle.

SBF has said that he made millions of dollars in donations to the Republican party using "dark money" pathways, and it's possible those funds won't be something that can be tracked down.

As far as FTX influencing US markets via financial crimes, I haven't seen much about that, but at this point nothing would surprise me. There's been new reporting coming out on almost a daily basis for months now. -PR

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mattyblaze420 t1_j478c8b wrote

Thanks for the reply. Seems everywhere we look something stinks. I’m hopeful some investigation can be done into these Tokenized stocks FTX created. Come to find out they are not backed 1:1 like FTX/SBF said (more lies; shocker I know). This claim may have left the door open for these tokenized stocks to be accessible for reasonable locates for hedge/money funds needing to meet lending obligations.

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smitty_1993 t1_j4787q5 wrote

From someone with very little in depth knowledge of how cryptocurrencies work - Is it easier or harder to uncover these kinds of issues in crypto exchanges vs FIAT exchanges? Isn't blockchain supposed to make these transactions transparent?

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ryanlak1234 t1_j47a35h wrote

Why do you believe CEXes became so popular in the crypto space? Don’t they defeat the whole purpose of a decentralized digital currency?

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Anal_carnavaI t1_j46wiav wrote

Where can i find a good timeline that explains exactly what happened?

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BusinessInsider OP t1_j46yz7c wrote

Good q! I actually wrote a timeline on just this! Here's everything that happened from November 2 (the first CoinDesk report on Alameda's balance sheet) until January 3, when SBF pled not guilty. He's set to stand trial in October.

Here's the timeline I wrote

https://markets.businessinsider.com/news/currencies/ftx-timeline-sam-bankman-fried-bankruptcy-trial-alameda-sec-doj-2023-1
- PR

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AlexanderTheGreat707 t1_j46xxhz wrote

In your opinion, who is at fault here? Is it only SBF or his team/investors also should receive some blame? Do you think there is a way to stop things like this from happening again?

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BusinessInsider OP t1_j473z3n wrote

There is certainly plenty of blame to go around -- we can look internally at FTX and Alameda first. Sam Bankman Fried's 2 top deputies have already admitted to wrongdoing, and I have yet to speak to anyone who believes Sam when he tries to deny the criminal allegations against him.

But then we can turn to of course the many, many high profile investors and companies that invested in FTX, and trusted them. Where was their due diligence? Why didn't they see or acknowledge red flags? (Unless FTX was that good at hiding them).

And we can turn to media too - major outlets touted FTX as a blue chip crypto company, a beacon of trust in the "wild west" of crypto, and then many outlets wrote about Sam Bankman-Fried as if he was some sort of precocious finance prophet.

The blame can be pinned wide and far, but I think the fact that SBF faces up to 115 years in prison if convicted of all charges says enough about where the lion's share of the blame may end up going. - PR

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Togapr33 t1_j46ym2k wrote

Between FTX and Celsius collapse, how much long term damage do you think was done to blockchain adoption/crypto?

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BusinessInsider OP t1_j475h6n wrote

Simply put - a lot. This goes back to trust. Trust had already been shaken in terms of crypto's value as an asset during 2022's deep bear market. But that trust was rattled further when Three Arrows collapsed, then other smaller firms, and then FTX.

It's one thing to see your portfolio crumble during a down year for assets. But it's an entirely different thing to feel like you've been cheated, or to learn your funds were being used for various things you didn't agree to, as in the case of FTX.

Trust is a critical component to markets, and when something like FTX's collapse happens, it can take time to rebuild. I don't have an exact forecast, but it won't happen overnight. Retail investors especially will need a reason to trust crypto companies again. And if those firms can't be trusted, that also sets back progress for the underlying blockchain technology.-PR

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IAmAModBot t1_j46zn5n wrote

For more AMAs on this topic, subscribe to r/IAmA_Journalist, and check out our other topic-specific AMA subreddits here.

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LincHamilton t1_j476ucd wrote

As a senior reporter, do you ever take a deep dive into crypto to look at projects and aspects that are not covered by everyone else?

To be fair, the entire SBF saga is covered by everyone by now, so why not do something more original?

Instead of contributing to already established headlines you could be the one making them.

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BusinessInsider OP t1_j477pay wrote

I do try to make my reporting as original as I can, and i do that by talking to experts, execs, and founders in crypto industry. The FTX saga is indeed widely covered now, but it's still important to cover, and worth reading and writing about.

That said, I'm still working constantly to dig into new projects, storylines, and people in and around markets and crypto. -PR

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LincHamilton t1_j478itq wrote

Thanks for your answer and thanks for doing this AMA. I’m glad you are as theres plenty of useful projects out there which gets 0 coverage cause they dont have insane sudden increases in mcap or scammy team members.

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LincHamilton t1_j477prj wrote

In other words, why not do a story about a project like Banano which has been around since 2018 and remains the top contributor to science out of all crypto projects through Folding at Home?

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ChefCheKwon t1_j47ap6k wrote

Does Brian Sozzi of yahoo finance belong in one of those progressive commercials about becoming your parents?

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Anal_carnavaI t1_j47ikfh wrote

If you can explain exactly what went wrong, I understand ftx lied about the amount of ftt token they held and they created it out of thin air. What does that mean in terms of real capital, liquidity and more?

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DWiB403 t1_j48p2s7 wrote

Do you think SBF gets let out and gets a slap on the wrist. Or, you you think he gets a slap on the wrist then let out?

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mpmckenna8 t1_j4b42p3 wrote

When you have the opportunity to interview someone like Mr Wonderful o'leary why don't you ask any questions about his background with FTX and crypto in general? He was paid more by FTX than he lost in FTX for his endorsements. As far as I can tell he lost nothing and helped promote and still thinks FTX is a viable company somehow. Do reporters just say what rich guys like that want b/c you're afraid to lose access to them?

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Timely_Map7511 t1_j5j6zw2 wrote

Is there some similar activity on other CEXs like we’ve seen on FTX/Alameda? I mean have You or Your colleges look into onchain activity of other CEXs. Maybe some of them has Alameda style market makers.

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iamlegend125 t1_j46xdx3 wrote

Hello Phil!
Big fan of yours! Just had an overall question for you which may have many layers, but, what are your thoughts on the present/future standing of Crypto now that all of this has happened?

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BusinessInsider OP t1_j47376e wrote

Thanks for your question here! This goes back to trust -- many everyday traders and institutional players lost faith in cryptocurrency. Perhaps not as an asset in a vaccuum, but as an industry due to the shaky series of events over recent months. But even before FTX imploded, there was a deep bear market over 2022 for digital assets that saw market caps for the most popular tokens all crash.

It looks to me like rebuilding trust will be key to the future of crypto. You will have plenty of very bullish and optimistic crypto investors still, but I think that group has shrunk since a year ago.

Interestingly though, if we look at the biggest cryptocurrency, bitcoin, while it's down 55% over the last 12 months, it has actually rallied about 12% in the last five days. Its possible that bitcoin and eth, the second largest crypto, could rally alongside traditional equities regardless of trust in the sector, so maybe if a bull market gets underway there could be some upside for certain larger tokens. - PR

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