FTX founder Sam Bankman-Fried tries to explain yield farming and it's just a ponzi

Sam Bankman-Fried pictured from the shoulders upSam Bankman-Fried (attribution)
Sam Bankman-Fried, one of the most well-known crypto execs and the founder of the popular FTX crypto exchange, appeared for an interview on Bloomberg's Odd Lots podcast alongside finance journalist Matt Levine. When asked by Levine to explain yield farming, Bankman-Fried launched into an explanation in which he compared it to a box that "they probably dress up to look like [it's] life-changing" but it "does literally nothing". He explained how people put money into the box "because of, you know, the bullishness of people's usage of the box". "So they go and pour another $300 million in the box and you get a psych and then it goes to infinity. And then everyone makes money."

Levine responded, "I think of myself as like a fairly cynical person. And that was so much more cynical than how I would've described farming. You're just like, well, I'm in the Ponzi business and it's pretty good."

Liquid Global cryptocurrency exchange hacked for $90 million

Japanese cryptocurrency exchange Liquid Global suffered a hack that saw $90 million in various assets stolen. The exchange stated that the attack had targeted the company's MPC wallet.

A week after the hack, FTX extended a $120 million loan to the platform. In April 2022, FTX formally acquired Liquid for an undisclosed amount.

FTX loses $800 million to MobileCoin market manipulation

At some point in April 2021, a trader on the FTX cryptocurrency exchange successfully exploited the firm for around $800 million. They were able to take positions in relatively illiquid crypto tokens, including MobileCoin and BTMX, then manipulate the token prices to appear much higher than their true market value (for example, MobileCoin spiked to $70 a token, rather than around $6). Using these falsely high-valued tokens as collateral, the trader was able to borrow around $800 million in more liquid tokens, abandoning the relatively valueless collateral on the exchange.

During the October 2023 criminal trial of FTX founder and CEO Sam Bankman-Fried, he gave more detail on how the exploit took place, and admitted that he personally had disabled FTX's automatic liquidation systems for this account. Though he intended to closely monitor the account to prevent any losses to FTX, he said that it was actually his actions that allowed the trader to drain such a massive quantity of assets from the exchange.

Prosecutors alleged that Bankman-Fried later had his cryptocurrency trading firm, Alameda Research, shoulder the loss, saying that he'd hoped it would be less visible on Alameda's balance sheets than on FTX's.

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