{"id":325417,"date":"2022-11-17T05:00:57","date_gmt":"2022-11-17T10:00:57","guid":{"rendered":"https:\/\/www.sgtreport.com\/?p=325417"},"modified":"2022-11-16T22:47:57","modified_gmt":"2022-11-17T03:47:57","slug":"ftx-was-creating-money-out-of-thin-air-like-the-fed-and-trading-its-own-stock-like-the-wall-street-mega-banks-in-their-dark-pools","status":"publish","type":"post","link":"https:\/\/www.sgtreport.com\/2022\/11\/ftx-was-creating-money-out-of-thin-air-like-the-fed-and-trading-its-own-stock-like-the-wall-street-mega-banks-in-their-dark-pools\/","title":{"rendered":"FTX Was Creating Money Out of Thin Air Like the Fed; and Trading Its Own \u201cStock\u201d Like the Wall Street Mega Banks in their Dark Pools"},"content":{"rendered":"

by Pam Martens and Russ Martens, Wall St On Parade<\/a>:<\/em><\/p>\n

\"\"<\/p>\n

On June 10 of last year,\u00a0Wall Street On Parade<\/em>\u00a0penned this headline:\u00a0Seven Years after Michael Lewis Described on National TV How the U.S. Stock Market Is Rigged, SEC Chair Gensler Says He\u2019s Going to Tackle Market Structure<\/a>. Unfortunately for confidence in U.S. markets, that\u2019s yet to happen. And it\u2019s not just the fault of Gensler. The Senate Banking Committee and House Financial Services Committee that should be holding in-depth hearings on the most corrupted market structure since 1929 have opted instead to hold superficial hearings each time something blows up as a result of that corrupted market structure, but never actually get around to tackling the corrupt market structure itself.<\/p>\n

TRUTH LIVES on at\u00a0https:\/\/sgtreport.tv\/<\/a><\/p>\n

So here we are today with another abject failure of market structure causing a week of sensational headlines around the globe that make U.S. markets look unhinged.<\/p>\n

If one looks very closely at the structure of FTX, the collapsed crypto exchange now in bankruptcy and causing everything it touched to teeter, it was actually using a technique of the U.S. central bank \u2013 the Fed \u2013 to create money out of thin air; and a technique we\u2019ve been writing about repeatedly since 2014, Wall Street mega banks trading their own stocks in their own Dark Pools, effectively making a market in\u00a0their own<\/em>\u00a0stock.<\/p>\n

Let\u2019s start with our comparison of what FTX was doing to\u00a0the Fed\u2019s creation of money out of thin air by pushing an electronic button<\/a>. You don\u2019t have to take our word for what the Fed is doing. The Fed actually\u00a0created an educational video<\/a>\u00a0to explain how it creates electronic money out of thin air. That video was released in 2011 and the spokesman for the Fed says this in the video: \u201cThe Fed will not keep buying large amounts of securities on an ongoing basis,\u201d noting that \u201cIts purchases are a temporary measure to help the economy recover.\u201d<\/p>\n

At the time of that video on January 14, 2011, the Fed had used its magic money button\u00a0to buy up $2.2 trillion of debt securities<\/a>\u00a0from Wall Street, thus pushing the interest rates on debt instruments artificially lower. And despite that promise that this would be a \u201ctemporary measure\u201d the Fed continued over the next decade to use its magic money spigot to the point that it\u00a0now holds $8.256 trillion<\/a>\u00a0of debt securities on its balance sheet and it can\u2019t figure out how to unwind that monster pile of debt securities without collapsing the U.S. economy.<\/p>\n

What Sam Bankman-Fried, co-founder and CEO of FTX, did with the help of his colleagues, was to create their own magic money creation tool. It was a crypto token called FTT and was backed by nothing more than the hyped reputation of FTX and Sam Bankman-Fried. In that sense, it traded much like the \u201cstock\u201d of FTX.<\/p>\n

And much like the price of debt on Wall Street was levitated by the Fed\u2019s $8 trillion buying binge over a decade, the price of FTT soared through a buying binge by FTX and Sam Bankman-Fried\u2019s own hedge fund, Alameda Research. FTT\u2019s price went from less than $4 in December 2020 to more than $84 in September 2021 \u2013 a 2,000 percent gain in less than a year. (And all those sophisticated institutional investors in FTX didn\u2019t find that suspicious?) This morning FTT is trading at $1.61 \u2013 despite the fact that some very sophisticated investors in FTX\u00a0have written down their investment to zero<\/a>.<\/p>\n

CNBC explains what was going on with the FTT token as follows:<\/p>\n

\u201cThe source explained that Alameda could post the FTT tokens it held as collateral and borrow customer funds. Even if FTX created more FTT tokens, it would not drive down the coin\u2019s value because these coins never made it onto the open market. As a result, these tokens held their market value, allowing Alameda to borrow against them \u2013 essentially receiving free money to trade with.<\/p>\n

\u201cFTX had been able to sustain this pattern as long as it maintained the price of FTT and there was not a flood of customer withdrawals on the exchange.\u00a0In the week leading up to the bankruptcy filing, FTX did not have enough assets to match customer withdrawals, the source said.\u201d<\/p>\n

Reuters reported<\/a>\u00a0that Bankman-Fried had moved as much as $10\u00a0billion\u00a0of FTX customers\u2019 money to his hedge fund, Alameda Research, through a \u201cbackdoor\u201d in its software. Alameda lost much of the money on wild bets while $1 billion to $2 billion had just \u201cdisappeared,\u201d according to Reuters. The Financial Times reported that FTX held just $900 million \u201cin easily sellable assets\u201d against $9 billion \u201cof liabilities the day before it collapsed into bankruptcy.\u201d<\/p>\n

CoinDesk\u00a0reported that a significant amount of the assets listed at Alameda<\/a>\u00a0were FTT tokens.<\/p>\n

In trading FTT, the equivalent of stock in FTX, Sam Bankman-Fried was using a technique deployed by Wall Street mega banks to trade their own bank stock \u2013 right under the nose of their comatose regulators \u2013 in what are called Dark Pools. These Dark Pools are effectively unregulated stock exchanges operated internally by the trading units of the mega banks.<\/p>\n

On August 26 of last year,\u00a0we reported<\/a>\u00a0the following:<\/p>\n

\u201cUntil August of 2017, JPMorgan Chase operated only one Dark Pool, known as JPM-X. But in August 2017, the bank added a second Dark Pool, which also began to trade in the shares of its own bank stock. That second Dark Pool is known as JPB-X\u2026<\/p>\n

\u201cFor the past seven years we have checked that FINRA data and witnessed JPMorgan Chase (as well as other banks) trading in the shares of their own bank stocks. We have repeatedly in the past asked the SEC to explain how this constitutes legal activity. We have yet to receive an answer.<\/p>\n

\u201cIn the most recent week reported by FINRA for Dark Pool trading, JPMorgan\u2019s two Dark Pools traded a total of 518,277 shares of JPMorgan Chase stock in a total of 3,308 separate trades. As the chart below from FINRA data indicates, JPMorgan Chase\u2019s own Dark Pool, JPM-X, was the third largest Dark Pool trader in the shares of its own stock for the week of August 2, 2021. In the four weeks from July 12 through the week of August 2, FINRA data shows that JPMorgan\u2019s two Dark Pools made a total of 22,070 trades in its own stock.\u201d<\/p>\n

For more on this Dark Pool insanity that has been allowed to continue in U.S. markets, see \u201cRelated Articles\u201d below.<\/p>\n

To make a long story short, those FTX wizards from MIT and Stanford seem to have adopted the corrupt market structure of Wall Street and simply tweaked it for crypto.<\/p>\n

Editor\u2019s Update:<\/strong><\/p>\n

Just moments after we posted this article, the House Financial Services Committee released the following statement:<\/p>\n

\u201cWASHINGTON, D.C. \u2013\u00a0<\/strong>Today, the Chairwoman of the House Financial Services Committee,\u00a0Congresswoman Maxine Waters (D-CA)<\/strong>, and the Ranking Member of the House Financial Services Committee,\u00a0Congressman Patrick McHenry (R-NC)<\/strong>, announced a bipartisan hearing into the collapse of FTX and the broader consequences for the digital asset ecosystem. In December, the Committee expects to hear from the companies and individuals involved, including Sam Bankman-Fried, Alameda Research, Binance, FTX, and related entities, among others.\u201d<\/p>\n

We would strongly suggest that the Big Law firm of Sullivan & Cromwell be ordered to send a law partner to testify at the House hearing on\u00a0how that law firm performed such extensive legal work for FTX and Alameda Research<\/a>\u00a0without spotting a house of cards.<\/p>\n

Read More @ WallStOnParade.com<\/strong><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

by Pam Martens and Russ Martens, Wall St On Parade: On June 10 of last year,\u00a0Wall Street On Parade\u00a0penned this headline:\u00a0Seven Years after Michael Lewis Described on National TV How the U.S. Stock Market Is Rigged, SEC Chair Gensler Says He\u2019s Going to Tackle Market Structure. Unfortunately for confidence in U.S. markets, that\u2019s yet to […]<\/p>\n","protected":false},"author":6,"featured_media":140141,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[142373],"_links":{"self":[{"href":"https:\/\/www.sgtreport.com\/wp-json\/wp\/v2\/posts\/325417"}],"collection":[{"href":"https:\/\/www.sgtreport.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.sgtreport.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.sgtreport.com\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/www.sgtreport.com\/wp-json\/wp\/v2\/comments?post=325417"}],"version-history":[{"count":0,"href":"https:\/\/www.sgtreport.com\/wp-json\/wp\/v2\/posts\/325417\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.sgtreport.com\/wp-json\/wp\/v2\/media\/140141"}],"wp:attachment":[{"href":"https:\/\/www.sgtreport.com\/wp-json\/wp\/v2\/media?parent=325417"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.sgtreport.com\/wp-json\/wp\/v2\/categories?post=325417"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.sgtreport.com\/wp-json\/wp\/v2\/tags?post=325417"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}