1. It’s now been three weeks since the collapse of SBF’s empire, and we continue to see dominos falling all across the industry. FTX owes $3B to its 50 largest creditors (and 1 million customers overall), and we are still only beginning to see all the downstream implications. Blockfi remains paralyzed. Gemini’s Earn product is also in suspended animation, with customers unable to withdraw funds. (The customer profits from Earn is courtesy of Genesis Trading, one of the world’s oldest crypto lenders, who had over $170 million deposited with FTX.) As far as I can tell, none of the major licensed exchanges here in the Philippines had substantial exposure to FTX or Alameda, although I imagine all of them feverishly triple-checked their accounts over these past weeks just to make absolutely sure.

2. SBF stepped down as FTX CEO a few weeks ago to give way to the notable restructuring expert John Ray, who also oversaw Enron’s bankrupcy proceedings in 2007. On Nov 17th, Ray filed a jaw-dropping report after his first week at the helm of FTX, which opens thus: “I have over 40 years of legal and restructuring experience […] Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here.” Let’s not forget that he’s referring here to a company that was worth $32B just a few months before, making it more valuable than the combined marketcaps of SM Investments and Ayala Corp.

3. Amongst many other revelations, he noted that FTX could not provide him with a list of their company bank accounts or a list of all their employees and contractors. Their primary auditor was a firm that only had a virtual address in Decentraland. Possibly most damning for a crypto company, they would routinely share private keys/seed phrases through a group email account. The report is absolutely riveting, and is well worth a read for any crypto person who dreams of starting a business in this industry. (You can check it out in full here.)

4. The Russo Brothers, the directors behind the two most recent Avengers movies, will be producing an Amazon mini-series about the FTX collapse. It may not be obvious from their action movie filmography, but the Russos got their start directing episodes of Arrested Development and Community decades ago, so I’m expecting something that really captures the utter insanity of this whole debacle. (Also, Jonah Hill as SBF, c’mon guys make it happen.)

5. Perhaps the most disappointing thing about all this is how badly we collectively misread SBF. Most of us saw him as a cunning wunderkind, one of the most gifted traders of this generation. But with all the lights turned on, we can now see exactly how grimey the dance floor actually is. It turns out that he was no different from all the trading gurus that make a name for themselves during a bull market, only to be liquidated into oblivion when the bears come calling. When the markets are hot, practically any altcoin has the potential to make you wealthy, so it becomes really hard to discern whether someone actually knows what they’re talking about, or are just throwing darts at a board.

6. We’ve witnessed this phenomenon in every cycle, but we’d never seen one at quite the same scale. Milky Eggs describes all this in his comprehensive overview of the disaster: “Ultimately, though, one gets the sense that perhaps they overextrapolated from the ambient bull market and ended up overrating their own trading ability, with consequent losses later down the line.” Translation: the bull market made them believe they were hot shit, and they got massively rekt as a result. Unfortunately, they took a million customers down with them. SBF’s talent was really in constructing a public persona that seemed totally plausible because it was so darn specific: a League of Legends-playing vegetarian altruist financial genius who wanted to save the world. It worked … until it didn’t. (Side note: he wasn’t even very good at League of Legends, it turns out, and was often just stuffing about in silver league.)

7. 2022 has been a really rough year, both on an industry level and on a personal level, but I wanted to end this week’s newsletter on an optimistic note. It's Thanksgiving after all! With the Philippine Web3 Festival and Axie Open Manila all wrapped up, we know definitively that there’s still a community out there that is alive and kicking. The industry is so much bigger than just FTX and its partners, and although things are bad right now, the market bottom is finally in sight. We’re a bit over a month away from the end of the year, and I think after the usual January dip, we’ll basically be at the lowest point of this cycle. It’ll take a long time to warm things up again, probably more than a year, but at least we know what direction we’re heading. Most importantly, we’ll have better discernment around the people we trust or look up to. Why? Because the leaders that arise during the winter will have to actually prove their worth rather than just signal it.

See you all next week, cryptofam!