Key Takeaways
- FTX allows its users to withdraw their funds, but only if they purchase selected tokens from the TRON network.
- These tokens – TRX, BTT, JST, SUN and HT – trade at a steep markup on FTX compared to other platforms.
- Some suspect that FTX is trying to close the $9.4 billion hole in its balance sheet through arbitrage.
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Some FTX users can now withdraw their money from the exchange, but only by transferring 80% of the value of their portfolio to arbitrageurs.
A deal with the devil
FTX has a questionable bailout plan for some of its users.
The collapsing crypto exchange announced Today, the company reached an agreement with the TRON blockchain to allow holders of TRX, BTT, JST, SUN, and HT – the main coins of the TRON ecosystem – to withdraw their tokens from FTX at 6:30 PM UTC.
Rumors of TRON’s involvement started circulating late yesterday, and the official announcement caused the tokens on the exchange to surge in price. At the time of writing, TRX is trading on FTX at $0.32, BTT at $0.00000382, JST at $0.17, SUN at $0.029 and HT at $29.8, although prices are moving quickly. These are significantly different prices than the prices found outside the exchange: on Binance, TRX trades for $0.05 and BTT for $0.00000073, and on Huobi Global JST exchanges for $0.023, SUN for $0.0057, and HT for $6.35.
This means that if FTX users want to withdraw their funds, they will have to accept to buy TRON coins from FTX at a significant markup compared to the price at which they can sell them on solvent exchanges. In other words, they will only be able to withdraw their money from FTX if they voluntarily incur a loss ranging from 78% to 86%.
Worse still, it appears that TRON will only put $13 million in funds on FTX’s books for now, meaning there are no guarantees that users will be able to withdraw their funds even if they buy the coins at exorbitant prices.
The plan obviously offers huge arbitrage opportunities for all market makers with access to FTX’s order books, as it allows them to buy “cheap” TRON tokens from solvent exchanges and sell them to FTX customers for much higher prices. Coincidentally, Alameda Research – the quantitative trading firm founded by FTX CEO Sam Bankman-Fried – is known for its specialization in arbitrage.
The bottom line is that FTX may be trying to partially close the $9.4 billion hole in its balance sheet by forcing its captive users to turn over about 80% of their portfolios to the arbitrageurs it has set up (with no guarantee that they will do that too). can withdraw their money). It is notable that even though FTX announced the TRON plan just an hour ago, the five selected coins have been trading at elevated prices since 05:00 or 06:00 UTC (depending on the token) or approximately 11 or 12 hours before the announcement. .
It would therefore be quite natural to suspect that FTX is purposefully inflating the price of its tokens, that it has given an edge to insiders, or both. The suspicion is reinforced by data about the chain indicates that selected FTX users were allowed to withdraw funds via the Ethereum network. It took over two hours to reach the official FTX account clarify that these withdrawals were possible for certain Bahamian customers in accordance with that country’s regulations. FTX is headquartered in the Bahamas.
Disclaimer: At the time of writing, the author of this piece owned BTC, ETH, and several other cryptocurrencies.
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