For those of us who ar enot tuned into financial word or Crypto the sudden ho-hum about FTX debacle would have definitely made you look into it. It is hard to find what exactly went wrong as there are just millions of avenues writing about this. With the help of a few friends I was aable to find a couple of good articles to really understand what went down at FTX.
Alex Tabarrok has written about a beautiful piece on The FTX debacle EL15 for Marginal Revolution.
Imagine that I own a house and I create a million coins representing the value of the house. I give half of the coins to my wife. I then sell one of my coins to my wife for $10. Now the house has a nominal value of $10 million dollars and my wife and I each have assets worth $5 million. Of course, no one is likely to buy my house for $10 million or lend me money based on my coin wealth but suppose I now get my friend Tyler to buy a coin for $15. Tyler says why would I want to buy your s!@# coin! To encourage Tyler to buy I give him a side-deal that is not very public. Say an extra 5% of our textbook royalties. Tyler buys the coin for $15. Now the coins have gone up in value by 50%. My wife and I each have $7.5 million. Other people may want to get in while they can—Tyler bought in! Are you in? I’m in!
Another aritcle that really resonated with me is Francine McKenna's breakdown of the FTX shit show on CoinDesk. Keep in mind Francine McKenna is an accompished finance professor, and she digs into the small little nitty gritties of this massive con.
I can just quote the entire article; its just an amazing read.