Morning Coffee: How a "gang of kids" at FTX in the Bahamas ran wild. Barclays' curious job cuts
Who will help Sam Bankman-Fried raise $8bn? Maybe not Richard Handler, the CEO of Jefferies, who says he reached out in the summer only to be rebuffed. A straight-up banker is probably no longer needed: a restructuring specialist would seem more appropriate now that the Bahamas regulator has frozen FTX's assets, but FTX seemingly has no one. The FT reported yesterday that SBF seems to be running the entire fundraising process by text message himself. "He doesn’t have a guy,” said one investor.
Given that SBF is an unconventional person who plays League of Legends during investor meetings and who's never had any trouble raising money in the past, this isn't surprising. If you've always been everyone's darling, you don't need a professional matchmaker. But sometimes it helps to evolve.
The more that emerges about FTX, the more it's becoming apparent that a lot of people there were big on aspirations but short on experience. As we reported yesterday, Constance Wang, the COO of FTX previously spent two years on the Credit Suisse analyst program; Caroline Ellison the CEO of Alameda Research (the FTX-owned market maker whose apparent $10bn loan from FTX set this whole thing running) previously spent around a year and a half at Jane Street. “The whole operation was run by a gang of kids in the Bahamas,” a person familiar with the matter told CoinDesk.
The key players at FTX appear to be nine people who live together in the luxury Bahamian penthouse owned by the firm. They include SBF, Ellison, chief technology officer Gary Wang, and FTX director of engineering Nishad Singh. Coindesk says that all are or used to be in relationships with each other. Ellison previously dated Bankman Fried.
As hatches are battened, few people outside the FTX dorm know what's going on. Reuters, however, has a good account of how it came to this. Between May and June, it says that Alameda Research suffered a series of losses, including $500m on a loan to Voyager Digital. FTX sought to prop-up Alameda and money was shifted across. A portion of that money that was moved seems to have been client funds.
It's not clear how much the dorm occupants knew. Reuters suggests that SBF may have told no one, although it might be presumed that Ellison knew at Alameda. Either way, when Bankman Fried told most FTX staff about the Binance takeover plan, it came as a terrible shock. Some employees kept their life savings on FTX and presumably can no longer access them. Most were paid in FTX's FTT token, which has fallen 80% in the past few days. It turns out that being managed by a group of fun people living together in a luxury penthouse isn't such a good idea after all.
Separately, news of who was let go at Barclays early this week is leaking out and they're not all investment bankers. The Trade reports that Barclays' layoffs include various equities trading staff, some of whom worked on the electronic product. They include: a director in e-trading; Robin Wiseman, head of quantamental data science (probably); Matthew Rogers, managing director and EMEA head of high-touch sales trading; Neil McKay, head of European event-driven trading; and William Fu, an equities trader.
Meanwhile...
1) I'm sorry. That's the biggest thing.
— SBF (@SBF_FTX) November 10, 2022
I fucked up, and should have done better.
Silicon Valley poured money into FTX. Within seven months of launching a fundraising program in summer 2021, it raised more than $1.9bn from more than 70 investors. (WSJ)
Hedge funds had preferred working with FTX over Binance. (Financial Times)
Job cuts are all the rage. Amazon stock is up 15% on the news that it's reviewing costs. (Bloomberg)
Of the 830 staff let go at Twitter, 360 have the word “engineer” in their job title. They include 26 machine learning engineers. (Gizmodo)
Coinbase is cutting another 60 jobs. (Bloomberg)
Coinbase shares are down 80%, but it's different to FTX: it doesn't lend out funds and clearly lists its client assets and liabilities and cash. (Financial Times)
Kene Ejikeme, one of Goldman Sachs' new partners, is a former professional rugby player. (Bloomberg)
It wasn't easy merging Morgan Stanley and Dean Witter, says John Mack. "The two cultures just smashed together." At Dean Witter, no one challenged the boss. “The Morgan Stanley culture was you speak up if you think it can be done in a more efficient way, a better way, more profitable way. You would speak up. That just didn't happen.” (Yahoo)
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