Whale Hunt - SBF & Blue Kirby

Red candles burn the hottest. When the bulls stop running, fingers start pointing, and euphoria and greed turn to suspicion and accusation.

In the translucent waters of the crypto markets, hunters watch the whales with an eagle eye.

When the waters get choppy and profits are harder to come by, many smaller fish look to the whales for direction. Closer inspection combined with the slimmer pickings of a fickle market often reveals some questionable behaviour.

Even Blue Kirby looks different in red candlelight. The once universally loved hyperactive YFI fan boy has faced his first public critiques over the past few weeks, first when he naively promoted the unaudited code of EMN before the hack, then after he dumped his YFI when the markets turned red.

It’s always interesting to analyse a change in public opinion.

Blue Kirby’s enthusiasm to shill EMN cost him dearly, forcing him to step down from his official position as Yearn comms / shillmaster.

Where the community had previously been happy to pay Kirby $7000 a month, they were now protesting at his wallet with pitchforks, and when he sold the YFI on which he had built his brand, the replies to his tweets turned from disappointment to outrage.

Kirby claims his YFI sales were an attempt to gain some privacy, and that he planned to rebuy using a different address, but many were left wondering why he didn’t simply use a CEX to deposit his coins and withdraw elsewhere.

Selling personal assets which equal 0.08% of the total supply likely had 0 impact on the markets. What he did isn’t a criminal offence anywhere, but in the land of crypto Twitter, society’s laws seem to change with the markets, and Kirby was widely criticised for his actions.

In the typical Blue Kirby marketing approach, he turned the condemnation into promotion, and created the #blamekirby hashtag.

Blue Kirby has played crypto Twitter like a fiddle. He piggybacked on the success of YFI to quickly build his own brand, and despite his tarnished reputation and exit from the yearn team, he is now attempting to launch his own token.

Seemingly unphased by this blip in his relentless PR campaign, Kirby is conducting an ICO for his mysterious NFT sales platform Off Blue, which raised over $800k in a matter of minutes, despite giving no details on what users were buying, or providing any public roadmap for the project.

Let's take a quick look at what their manifesto offers.

No tokens for the team - how noble. However the NFTs that users must purchase from Off Blue to exchange for the “valueless” tokens cost 1 ETH each...
Who controls this?!
And who controls this?!

Here is the contract address, for those who are interested, we encourage you to do some research and let us know what you find!

Unless you are such a fan of Blue Kirby that you want to simply give him your money, perhaps you should stay away from this cheap ICO.

In what is playing out like a cartoon styled parody of a descent into fascism, Blue Kirby has started to ban replies to his tweets, muting any criticism of his actions while he transforms from irritating fanboy to desperate 2017 ICO scam artist.

Where there is no regulation, reputation is key. It is so often the case in crypto Twitter, that you either die a hero, or live long enough to become the villain.

In an unexpected move which has provided your author with the perfect segue; Blue Kirby’s ICO has just been retweeted by no other than...

Sam Bankman Fried; another well known character in the industry; one who seems to have avoided such a binary label. Commonly known by his initials; SBF is the CEO of the crypto derivatives exchange FTX and the trading desk / investment firm Alameda Research.

SBF’s actions have come under some scrutiny over recent weeks, starting with his unexpected takeover of the SushiSwap protocol in early September.

More recently, people have been voicing their concerns about the large amount of FTT - (FTX’s native token) that has been posted on C.R.E.A.M Finance for use as collateral.

There is currently $80M of FTT being used as collateral on C.R.E.A.M.

If we analyse the wallet 0x477573f212A7bdD5F7C12889bd1ad0aA44fb82aa we can see that $76M in FTT and $11.7M in Sushi were used as collateral to borrow $4.8M in UNI and $2.5M in YFI before sending them to Binance.

It appears there were too many eyes on that wallet so they repaid the YFI debt to cream, and borrowed 800 YFI from Aave using another address. They have since received 468 YFI to that address from Huobi and Binance, so it appears the short was successful.

There has been lots of public debate and questioning about the use of FTT as collateral for short selling other assets. Many users have taken to Twitter to express their concerns and on October 9th, a governance snapshot vote was called to decide if FTT should be delisted from C.R.E.A.M.

The following information is presented along with the snapshot vote.

1 - The FTT token was added to C.R.E.A.M. without it being a popular token

2 - Alameda is the only user of the FTT token with 96% crFTT. This is easily shown on Etherscan.

3 - If FTT were delisted, no other users would likely be impacted; there is very little supply volume, and very little borrowing demand for FTT.

4 - FTT is not a normal asset. Many assets can decline in price, but because FTT is a fully centralized token, if there is an issue, it can instantly go to $0, which is a safety risk for all C.R.E.A.M. users.

5 - SBF borrowed YFI which destroyed its price, he sold it on Binance and other exchanges - only once he was caught, did YFI go back up

The vote will be open until the 14th of October, so it’s too early to say how it will end, however, at the time of writing, the vote was 100% in favour of delisting FTT.

Although SBF clearly has the ability to purchase enough CREAM to swing the vote in his favour, forcing the vote in this way would not only have a negative impact on his reputation, it would reduce the credibility of the entire C.R.E.A.M protocol.

The founder of C.R.E.A.M, Jeffrey Huang, doesn’t seem to see anything wrong with how SBF is using his protocol, and has praised his actions; claiming they demonstrate a good product market fit.

It should be noted that the community is not just upset that SBF is shorting their assets, but that he is taking over a decentralised protocol by depositing his own centralised tokens, and using them as collateral to short other decentralised tokens.

SBF has spoken out on the matter to defend his actions. The fact that he had to do this is somewhat surprising, as one of the core values of decentralised finance is that the protocols are open to be used by anyone in any way that the parameters allow.

However, it can be argued that having access to such a large amount of centralised tokens gives him an unfair advantage, especially when the real market value is not likely to be the same as the value they have been given for collateral.

Coingecko lists a 24 hour trading volume of just over $2M for FTT. The most popular FTT pairing on Uniswap has only $155.62 in liquidity. If these tokens ever had to be used to collateralise a position, they simply would not hold their value.

When economically rational market participants such as SBF are able to take advantage these tools in a way that the community doesn’t approve of, the immaturity of both the market and its users are revealed.

When less influential actors such as Blue Kirby take actions that the community doesn’t approve of, they are putting their career at stake. If you are an “influencer”, marketing and PR are your only tools. As YFIs biggest mascot, it was understandable that Blue Kirby’s followers would be disappointed to see him dump his tokens.

However, SBF and Alameda Research are in a different position. Alameda is a for profit company, and when DeFi presents them with an opportunity, they’ll game it and take it.

As institutional money flows into cryptocurrency and turns the heads of lawmakers and regulators across the globe, one wonders how long this anarchistic meritocracy can last.

Until our governments tighten their grip on our world, code is law, and we should accept and embrace that fact.

SBF is supposedly a fan of effective altruism - using his wealth to improve the lives of others. If you lost money due to him shorting your assets, hopefully you can take some solace from the fact he might have donated your bag to charity.

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