Arthur Hayes: Market Makers Knew They’d Be Front-Run on FTX—It Was ‘Common Knowledge’

Arthur Hayes, the co-founder of FTX, has defended the practice of front-running by market makers on the exchange, stating that it was “common knowledge” that this would happen. Hayes argued that market makers were able to front-run due to the nature of the platform and the fact that they needed to make quick, reliable trades. Despite criticism of the practice, Hayes maintained that it was a necessary part of a healthy market ecosystem.

FTX, a now-bankrupt digital asset exchange, had a shady reputation that was known to most investors, according to former BitMEX CEO Arthur Hayes. In an interview with Decrypt podcast, Hayes stated that most investors were blinded by greed and chose to ignore the founder’s methods as long as they made money. Market makers did not want to trade on FTX, as they knew they were going to be front-run. Front-running is taking advantage of pre-market knowledge to buy or sell before other trades have been executed. This information was common knowledge and known to many who were into trading.

FTX’s valuation ballooned to $32 billion by early 2022, but the exchange collapsed in November of the same year, following a selloff of its FTT token and a liquidity crunch on the exchange that revealed the company did not hold one-to-one reserves of customer assets. FTX had enlisted endorsements from celebrities like Tom Brady and Larry David to help bolster their image, and SBF was actively courting prominent politicians and regulators across the U.S. and donating hefty amounts of money to various charities.

Hayes said that in the case of SBF, people did call out his business perspective, but everyone stood to make a lot of money if he was successful, so they were willing to not look too much deeper beneath the disservice. The former BitMEX chief stated that if you were a TradFi person, you wanted a foothold into crypto, and you wanted your type of person who was in charge of the leading exchange. If you were a crypto person, you believed that Sam had the ear of the regulators globally and could help push the agenda for crypto. Therefore, everyone was invested in him being successful and was willing to not look too much deeper beneath the disservice.

In conclusion, many investors knew about the shady reputation of FTX, but they were blinded by the opportunity to make money. It’s important to do due diligence before investing in any company and to not be blinded by greed.

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