If you take other people’s money by promising you will be keeping their money under your mattress, yes, you should keep all that money under the mattress or you’ll be behind bars for fraud.

I'm not a business masquerading as a bank, lol.

Banks don't have cash on hand equal to assets either...

The CEO of a band has never say they have everyones money sitting in the safe waiting for them to pick it up whenever they wanted it.

FTX CEO litterally said that in his tweet.

My read of the situation: SBF's comments were about assets (balance sheet) rather than FTX's liquidity. I believe SBF was saying (paraphrasing) "Our balance sheet is fine; FTX doesn't invest customer assets; we're processing withdrawals as fast as possible." That's different than saying "we have 100% liquidity."

Banks make similar statements all the time -- they require regular audits of assets (stress tests) and maintain some minimum levels of liquidity.

Banks say that they don't invest deposits?

In the Glass-Steagall sense, they probably shouldn't. Mixing commercial banking and investment banking was illegal from 1933-1999, and it is (arguably) one of the underlying factors in the 2008 financial crisis.

Note: There's a difference between being a custodian of customers' investments (brokerage / commercial banking) versus proactively investing customer deposits (investment banking).

Going to need a _huge_ source on that claim. Investing customer funds is the primary way banks make their money, and has been that way essentially since the invention of banking.

From https://en.wikipedia.org/wiki/Fractional-reserve_banking:

"Fractional-reserve banking predates the existence of governmental monetary authorities"

Banks lend deposits. That's how they make their money. They have to keep some part of the deposits as a reserve.

Real regulated banks have access to the Fed to borrow in a case of a bank run.

And FDIC to de-risk customers from feeling they need to do a bank run.

To a large extent, but not completely.

Anyone who has more than the insured amount, or anyone who needs their money in the near future will still engage in a run.

There were several runs during the 2008 crisis, the most famous is the run on IndyMac Bank.

https://en.wikipedia.org/wiki/IndyMac

It’s pretty clear now it a last ditch Hail Mary effort to save them from a bank run that would ruin them

Real banks have access to a lender of last resort.

Shadow banks don't.

> It is actually irresponsible to the users (risk management wise) to be keeping all that cash in hand 24/7. The easiest bad case example: are you keeping all your savings under your mattress?

"We never block withdrawls" is the new "We don't crash ever" as seen in the Facebook movie.

If you are in the crypto exchange business you gotta do both actually. Don't crash the website and don't suspend withdrawls ever.

> risk management wise

Short dated government bonds would be the safest. But tweet 0 he litterally says they dont do that, they keep the cash under the mattress and you can have it if you stop by. People stopped by and there was no cash under the mattress...

I agree. And it is sketchy when people give a guarantee we know they can't keep.