It matters a bit, as it seemed that FTX had $1+ billion in Bitcoin customer liabilities which have evaporated.

Because they never bought the coins to begin with. It's marked down in a ledger that this person has this many coins. It only matters when someone wants to transfer coins to another exchange or their own wallet. Then they have to purchase the coins and send them.

> Because they never bought the coins to begin with.

Users bought it but the exchange didn't have it, which is what the OP was saying. If you don't have the keys, you don't really have the coins.

Also interesting. Is this the same thing. https://i.redd.it/qofb7x8zmj0a1.jpg

Citadel Securities has in their books securities sold, not yet purchaed. $65 billion. How is this not the same thing ? lol

I would argue it's not necessarily a problem to have liabilities for which you do not have assets on hand, whether it's Bitcoin or some security. The difference between these two situations is:

1) FTX didn't even bother listing their customer liabilities on their balance sheet, unlike Citadel.

2) I would assume (hope) that Citadel isn't a completely fraudulent company without the capital to make good on those assets if delivery is demanded!

It's not the same because there are actual equities involved in a short sale, Citadel is just borrowing them.

They could obviously get completely wrecked, but the shares are real things.

It is the same, it's the fact that you don't really own it or know if the 3rd party has it or has the means to get it. If you have the keys to the wallet you're certain of what you have and you have full domain.

They’re a market maker, so wouldn’t those be options contracts? The “securities owned” line would be other options contracts that hedge against them, no?