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FTX’s insolvency case is now the spotlight in the crypto market. Crypto investors and traders might have seen many headlines related to this event. Why is it such a big deal?
Well, it is like a ‘celebrity’ thing when the internet explodes with a storm of information and brilliant insights into the man behind FTX, Sam Bankmanman-Fried. He has been one of the most influential people in the crypto industry over the years. Yet, his promising crypto ‘child’ collapsed!
He stated that the crypto winter did not even bother his company. Besides, he has nourished many ideas for policing the crypto industry to create a much healthier and solid space for crypto traders. The highlight was that he said that FTX was “fine” on November 7, 2022. Things seemed not so ‘fine’ with FTX when it faced insolvency and the company filed for Bankmanruptcy four days after that.
How did such things happen? This article walks you through the main events and decodes the collapse of a crypto star, FTX, and its founder, Sam Bankman-Fried, also known as SBF.
The crypto industry is new so how to evaluate the value of crypto or how to pick a profitable coin is still really much based on instincts and reputation. Yeah, you do not read it wrong, we mentioned reputation. It is really the case of FTX and how SBF used media to polish the fame of FTX.
The partners that Sam Bankman-Fried worked with include a powerful but soon-to-be-divorced Tom Brady and Gisele Bundchen. Moreover, he also co-hosted Crypto Bahamas with Anthony Scaramucci, which Bill Clinton and Tony Blair attended.
One of the factors that nourish fame is the frequency of turning up in public. SBF knows it really well. Crypto newspapers are full of his faces and his exchange, FTX. There was even a memorable ad featuring Larry David throughout the Super Bowl with the message of investing in cryptos even when you don’t really get it!
Sam was also active in the field of politics when he was the main donor to Joe Biden’s presidential campaign and the 2022 midterms.
However, all the activities seemed to cover the actual financial health of his trading firm, Alameda Research. The leak of the company’s performance worried many investors and drove them to the decision of pulling their money out of FTX en masse. The rise of a kingdom now faces collapse!
The fall of FTX has been one of the most shocking events in the crypto industry. There are still many unknowns. Yet, decoding it through the whole saga can help us draw some valuable insights and even some highly-accurate forecasts.
Binance is now the biggest crypto exchange since it was launched in 2017 by Changpeng Zhao, commonly known as CZ. Also in 2017, Sam Bankman-Fried founded Alameda Research, a quantitative trading firm focused on digital assets. Then, he launched FTX as an exchange in 2019. Though SBF walked away from the operations of Alameda Research, the two entities remained really much related.
Things went well as FTX had a $32 billion valuation while Alameda generated around a $1 billion profit in a year. Plus the active activities through commercial ads and the handshakes with many famous figures created beautiful outfits for Sam Bankman-Fried.
Up till then, things were in decent shape or even with the promises of a bright future waiting. The signals of the fall were in the leak published by Ian Allison at CoinDesk on November 02.
It revealed the fact that Alameda’s assets, having a value of $14.6 billion, were all in FTT, a token by FTX. The holders did not have to pay fees when holding FTX, which is an appealing perk. However, the leak by Ian Allison pointed out that the tokens were all lies, making people believe in the valueless things.
CZ Binance shared in his Tweet that Binance would take action on liquidating its FTT holdings on November 06. Binance received $2 billion in tokens with some in the FTX token, yet CZ decided to get rid of the FTT due to the recent revelations.
Despite all the efforts by Sam Bankman-Fried and Alameda’s CEO, Caroline Elison, investors did not believe in the present performance or the future of both FTX and Alameda. Everything built up for the flame of the “this is fine” meme as SBF announced that FTX was in the transaction of strategies while FTT dropped to under $5 in value days after that.
CZ Binance said that there was a non-binding letter to buy FTX, yet he backed out of the FTX rescue, which worsened the situation for FTX and Sam Bankman-Fried. When things unfolded, CZ and many investors shared one statement in common they had little knowledge about the internal things at FTX and its actual performances.
Sam Bankman-Fried and his crypto exchange, FTX, went from being a darling of the regulators to a pariah within three days! Dreams crumble under the harsh heat of reality.
Binance said it would buy FTX but backed out of the rescue on November 11, 2022. Then, SBF’s billions of dollars evaporated.
It is still a mystery around the event, such as what happened, why it happened so quickly, or the impact on FTX’s customers. Yet, there are some things that we believe are on the horizon. FTX has commenced Bankmanruptcy proceedings in the US and might face an $8 billion shortfall.
Yet, it is not the end. There is still hope for rebirth as Chapter 11 enables Bankmanrupted companies to keep on operations as long as they can pay creditors.
Things get so quickly, from the promising empire to the collapsed one. FTX and Sam Bankman-Fried have been the biggest stars in the crypto industry. They are still famous even when they are in the glorious days or the collapse. Many things are not unfolded completely and there might be a chance for a rally in the future. Who knows that FTX would fail? So, it might be the same for this exchange’s future! Share your thoughts in our comment section.
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