- The FTX exchange declared bankruptcy after information about its financial status and the alleged mishandling of client funds became known.
- Crypto news platform CoinDesk revealed that Alameda Research, an FTX partner store, was mainly holding illiquid tokens and FTT from the Bankman-Fried exchange. His assets were 14,000 million.
- From here the collapse begins; The almost immediate reaction of investors and traders to the statement was to sell FTTs, causing the price to crash and liquidity issues. The founder of FTX wanted to help CZ with the solution to this crisis, but in less than a day, Binance rejected FTX’s proposal due to transparency problems with the management of its users’ funds.
On November 11, one of the largest cryptocurrency exchanges on the market, FTX, filed for bankruptcy. Sam Bankman-Fried, founder and CEO of the Bahamas-based platform, has stepped down.
That same day, something happened that for the members of the company was a piracy maneuver: 600 million dollars were diverted from the collapsing platform.
From the moment CoinDesk revealed information about the relationship between Alameda Research and FTX (both founded by the same person), emphasizing questionable financial stability, Sam Bankman-Fried saw the exchange begin to fall.
In 2017, he founded Alameda Research, in the company of some friends, a company dedicated to quantitative operations with which he amassed many millions trading Bitcoin. The following year, he founded FTX, a cryptocurrency exchange, and then FTX future fund, whose partners were Gary Wang, Caroline Ellison, and Nishad Singh.
The aim of the Future Fund was to create a system that would facilitate the early detection of hitherto unknown pathogens. Also, he intended to develop protective equipment designed for people suffering from depression.
FTX was a company that offered volatility products, tokenized shares, derivatives, and leveraged tokens, among others. In 2019, the company achieved great profits. In 2020, after the funding round, it raised 75 times more than expected. By the beginning of 2022, its value was around 32 billion dollars.
One of the largest cryptocurrency exchanges, Binance, collaborated in the expansion of FTX with an investment of shares and FTX Token (FTT). Thanks to that deal, the FTX ecosystem earned 2.1 billion in stablecoins (BUSD) and FTT tokens after Binance sold its stake in 2021.
Crypto world news platform CoinDesk revealed that Alameda Research, an FTX partner store trader was mainly holding illiquid tokens and FTT from the Bankman-Fried exchange. His assets were 14 billion. Here began the collapse.
Upon learning of this information, Changpeng Zhao, CEO of Binance, wrote in a tweet: “ Due to recent revelations that have come to light, we have decided to liquidate any remaining FTT on our books .”
The almost immediate reaction of investors and traders to the statement was to sell FTTs, causing a price collapse and a liquidity crisis. The founder of FTX wanted to help CZ with the solution to this crisis, but in less than a day, Binance rejected FTX’s proposal due to transparency problems with the management of its users’ funds.
Given what happened, Bankman-Fried spoke with employees to seek other offers, due to Binance’s refusal to sign an agreement. What Bankman-Fied communicated was: “I’m working, as fast as I can, on the next steps here. I wish I could give everyone more clarity than I can.”
“I will continue to fight for those (goals), to the best of my ability, as long as it is right for me as well. I am exploring all the options,” she adds. “I deeply regret getting into this place and my role in it.” “That’s up to me, and me alone, and it sucks, and I’m sorry, not that it makes it any better.”
The FTX founder was tasked with acquiring $8 billion to cover withdrawal requests, but it was a flop, leading him to file for bankruptcy with all FTX partner companies.
Bankman-Fried wrote on Twitter: “So sorry, again, that we ended up here. Hopefully, things can find a way to recover. Hopefully, this can bring them some transparency, trust and governance. Ultimately, I hope it can be better for customers.”
He further added: “This does not necessarily mean the end of companies or their ability to provide value and funds primarily to their customers, and may be consistent with other routes. Ultimately, I am optimistic that Mr. Ray and others can help provide what is best.”
Bakman-Fried was replaced as director by John Ray III., who commented:
“The immediate Chapter 11 discharge is appropriate to provide the FTX Group the opportunity to assess its situation and develop a process to maximize recoveries for interested parties. The FTX Group has valuable assets that can only be managed effectively in a joint, organized process. I want to assure all employees, customers, creditors, contracting parties, shareholders, investors, government authorities and other interested parties that we will carry out this effort with diligence, thoroughness and transparency. Stakeholders need to understand that events have moved quickly and the new team has recently been engaged.
CoinDesk reported on the $600 million diverted from FTX. The company informed its customers to refrain from installing or terminating FTX applications.
In the Telegram channel for customer support, one of the administrators wrote: “ FTX has been hacked. FTX apps are malware. Delete the. The chat is open. Do not go to the FTX site as you might download trojans ”.
Ryne Miller, General Counsel at FTX, posted: “Following the Chapter 11 bankruptcy filings, FTX US and FTX [dot]com initiated precautionary measures to move all digital assets to cold storage. The process was expedited tonight to mitigate the damage by observing unauthorized transactions.”
Among the members of the community, there are suspicions about these diverted funds, and they assume that someone from the team closest to Bakman-Fried could be responsible, according to CoinDesk.
ZackXBT, a Twitter detective, commented: “Several former FTX employees confirmed to me that they do not recognize these transfers for ~$383 million.”
