“I’m having a bad time.”
FTX founder says in one-man low-key way he just forgot to put the dumpster out for a few weeks Sam Bankman-Fredevaluation of The period that saw his star-studded £21bn cryptocurrency empire collapse in the blink of an eye.
From being one of the world’s largest digital currency exchanges to filing for bankruptcy protection in just three days, Bankman-Fried has seen a spectacular implosion — almost a full month later — saw him arrested in the bahamas and Accused of defrauding investors in the US.
How did we get here?
FTX was on the brink of bankruptcy in early November when larger rival Binance dramatically Withdrew from non-binding bailout offer.
Citing reports of FTX’s “corporate due diligence” and “mishandling of client funds,” the firm walked away, leaving its struggling rival’s native crypto token FTT behind as investors scrambled to withdraw their funds.
It follows earlier reports that U.S. securities regulators and the Department of Justice are investigating FTX’s handling of client funds and crypto lending activities.
With no other proposals to offer, FTX was forced to file for bankruptcy proceedings, and its founder and one-time “king of cryptocurrencies” resigned as CEO.
Why did FTX end up like this?
Considering that FTX has over 1 million customers, sponsors stadiums and owns More and more celebrity endorsements.
They include tennis star Naomi Osaka, comedian Larry David and NFL legend Tom Brady, while reports emerged that Taylor Swift was lobbied for a deal just weeks before the exchange collapsed.
Bankman-Fried himself is used to rubbing shoulders with the elite, appearing on stage with former Prime Minister Tony Blair and former US President Bill Clinton (Who, unfortunately, has the unfortunate habit of showing up with soon-to-be-disgraced tech entrepreneurs).
The problem stemmed from FTX’s close ties to Bankman-Fried’s first company, Alameda Research, whose balance sheet was revealed by leaked documents to have a large number of FTTs.
FTT, a token created by FTX to offer discounts and rewards to the exchange’s customers, raised questions about Alameda’s health and spooked Binance boss Changpeng Zhao.
Zhao, a former investor in FTX, ignited the spark that ignited Bankman-Fried’s empire by announcing that Binance would sell FTT for a book value of $529m (£430m).
What have we learned since bankruptcy?
Allegations of unfair business practices have since emerged, including:
• FTX uses client funds to cover Alameda’s losses
• Bankman-Fried created a “back door” that allowed funds to be moved out of FTX without the knowledge of other executives
• Over $8bn (£6.5bn) of client funds disappeared from exchanges
New CEO John Wray, who steered the energy company through bankruptcy proceedings in the early 2000s, said of FTX: “In my career, I’ve never seen such a complete failure of corporate control and such a failure as what happened here. Complete lack of reliable financial information”
At the same New York Times event, where he admitted he had “a bad month,” Bankman-Fried admitted that “apparently I’m not doing a good job running FTX.”
Some customers may only get back 20% to 25% of their savings, he said.
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Where did “SBF” and cryptocurrencies come from?
The next stop for the 30-year-old known as “SBF” is the District Court of the Bahamas, the Caribbean island where FTX has been based since 2021.
He also faces extradition to the United States.
As for the cryptocurrency market, the debacle of FTX — which has been praised for making it so easy for people to buy cryptocurrencies using traditional currencies, with a simple interface and low transaction fees — has pushed calls for more regulation.
Brian Armstrong, CEO of another crypto exchange Coinbase, told Sky’s Ian King last month that the world’s financial centers must improve their “crypto-specific regulation.”
He acknowledged that the FTX debacle “thwarted” the cryptocurrency’s path to becoming a legitimate asset class.
Amber Ghaddar, co-founder of Alliance Block, told Sky’s Big Ideas Live event that the crypto industry had people making “the same mistakes that led to the 2008 financial crisis.”
“There is no risk management, no internal controls,” she said.
“If the post-2008 regulations limiting the power of banks and hedge funds applied to these crypto companies, it wouldn’t be as egregious as what we’re seeing now.”