FTX, the second biggest cryptocurrency exchange in the world went bankrupt affecting over a million people. Here’s more on the fall of the exchange and the aftereffects.
The disastrous fall of FTX
The last week has been one of the most dramatic periods for cryptocurrency. FTX, the second biggest crypto exchange in the world went bankrupt. The collapse also shook investors’ beliefs and led to a fresh crypto sell-off. Additionally, the event also started a fresh wave of concerns about the safety of customer funds. Moreover, unlike financial institutions like banks, crypto exchanges lack gatekeeping.
“The administration has consistently maintained that, without proper oversight of cryptocurrencies, they risk harming everyday Americans,” stated Karine Jean-Pierre. Jean-Pierre is the Press Secretary for the White House. Several are calling this the Lehman Brothers moment, comparing it to the bankruptcy of the bank that initiated the global financial crisis in 2008.Â
However, the situation is highly complicated, Sam Bankman Fried, the founder of FTX, popularly known as SBM is also the founder of Alameda Research, a trading firm. While the two firms are supposed to be separated, a report by Coindesk and the Wall Street Journal suggests otherwise. The WSJ report reveals FTX extended loans to Alameda using funds from customers who deposited on the exchange, Another report reveals a majority of Alameda’s assets were in the form of FTT. FTT is a token issued by FTX.
More on the events
Binance, the largest cryptocurrency exchange in the world, run by Changpeng Zhao revealed it was planning to sell all its FTT owing to recent relegations. Additionally, Binance also stated it will not be buying from FTX “as a result of corporate due diligence”. The announcement spooked investors and led the token to crash by 78 percent. However, FTX lacked the money to handle the increasing withdrawals and this stopped customers from pulling their funds out. With increasing rumors of SBM fleeing to Argentina, he stated he was still in the Bahamas, the FTX HQ.
“The whole operation was run by a gang of kids in the Bahamas,” stated a source close to the firm. A Reuters report also claims that about 10 members were entangled in romantic relationships.
So darn the year has seen three major crypto exchanges pause clients from withdrawing funds, hurting investors’ confidence across the world. Now, with FTX filing for bankruptcy, founders of other exchanges are reassuring their users. CoinSwitchKube “holds user assets 1:1. The funds you deposit and the crypto invest in are fully held against your name. They are not reinvested or reused by us. You can access them at any time,” stated Ashish Singhal, the co-founder.
