Crypto investors are in shambles this week as one of the worlds largest crypto exchanges FTX has filed for bankruptcy. The CEO and co-founder Sam Bankman-Fried has resigned upon the announcement of their troubles. The news rocked the already shaky cryptocurrency markets, as FTX was seen as one of the more reputable companies in the crypto space. The fall also comes after a hard year for cryptocurrencies as the price of coins like BTC have fallen 65% year to date.
The story started when journalists at Coindesk wrote an article on the concerning amount of FTX assets owned by another one of Bankman-Fried’s companies, Alameda. Specifically, the firm owned billions of dollars of FTT, a coin issued by FTX. This meant that a large portion of FTT’s price was being held up artificially by one of Bankman-Fried’s own companies.
While another company, Binance, looked to buyout FTX, they soon backed out of the deal after looking at the company's financials. After looking into the company, they reported that it had “mishandled customer funds” and announced they were no longer interested in the company.
All the news caused a bank run on FTX and sent the price of FTT plummeting from $26 in the beginning of November to less than $2. With all of the money rushing out of FTX, the platform began to halt withdrawals, increasing investors worries that people won’t be able to get their money back. The balance sheet shared publicly before the report showed that the firm had $9 billion in liabilities and assets totaling $9.6 billion, $900 million of which being liquid assets.
The news is particularly shocking due to how big FTX is in the crypto industry. The CEO was formerly seen as a reputable name in crypto calling for regulations in congress and having a net worth of $24 billion - most of which is now gone. Major investors like Softbank, Sequoia Capital, and Tiger Global had millions of dollars of combined investment in the firm. The company also advertised with large sports names like Tom Brady and Steph Curry. The Miami Heat even renamed their stadium to“FTX Arena” - which has now been removed.