Wowza. FTX imploded in the craziest crypto fiasco since Razzlekhan.
This story has it all including: rivalries, begging, hubris, apologies, scams, and high-visibility. The blast-radius captured the well-known exchange, a “strong” crypto token, celebrities, a billionaire wunderkind (the one and only SBF), and a “research” company intertwined with several major venture capital companies. The entire nutty downfall took one week.
Forevermore in the future, the FTX collapse will be remembered as the event associated with Proof-of-Reserve reporting for all crypto exchanges. Binance, Coinbase, Kraken, Gate.io, Bitfinex, OKX, and Kucoin have all promised to publicly reveal their holdings to reassure customers that their assets are in safe hands.
Gary Gensler and the SEC didn’t even have to lift a finger to make this happen.
Though the details are still unclear, the highlights went something like this: (you can find all of this more at essentially any financial, crypto, or news website)
- SBF tweets support for further government regulations.
- CZ, head-honcho at Binance (a rival exchange and contestant in the rule-the-cryptoverse competition), tweets a disagreement with SBF’s position.
- CZ sees a leaked balance sheet from Alameda Research (a different crypto-related endeavor that is tied to FTX and SBF in murky ways). This balance sheet implied some form of “laundering” of FTT token money, and FTX exchange user money of more than 10 billions, being used to keep Alameda afloat.
- CZ tweets that Binance would be liquidating their holdings of FTT (the FTX token).
- An old fashioned “run on the bank” occurs, leading to a >70% drop in FTT token price.
- SBF admits to FTX having liquidity issues.
- SBF personally calls CZ and begs him to bail out FTX.
- Binance tentatively agrees to acquire FTX.
- In less than 24 hours of undergoing due diligence review, CZ announces that FTX cannot be saved and Binance backs out of the agreement.
- SBF admits, “I fucked up twice. I’m sorry.”
- Alameda Research, FTX, and other associated companies all file for Chapter 11 bankruptcy.
- Then overnight, FTX loses between 400-600 million dollars in scams. FTX then confirms that anyone who had used the FTX app or site in the past few days became exposed to malware and Trojans.
