The FTX drama is big news in the crypto space this week. The original FTT token lost most of its value, which also hit other cryptocurrencies hard. Let’s take a closer look at how it all started, what happened and what the current situation is.
It all started when reports surfaced that most of Alameda Research’s funds were held in FTT, the token created by its subsidiary, FTX Exchange.
In response to this balance sheet report from Alameda Research, Binance CEO Changpeng Zhao (CZ) announced that Binance will be selling the remaining FTT tokens on its books.
Shortly after, FTX and Alameda co-founder Sam Bankman-Fried gave an olive branch to CZ and tweeted that he would love the two “to work together for the ecosystem.”
The FTX exchange, on the other hand, saw increased outflows as more users withdrew their funds, causing its stablecoin reserves to fall.
The collapse of the SBF empire is bad news for the battered crypto market, which has lost many of the profits it has built over time.
News has been circulating on the blockchain that FTX appears to have stopped processing withdrawals. However, the SBF dismissed these claims and clarified that the payments were still being processed.
SBF's net worth fell 95% after the FTT token crash, causing him to lose his billionaire status.
Circle founder and CEO Jeremy Aller called the recent crisis a Lehman Brothers crypto moment, referring to the events that sparked the unprecedented financial crisis in 2008.
CZ tweeted a note to his Binance team, implying that Binance was considering buying FTX outright.
Things got worse for SBF when less than a day after the FTX review, it emerged that it was “highly unlikely” that Binance would go ahead with its proposed acquisition of a rival exchange.
On Wednesday, Binance confirmed it would no longer proceed with a deal to acquire the ailing cryptocurrency exchange after conducting due diligence.
Reuters reports that when the Binance deal fell through, FTX expected its investors and competitors to raise $9.4 billion.
Soon after, FTX announced that in an agreement with Tron Justin Sun, holders of certain assets such as TRX would be allowed to exchange them from the FTX exchange to an external wallet.
The Bahamas Securities Commission is cracking down on FTX’s Bahamas subsidiary, FTX Digital Markets (FDM), over allegations that it failed to protect client funds.
The SBF also faces an investigation by the US Securities and Exchange Commission for possible breaches of securities rules.
The FTX crisis shows no signs of abating as the exchange now faces the specter of a potential hack that has cost $600 million.
FTX Trading filed for Chapter 11 bankruptcy on Friday, while SBF’s founder and CEO stepped down and John J. Ray III as the new CEO.
A shocking report from Reuters revealed that the SBF had built a “special backdoor” to trick the FTX compliance system without raising red flags.
Disclaimer: This article is for informational purposes only. It is not offered or used as legal, tax, investment, financial or other advice.