FTX and Sam Bankman-Fried’s Epic Drop
L.last week Sam Bankman-Freed is the best Key figures in crypto.sbfis the founder of ftx, was the third largest exchange in the industry at the time. When crypto prices crashed earlier this year, he swooped in with loans to Voyager and BlockFi, offering hundreds of millions of dollars in crypto lending business and assets from distressed crypto hedge fund Three Arrows. got the Many compared him to John Pierpont Morgan, the banker who saved America’s financial system in 1907.
Bankman-Fried has also spent millions of dollars from his vast fortune, worth $26 billion at its peak, and has lobbied Congress. crypto regulationHe supported Effective Altruism, a social movement that advocates charitable donations to protect the future of mankind, and planned to donate much of the rest. , Clearly Not Cryptoblot: Many Thought sbf He was a man who could have saved the industry from itself, and he did little to let that reputation down.
Oh, how the mighty man has fallen! After rumors that ftx Insufficient liquidity swirled around and investors withdrew $650 million in assets from the exchange on Nov. 7, stopping to meet demands.The value of the ftx Tokens, the company’s profit-sharing mechanism, have fallen 84% since November 4 (see chart). On November 8, Bankman-Fried and her Binance boss Changpeng Zhao, the largest crypto exchange, announced that Zhao’s company had signed a letter of intent for acquisition. ftxThen, on November 9th, ftxbook of. Binance is ftxThe problem was “beyond our control or ability to help.” Bankman-Fried’s fortune is now below $1 billion, down 94%, the largest ever, according to Bloomberg Wealth. One day down.
What the hell happened? There are two stories out there, both in Shakespearean style. The first is rivalry and the second is arrogance. Let’s start with the rivalry between Mr. Bankman-Fried and Mr. Zhao. Bankman-Fried says he owns three companies. ftxa global exchange. ftx.us, an American exchange. Alameda Research, a cryptocurrency trading fund. In theory, they are separate entities.However, the relationship with Alameda ftx It was unknown for a long time. On November 2nd, his online publication, CoinDesk, ftx Rumors circulated that it held two-fifths of Alameda’s assets and was liquidating other assets to protect Alameda’s value. ftxtoken. Apparently in response, Zhao tweeted that he would liquidate his Binance holdings. ftx It is a token and is worth over $500 million.
His later move to acquire the company led many to believe he orchestrated the turmoil. ftx Start a sale. It seemed like an easy story to swallow. Little love is lost between Bankman-Fried, the golden boy of cryptocurrency, and the wealthier but lesser-appreciated Chao. Zhao has long claimed that his company’s headquarters are “nowhere”. Some services are prohibited in countries, including the UK, due in part to a lack of information on regulatory compliance. Bankman-Fried reportedly infuriated his Zhao over the matter.
However, Binance is now turning its tail to salvation. ftxsuggests that the story might be better characterized as one of hubris. ftx and Alameda. An exchange that sits between buyers and sellers and takes spreads should not go bankrupt easily. Exchanges typically only hold assets on behalf of investors, so they are not exposed to the run. Perhaps he’s Bankman-Fried’s asset purchases and loans have upset this balance.
Or maybe an ambiguous connection to Alameda was the problem. It’s easy to imagine things going dramatically wrong within a trading shop that operates in a manner akin to a hedge fund. Bloomberg assumes Alameda is the bankruptcy of both companies and is currently worth just $1 when estimating its assets. According to a November 9 report, America’s premier financial regulator, the Securities and Exchange Commission, months ago ftxof funds and the connections between Mr. Bankman-Fried’s companies. ftx I have not yet commented on this matter.
Whatever the cause of the explosion, the impact will be horrific for cryptocurrencies. The price crash has previously claimed only the expected types of victims: poorly designed stablecoins, hedge funds, and some platforms that made riskier loans.that it has come now ftx, Bankman-Fried, a reputable business and the public face of crypto, is taking a beating. The carnage has spread to other parts of the industry. Since November 8th, the price of Bitcoin has dropped 21% for him, to $16,290 at the time of writing. Other financial institutions are also scrambling to reassure their customers. Large exchange Coinbase has sent a desperate letter to the press. Nevertheless, the company’s stock has lost a fifth of its value in recent days and is nearing an all-time low.
Depending on the roughness of the details, ftx It may be enough to reverse acceptance of crypto by institutions, the public, and the occasional government. Softbank, a Japanese technology investment group. The Teachers’ Pension Plan, a Canadian pension fund, ftxLegislators began to look to the industry with even deeper suspicion.whatever the consequences ftx‘s epic implosion, the story is clearly an industry tragedy. Detractors may also appear to be a bit of comedy. ■
https://www.economist.com/finance-and-economics/2022/11/09/the-spectacular-fall-of-ftx-and-sam-bankman-fried FTX and Sam Bankman-Fried’s Epic Drop
