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Is FTX CEO Sam Bankman-Fried the Elizabeth Holmes or Bill Hwang of crypto?
After Binance transferred its deal to buy the firm earlier this week (and stemmed its massive losses), FTX is seriously short on cash — whether it’s real dollars, cryptocurrencies, or whatever. To make matters worse, reports of Bankman-Fried’s funding of user assets to raise venture capital funds are emerging through the brokerage firm Alameda Research, the sources said. The Wall Street Journal.
Panic in Crypto
If you’re the type who wants to call the entire cryptocurrency revolution an overnight scam built on a house of cards built by hackers in over their heads and backed by private investors , well, read on. above. Bankman-Fried, whose FTX is based in the Bahamas, has helped steer a $32 billion company from the brink of bankruptcy in less than a year.
Basically, exchanges like FTX make money by capturing large ask spreads on crypto exchanges. According to the WSJFTX has been involved in extremely risky crypto trading activities – namely, placing $10 billion of its $16 billion in client assets with Alameda, which continued to trade speculation.
The details of the exchange started when the crypto news magazine CoinDesk reported last week how the two companies are connected. The report revealed that the majority of Alameda’s balance sheet is not bitcoin and fiat currency but the FTT token – an asset created by FTX. The revelation sparked a classic run on the block. Users slammed the exchange with $5 billion worth of withdrawal requests on Tuesday. FTX halted takeover bids but on Wednesday Bankman-Fried told investors the firm had lost about $8 billion, sources told CNBC.
Now, the 30-year-old CEO is looking for a lifeboat:
- Binance backed out of the buyout after the company said the company’s problems were “beyond our ability to help.” Sequoia Capital, a backer of FTX, announced on Wednesday that it is canceling its $210 million investment in the company.
- Bankman-Fried reportedly reached out to OKX, another exchange, earlier this week for help. OKX is waiting for more information before making a decision. “The goal of this increase is the first to [do] right by customers; secondly by existing and new entrepreneurs; third of all of you,” Bankman-Fried told FTX employees this week, according to the WSJ.
Security: Unlike traditional market traders, it is not clear whether crypto exchanges exist for misuse of customer funds, meaning that regulators have no power to help customers. Hello crypto kids, it’s time to familiarize yourself with some of the tricks called the CFTC and the SEC.
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