After a precipitous fall from favor, FTX Exchange filed for Chapter 11 bankruptcy protection on November 11, 2022. In a couple of days, the company’s value plummeted from $32 billion to bankruptcy, bringing founder and CEO Sam Bankman-$16 Fried’s billion net worth to almost nothing. During a Nov. 30 interview at the DealBook Summit with New York Times columnist Andrew Ross Sorkin, it was allover floated as FTX News with FTX Fraud, Bankman-Fried claimed to have roughly $100,000 in his bank account.
When Bankman-Fried founded FTX Exchange at the age of 28, it quickly rose to prominence as one of the biggest cryptocurrency exchanges, with a $32 billion valuation. Bankman-Fried employed aggressive marketing techniques, such as a Super Bowl advertising campaign and the acquisition of naming rights to the Miami Heat basketball team’s arena. He rose to prominence through his political contributions and lobbying, as well as his endeavor to advance the Bitcoin market more broadly. Early in 2022, when values plummeted, he handled transactions worth around $1 billion to support cryptocurrency businesses that were suffering as a result of falling token prices.
What Is FTX Exchange?
FTX Exchange is the name of a cryptocurrency exchange having a base in the Bahamas. Users could buy, sell, hold, and trade cryptocurrencies using this platform, which Sam Bankman-Fried created in 2019. However, these functionalities are no longer available due to the FTX collapse.
A cryptocurrency exchange called FTX promoted trading and the liquidity of coins and tokens. Users of FTX were able to swap digital currencies, make trades, connect their wallets, enter into derivative contracts, and purchase or sell NFTs.
The cryptocurrency market was shaken by the FTX collapse; it lost billions in value and fell below $1 trillion. The fallout from FTX Exchange’s abrupt slide and collapse will probably have an effect on the Cryptocurrencies Market for a very long time to come and may even cause wider market declines. According to FTX Exchange’s CEO Ray, investors and clients have lost billions, and not all of it will be made up, a House hearing was held on December 13th.
Affiliations of celebrities
Along with other stars including NBA player Stephen Curry, tennis player Naomi Osaka, and many more, Tom Brady and his wife Gisele Bündchen signed on as celebrity endorsers for FTX Exchange. Gisele Bündchen also agreed to serve as an advisor for environmental and social efforts.
The same businesses established a long-term advertising alliance with entrepreneur and television celebrity Kevin O’Leary in August 2021, giving the “Shark Tank” presenter ownership holdings in FTX and FTX US as well as payment in cryptocurrencies.
What Happened to FTX?
On November 11, 2022, FTX Exchange requested Chapter 11 bankruptcy protection, and as a result, Bankman-Fried resigned. According to John J. Ray III, the exchange’s new CEO, the loss of corporate control was to blame for the FTX collapse. Ray asserted that FTX showed an instance of “old-fashioned embezzlement,” citing his experience with large-scale company failures like the energy trader Enron following its collapse in an accounting scandal in 2001 very well known as the “Enron Scandal“. Ray further stated that it is unlikely that creditors and investors will receive a full return on their investment.
- 16th November 2022: In a class action lawsuit brought on November 16 in a federal court in Florida, Sam Bankman-Fried is charged with creating a fraudulent cryptocurrency scheme meant to take advantage of ignorant investors from throughout the country. Other well-known figures named in the case as allegedly aiding Bankman-Fried in carrying out the scheme include Steph Curry, Shaquille O’Neal, Shohei Ohtani, Naomi Osaka, Larry David, and Kevin O’Leary.
- 18th November 2022: On November 18, the Bahamas Securities Commission assumed authority over the bitcoin holdings of the defunct exchange FTX. The U.S. House Financial Services Committee announced that it will hold a hearing on the FTX collapse in December 2022.
- 28th November 2022: Following the disclosure, Genesis, a lending associate of Gemini, the Winklevoss twins’ cryptocurrency exchange, reported delays in withdrawals from its Earn product. On November 28, BlockFi, a company that lends cryptocurrencies and has substantial exposure to FTX, stopped permitting withdrawals and filed for bankruptcy.
- 06th December 2022: As authorities look into the collapse of FTX, Reuters reported on December 6th that Bankman-Fried had recruited white-collar defense lawyer Mark S. Cohen.
- 12th December 2022: After the U.S. Attorney for the Southern District of New York shared a sealed indictment with the Bahamian government, Sam Bankman-Fried, the former CEO of the bankrupt cryptocurrency trading company FTX, was detained on December 12, 2022, in the Bahamas.
- 19th December 2022: He freely consented to be extradited to the US on December 19.
The Collapse of FTX happened over 10 days in November 2022. The turning point came on November 2, when “CoinDesk” broke the story that Bankman-quant Fried’s trading company, Alameda Research, had a $5 billion position in FTT, FTX’s native token. According to the study, Alameda had its investment base in FTT, the token that its sister business had created, rather than in fiat money or any type of cryptocurrency.
‘Illicit Transactions’ on FTX
There are numerous ongoing inquiries and legal actions. Regulators are investigating whether FTX utilized customer cash to support Bankman-Fried-formed trading company “Alameda Research“, which was founded and virtually fully owned by the latter. After resigning, Bankman-Fried admitted he had no idea how much Alameda had borrowed from FTX in an interview with the New York Times. He expressed regret for declaring bankruptcy in separate interviews with a Vox reporter, saying that regulations “make everything worse.”
Future of FTX and Consequences to Cryptocurrency of Collapse
The sudden shocking closure of the third-largest exchange in terms of volume will have long-lasting repercussions on the cryptocurrency industry. On November 11, 2022, the cryptocurrency lender “BlockFi” stopped allowing client withdrawals, and there are rumors that the business may soon run into problems. There was a surge in withdrawals on Crypto.com on November 12 and 13, 2022. The cryptocurrency lending division of Genesis Global Capital has suspended customer withdrawals. Furthermore, the collateral damage has probably just started.
The fortunes of FTX and its creator, who is currently detained in the Bahamas and was awaiting extradition to the United States, are intertwined. This development is all related to the eight-point indictment that Bankman-Fried was hit with on December 13 for allegedly defrauding investors and clients. However, it is yet to be investigated whether there is any FTX Fraud. The assets of FTX had been frozen as of mid-November 2022 by the Bahamas securities regulator. Various other regulatory inquiries are continuing.
A study that suggested potential leverage and solvency difficulties caused the exchange to encounter a liquidity difficulty. It attempted to arrange a rescue with rival Binance, but the negotiations were unsuccessful. It is difficult to foresee the repercussions on the long-term prospects of FTX and the greater cryptocurrency industry.
Binance news buying FTX?
Binance signed a letter of intent to purchase FTX on November 8th as reported by “Coinmarketcap” but included language indicating the arrangement was nonbinding. A day later, Binance withdrew from the agreement, claiming FTX’s problems were “beyond its control or ability to aid.”
When did FTX declare bankruptcy?
On November 11th, FTX and Alameda Research filed for Chapter 11 bankruptcy, and Bankman-Fried resigned as CEO at the same time. Several internal problems at FTX are revealed by the filing, including the likelihood that the business hasn’t even confirmed the number of users on its platform and that it doesn’t have an “exact list of bank accounts and account signatories,” which is… pretty terrible.
What impact to Cryptocurrency have?
Due to the general uncertainty, the big cryptocurrency brokerage Genesis’ lending division suspended loan redemptions and new originations because it couldn’t afford to handle the unusually high volume of withdrawal requests it began to receive after FTX’s collapse. Bloomberg reports that the company’s creditors are presently looking into their possibilities to prevent the company from declaring bankruptcy.
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