Crypto Roundup Weekly: The FTX Drama

The FTX drama has been the pervasive news in the crypto space this week. The native token FTT lost most of its value, leading to other cryptos being heavily affected as well. Let’s take a close look at how it all started, what all went down, and what is the current situation. 

The whole thing started when reports emerged that most of Alameda Research’s funds were held in FTT, the token created by its sister concern, the FTX Exchange. 

Responding to these reports about Alameda Research’s balance sheet, Binance CEO Changpeng Zhao (CZ) announced that Binance would sell the remaining FTT tokens held on its books. 

Soon after, FTX and Alameda founder Sam Bankman-Fried extended an olive branch toward CZ, tweeting that he would love it if the two of them could “work together for the ecosystem.”

The FTX exchange, on the other hand, experienced a surge of outflows as more and more users withdrew their funds, resulting in a drop in its stablecoin reserves. 

The fall of the SBF empire spelled bad news for the already struggling crypto market, which lost much of the gains it had gradually built up. 

There was word around the blockchain that FTX had apparently stopped processing withdrawals. However, SBF dismissed these claims and clarified that the withdrawals are still being processed. 

SBF’s net worth plummeted 95% following the crash of the FTT token, resulting in him losing his billionaire status. 

Co-founder and CEO of Circle, Jeremy Allaire, called the recent crisis crypto’s own Lehman Brothers moment, referring to the event that set off the unprecedented 2008 financial crisis. 

CZ tweeted a note meant for his Binance team in which he alluded that Binance was considering buying FTX outright. 

Things got worse for SBF, when less than a day after reviewing FTX, it was revealed that Binance is “highly unlikely” to continue with its proposed acquisition of the rival exchange.

On Wednesday, Binance confirmed that it would no longer move forward with the deal to acquire the troubled cryptocurrency exchange after conducting due diligence.

Reuters reported that since the deal with Binance did not happen, FTX is looking at its investors and rivals to raise $9.4 billion

Soon after, FTX announced that in an agreement with Justin Sun’s Tron, holders of select assets, such as TRX, will be allowed to swap them from the FTX exchange to external wallets. 

The Securities Commission of the Bahamas is cracking down on FTX’s Bahamas-based subsidiary, FTX Digital Markets (FDM), over accusations of not safeguarding customer funds. 

SBF is also facing an investigation by the U.S. Securities and Exchanges Commission for potential violations of securities rules. 

The FTX crisis is showing no signs of abating, with the exchange now facing the specter of a potential hack that siphoned away $600 million. 

FTX Trading filed for Chapter 11 bankruptcy on Friday, while founder and CEO SBF resigned and appointed John J. Ray III as its new chief executive.

A shocking report from Reuters reveals that SBF built a “bespoke backdoor” to outwit FTX’s compliance systems without raising red flags.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice. 

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Written by Amara Khatri on 2022-11-13 10:30:00.

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