The Crypto Crash

the crypto crash

Sam Bankman Fried suffered major losses in the recent crypto crash; here is your guide to the full story. When it came to the crypto market, Sam was a paragon. With his efforts to make his cryptocurrency exchange a household name, Mr. Bankman-Fried, better known as SBF, rose to fame.

Sam Bankman Fried

The eccentric, messy appearance of the 30-year-old billionaire gave his audience an impression of genius. Investors in venture capital joined in. Famous athletes and performers, as well as an invasion of FTX advertisements, urged the general public to use the exchange to take advantage of cryptocurrencies’ potential.

Where Bankman-Fried went wrong:

Before the creation of FTX, Fried founded the Alameda Research group, which played a big role in the crypto market and trading world. Mr. Bankman-Fried hired Caroline Ellison, who later rose to the position of chief executive. The cryptocurrency exchange’s CEO, Mr. Bankman-Fried, continued in that position at FTX.

Although Mr. Fried was no longer present at the Alameda firm, according to bankruptcy filings, he still has 90% ownership. Mr. Bankman-Fried claimed that Alameda had no special treatment on FTX. Recent reports contradict that saying Alameda had an exemption and could take on more risk than other users. 

Alameda also spent billions on startup stake purchases. It frequently utilized FTT, FTX’s cryptocurrency, as security for loans. In addition, some reports claim that FTX CEO and Ms. Ellison were romantically involved.

The Crypto Crash

With the fall of crypto prices earlier this year, Alameda’s risky bets took a downturn. Mr. Bankman Fried attempted to prevent future catastrophes and lent billions of dollars from customer assets to aid Alameda in covering its funds. 

The word came out on Nov 2 when CoinDesk set out a report questioning the financial situation of FTX and Alameda. They stated that FTT made up a sizable portion of Alameda’s balance sheet.

The founder of Binance, Changepeng Zhao, mentioned that he would be getting rid of his FTT holdings. This led to panic, and many customers began to withdraw their money. This resulted in FTX’s agreement to sell itself to Binance. However, Binance refused the offer. Not long after, SBF resigned, which led to FTX filing for bankruptcy.

John J Ray, an expert with experience in overseeing bankruptcies, mentioned that the collapse of FTX is the worst he’s seen.

Will customers be refunded?

The crypto crash of FTX has gotten people worried. The many court filings with Mr. Ray have ended with no hope. With no answers as to how much crypto or cash can be found at FTX. The new chief executive asked for patience during this tedious time.

On Monday, a court filing announced that $1.2 billion was found, thanks to the new management of FTX. In addition, $740 million in cryptocurrency was recovered. However, the majority still needs to be found.

The total amount owed by FTX to its 50 largest creditors is $3.1 billion. The firm’s attorneys believe there may be more than a million creditors. There are still further financial anomalies. Out of a $420 million fundraising round, SBF himself pocketed $300 million. In a probable hack that happened after the bankruptcy filing, more than $370 million seems to be missing.

Justice Department and Securities and Exchange Commission are continuing to investigate FTX.

The Crypto Crash
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