FTX Exchange BANKRUPT (what happened?)

Over last week (week of 10th November 2022), there was a series of twitter spat between Binance’s founder CZ and FTX’s founder Sam Bankman-Fried (SBF), and then there was a strong signal by CZ saying they’re gonna sell off all the FTT tokens they have to derisk. FTX offered to buy those tokens over-the-counter (OTC), but Binance declined.

Market panicked

The market panicked, and FTT holders rushed to sell their tokens. During this time, SBF tweeted that “a competitor trying to attack them, and that FTX and their assets are fine”…and a few days later, withdrawals halted and it spiraled into liquidation after a short 1-day of Binance doing due diligence to potentially buy them out, but when that failed, FTX applied for bankruptcy protection.

Truth to be told, I also almost bought into their tokens when it was around $30s-40s range, but somehow that didnt happen.

SBF was in Bahamas.

That event was intense, and caused the entire crypto market to have diarrhea, all was sea of red, because, I think, that FTX is the golden poster boy of crypto-financial institutions, with lots of investments from big boys such as Sequioa and Temasek even. For FTX to fall, it was a big thing, shocking.

But let’s not be naive.

FTX wrong moves

From what I read and understand, FTX did some less-than-optimal moves, such as

  • taking a loan on their FTT tokens (collateralizing tokens, risk of margin calls if token drop in price)
  • loaned FTX and company funds to Almeda to trade (risk of trading losses)
  • fractal practice: had 900M in assets but loans of more than $9B

It was a disaster waiting to happen, and boy, did that disaster sweep FTX and the crypto world. In just a series of days, FTX is bankrupt and undergoing liquidation, SBF tried to flee to Dubai but was apprehended, “hacks” of ftx website causing money to disappear, and sudden printing of more FTT tokens that was sent to centralized exchanges.

That was popcorn-level-fascinating but wrong on so many levels. So many people lost their hard earned money, savings and investments, but it’s not good at all.

  • Where is the accountability?
  • Where is the moral high ground?
  • Where and how can the people trust crypto more and more?
  • Where is good leadership?

It’s no wonder CDC’s CEO kept saying that this event has hurt the user’s confidence of crypto, and that everyone has to play a role to win that trust back. This isn’t right, and yes, I’m not naive – these kind of games happen all the time in corporate board rooms, and even I’ve seen a couple of such circus clowns with my own eyes.

The good thing from this?

  1. Expose and removal of bad actors from the system. Call it a purge, but let those that should be purged out, be purged out, and decrease the contagion. There is so much potential in blockchain and crypto space.
  2. Focus on important things such as building important and good useful products and projects that the marketplace and people want
  3. Happened during a bear market, so there’s less damage potentially as compared to height and euphoria of bull market