how The FTX Collapsed and Affected The Crypto World
Sam Bankman-Freid’s court case is still ongoing regarding his company filing for bankruptcy and misusing his customer’s assets. Recently, he denied the allegations that he misused customer assets worth up to eight billion dollars.
He also denied other claims including bankruptcy officials and regulators filed against him. Including the company, he was co-founder of FTX US, and the sister company to FTX, Alameda Research, which collapsed due to the market and not because of money laundering. So, what happened to Sam Bankman-Fried and FTX?
What Happened To FTX?
The collapse of FTX only took 10 days and began on the 2nd of November. It all began with a crypto news site called CoinDesk, mentioning in a report that Alameda Research, a firm which Sam Bankman-Fried was also involved with, held a position of $5 billion in FTT which is the token to FTX. This report raised a lot of questions across the company, including many other cryptocurrency firms such as Binance.
After the report, Binance, one of the biggest cryptocurrency firms in the world, sold all of their FTT tokens. Once they were sold, FTX then announced they were entering a liquidity crisis and asked for support from other cryptocurrency firms such as Binance.
Binance agreed to support FTX but only their non-US firm and a day later after they announced they would support FTX, Binance pulled out of the deal following their due diligence.
FTX Assets Were Frozen
On November 10th, the Bahamas froze the assets of FTX after the news broke out that Bankman-Fried was trying to bail out the exchange. On the same day, Californian financial protection announced they were starting an investigation on Bankman-Fried and FTX.
Bankman-Fried did not handle the situation professionally and people could see he was panicking. On November 10th, Bankman-Fried apologised on Twitter and mentioned that the FTX non-U.S company did not have the funds to support customers’ needs. He also mentioned that Alameda would “wind down” on trading.
FTX then announced there had been some unauthorised transactions which were made. After this, they announced that they would be moving their digital transactions into cold storage for security reasons. Analysts outside of FTX suspected that there were around $477 million which were stolen from the FTX alleged hack.
The Arrest and Charges Against Bankman-Fried
Fast forward to December 2022, the Bahamas arrested Bankman-Fried and put him in jail for numerous charges. He was then extradited to the United States for eight counts including money laundering and security fraud. December 22nd, Bankman-Fried was released from prison and agreed to a $250 million bond until his court case later this year.
How Does It Affect Crypto Investors
Those that have invested in cryptocurrency with FTX and lost their money should consider contacting an investment fraud lawyer. They may be able to retrieve some of the money that you lost due to your investment.
This situation regarding FTX has made everyone question whether the crypto market is well-regulated. Those who invest in crypto know about the current loopholes and cryptocurrency scams which occur sometimes. That is why many people are calling for independent regulators to manage digital currency.