Sam Bankman-Fried went from crypto’s golden boy to whipping boy in a matter of weeks. The FTX founder and CEO used customer assets from the crypto exchange to make up for losses at its sister business, Alameda Research. A “lack of liquidity” turned into a $32 billion meltdown.
FTX filed for bankruptcy last week. A class-action lawsuit has been filed against its high-profile advocates, with investors claiming these famous faces prompted them to sink money into the endeavor. Sadly, it is unlikely that those who lost money will be able to recover it.
Bankman-Fried previously claimed FTX held as much as $5.5 billion in liquidity in the form of its native currency, the FTT token. According to the Chapter 11 filings, the exchange only held $659,000 worth of crypto at the end of September. This significantly differs from the $2.2 billion Bankman-Fried listed as of September 30.
The new FTX CEO, John Ray III, is currently overseeing the company’s liquidation. Per Ray, “Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here.” And that is coming from the person who headed up Enron’s $60 billion bankruptcy in 2001.
Sam Bankman-Fried himself had hinted at the news. In multiple tweets, he used phrases like “to the best of my knowledge” and “treat all of these numbers as rough.” During its collapse, FTX has also been plagued with a high-profile hack and anywhere from $1-$2 billion in assets “vanishing” when transferred between Alameda and FTX.
For those who are wondering what happened, Ray has an excellent answer. He cites “compromised systems integrity” and “faulty regulatory oversight” by “a very small group of inexperienced, unsophisticated, and potentially compromised individuals.”
Simply put, this small group has done some unprecedented damage. And entities like the Department of Justice are taking a very close look at it.
Cover Image: Scroll.in via AFP