The unexpected bankruptcy of FTX, one of the largest cryptocurrency exchanges in the world, caused an earthquake in business and political circles.
The magnitude of the shock reflects the central role played by FTX and its founder, Sam Bankman-Fried, in building the young industry, which aims to disrupt traditional financial services.
This overnight implosion of a company that was valued at $32 billion in February, with a founder considered one of the richest men in the world, put pressure on the entire crypto sphere.
Investors seem to have lost confidence and are now looking at every crypto firm with suspicion. They wonder if they can trust the accounting presented to them and the statements made by crypto executives.
“If you are running a background check on someone like Sam [Bankman-Fried] you are not going to find anything, he was unblemished, if you will, prior to this incident,” Anthony Scaramucci, the founder of alternative investment company SkyBridge Capital said at the Bloomberg New Economy Forum in Singapore on Nov. 15.
The day before FTX went bankrupt, Bankman-Fried, who was still the platform’s CEO, said his empire was “fine”.
But 24 hours later, he called his rival Changpeng Zhao for help. After initially agreeing to acquire FTX, Zhao backtracked a day later, saying he discovered that the situation was even worse than he thought once his teams began due diligence.
Worried Retail InvestorsTroubling PastNo Back Door
Worried Retail Investors
“They lied. FTX lied. I think Sam lied to his employees, his users, his shareholders, regulators all around the world and all the users,” Zhao said during a Twitter event on Nov. 14. “So yes, he should take most of the blame.”
The insolvency of FTX, which filed for Chapter 11 bankruptcy on Nov. 11, was due to a liquidity shortfall when clients attempted to withdraw funds from the platform a few days ago. The liquidity shortfall appears to have been the result of its founder reportedly transferring $10 billion of customer funds from FTX to his cryptocurrency trading platform Alameda Research, according to…