THE COLLAPSE OF FTX
Author: Elisabetta Caglio, Content Creator
In recent weeks #Ftx, one of the most important company of cryptocurrency, lost most of his fortune ($32 billion) and declared the #bankruptcy. Now has become the target of investigations by the Securities and Exchange Commission and the Justice Department.
#Sam Bankman-Fried (called also with his nickname Sbf) stepped down as CEO of Ftx after its crypto exchange filed for #Chapter 11, that is the law of the United State Code which allows companies to restructure debt after filing for bankruptcy.
It all began on the 2nd of November, when an article in online trade magazine Coindesk raised doubts about the risks associated with the company's solvency and the possibility of a collapse in the value of #Ftt, the token of the Ftx exchange. A few days later #Changpeng Zhao, CEO of the rival company Binance, announced that he had decided to liquidate all Ftt positions in the portfolio of the society. This led to the collapse of Ftt and the rush to withdraw deposits from customers.
Changpeng Zhao offered to help and take over Ftx but then decided to renounce due to the unsustainable situation that was too complex and burdensome to be repaired. Some people have dubbed the current crisis as #"Lehman Brothers of crypto".
To solve the situation, the Ftx group will implement a process to maximize recoveries for affected parties. The number of companies involved are 130, including the #Alameda Research investment fund, to which Ftx had granted loans of 10 billion dollars, using the money that customers had deposited on the stock exchange to finance risky bets. Ftx indicated that it had more than 100,000 creditors, with claims in the case but an update shows that there could be more than one million of them. In Italy it seems that 100 thousand users have been involved and the total damage for the specific country could reach 2 billion euros.
This crisis has not only affected Ftx, in fact: Bitcoin has fallen by 3.61% returning below $17,000 to $16,897, while Ethereum has lost 4.43% to $1,262 and Tether by 0.19% to $1. Ftt, the token of the Ftx platform, also fell by 0.23% to $2.61 and Binance Coin by 8.22% to $288.
The #collapse of Ftx can turn into an avalanche that is difficult to stop. According to Changpeng Zhao, other companies could fail in the coming weeks, dragging the digital asset market into a #crisis similar to the one experienced by the financial sector in 2008. Another company has started showing the first signs of danger. The clients of #Crypto.com, one of Serie A's sponsoring digital asset platforms, rushed to withdraw their savings after that his CEO (Kris Marszalek) admits he mishandled an approximately $400 million transaction.
The 2022 will close with high #volatility for the cryptocurrency world. In fact, in the short term, the crisis will not subside and the the rush to withdraw the savings will still remain significant. However, according to some experts, the situation will improve over time and the medium-long term prospects of cryptocurrencies remain positive.
Sources:
https://www.cnbc.com/2022/11/14/former-ftx-ceo-sam-bankman-fried-loses-lobbyists-to-washington.html
https://www.nytimes.com/2022/11/14/technology/ftx-sam-bankman-fried-crypto-bankruptcy.html
https://nypost.com/2022/11/12/ftxs-sam-bankman-fried-in-bahamas-after-collapse/