The FTX Fall down, Outlined | WSJ What Went Heinous

– Over $150 billion. In three days, that's how much the world's 15 largest cryptocurrencieslost in market value. It's because of the CryptoExchange platform FTX, which is behind this token, named FTT. On November 6th, thetoken's value began to fall, losing more than 80% of itsworth in the span of 72 hours. Once seen as a survivorin a struggling market, the fall of FTX has sent shockwaves.

Through the cryptocurrency industry. So, what went wrong? FTX is the brainchildof Sam Bankman-Fried. He's commonly known asSBF on social media. He's been previously hailed as a savior of the crypto industry. – You were called the JP Morgan of crypto. – Yep. – Does that bother you or not?.

– It doesn't bother me too much. – Bankman-Fried founded the quantitative trading firmAlameda Research in 2017. Two years later, he startedFTX, an exchange platform for buying or selling cryptocurrencies. Right now, he's the majorityowner of both firms. – That kinda aroused someskepticism among industry players and traders, investors, stakeholders, that there could be somesort of conflict of interest.

In terms of whether research was getting preferential treatment on FTX, vice versa. But the official narrativethat SBF gave in the past is that the two companiesare separate entities. – After its launch, FTX attracted majorinvestments from Silicon Valley and Wall Street. – Yeah, we'd raised a few billion dollars over the course of the last couple years.

And we're a profitable business. – It grewinto the fourth largest cryptocurrency exchangefor derivatives trading. Celebrities promoted the platform in ads. – I'm getting into crypto with FTX. You in? – It's FTX. It's a safe and easyway to get into crypto. – I don't think so.

– FTX was gaining steam, and in the process, oftentussled with Binance, the world's largestcrypto exchange by volume. – When FTX was getting started,Binance invested in FTX and it was one of the cryptoexchange's earliest investors. But FTX, as we know, grew really rapidly and became a verysubstantial rival to Binance. – As FTX grew in the industry, Bankman-Fried furthered hisreputation as a Crypto savior,.

When digital asset pricescollapsed earlier this year. – It's not fair to customers. – He bailed out firms, spending about a billion dollars. – It's okay to do a dealthat is moderately bad in bailing out a place. – But that image didn't last. On November 2nd, CoinDeskpublished a report based on a leaked Alameda balance sheet.

According to the leakeddata, Alameda claimed it had over 14 billion in assetsat the end of June, but most of that was FTX's tokens. Alameda CEO Caroline Ellison tweeted that the balance sheet wasn't complete. – Caroline also saidits financial situation is under control, thecompany is doing well. However, it seems like the market just didn't really buy that,.

And then traders continueto withdraw from FTX. – FTX andAlameda did not respond to a request for comment. Things escalated on November 6th, when Binance said it would offload hundreds of millions of dollars of FTT. Binance did not respondto a request for comment. The announcement sparked mass withdrawals. That day, FTX processed $4billion of transactions,.

Many times the normal amount for a day. Some got backlogged, whichsparked demand for more. By November 7th, that numberballooned to $6 billion. On the 8th, a day later,FTX's finances were in crisis. Binance stepped in and saidit would buy the company. It seemed like FTX might havesolved its liquidity problem. But on the 9th, Binance backed out of the non-binding acquisition. The next day, TheJournal reported that FTX.

Used money from customersto fund risky bets made by Alameda. – It's a shocking revelationfor a lot of people in the industry, because even though therehas been a lot of speculation about FTX and Alameda researchbeing joined at the hip, nobody could have foreseenthat SBF was willing to transfer billions of customer funds at his crypto exchange tohelp his crypto trading firm.

– The Securitiesand Exchange Commission and Justice Departmentare investigating FTX, according to a personfamiliar with the matter. – This is not like the NewYork Stock Exchange or Nasdaq. They take people's money,they borrow against it. It's not much disclosure. And then they tradeagainst their customers. – A spokespersonfor the Justice Department declined to comment.

Bankman-Fried told investors that FTX couldn't cover withdrawalssince its collateral was dropping in value andcouldn't be liquidated, according to peoplefamiliar with the matter. On the 11th, Bankman-Fried resigned as CEO and FTX and Alameda filed for bankruptcy. Afterwards, FTX said it wasprobing a potential hack. More than 370 millionworth of crypto funds appeared to be missing,.

According to cryptoanalytics firm Elliptic. On the 12th, The Journalreported that Alameda and FTX executives knew that FTX had lent its customers money to Alameda. – So a lot of retail tradersand investors I've talked to are feeling desperate or frustrated. The majority of the people in the industry could not have seen this coming because FTX is such a dominant player.

– The fallouthas led other companies to tout their reserves andcall for more transparency in the industry. As of November 11th, accordingto the bankruptcy filing, FTX is estimation of their liabilities would make it the largestcrypto related bankruptcy ever filed.

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