If you had heard of FTX before November 2, you would have known the company as one of the biggest crypto exchange platforms in the world. It was the gold standard in the crypto world, highly reputable with backers such as Soft Bank, Tiger Global, tie-ups with financial services company Visa and more.
It was right there next to Binance, the world's largest crypto exchange platform. So, even if you were very careful with your crypto investments with thorough knowledge of its volatility, you wouldn't have been concerned about investing through FTX.
But now, the company has filed for bankruptcy in the US with a hole of nearly $8 billion in its balance sheet, an alleged theft of millions of dollars and investors' money gone in a poof.
Its CEO Sam Bankman-Fried has lost his entire $16 billion fortune and resigned. He's gone from the "King of Crypto" to suspected of being a weird, alleged "orgy-indulging", Elizabeth Holmes-kind of a fraudster.
The story in brief: Things have been chaotic at FTX as the volatility of the crypto world impacted the platform and its core members tried to keep the company afloat.
But amid this, a theft of several millions of dollars completely knocked FTX over.
1/ Statement from John Ray, Chief Restructuring Officer and CEO of @FTX_Official — Consistent with their obligations as Chapter 11 Debtors-in-Possession, FTX US and FTX [dot] com continue to make every effort to secure all assets, wherever located.— Ryne Miller (@_Ryne_Miller) November 12, 2022
You see the beauty of cryptocurrency is such that it is very hackable, but also VERY traceable. So it is very hard for the thief to cash out the money without revealing their identity.
Of course, it would be a bummer if it turned out that the thief is a North Korean or a Russian or a Chinese, or some other rogue state-controlled entity, with no extradition threat applying to them.
But mostly the fingers are pointing at none other than FTX insiders including Sam Bankman-Fried.
How did the collapse take place: The downfall started on November 2, when CoinDesk published the balance sheet of another Sam Bankman-Fried entity called Alameda Research.
And then Starbucks comes and market sells the clown-bucks they were holding, while reminding the market that clown-bucks aren't really a thing.— Lyn Alden (@LynAldenContact) November 8, 2022
McDonald's balance sheet is trashed, with their clown-bucks wiped out.
Anyway, that's what happened in crypto-land this week. pic.twitter.com/nMKMgUuV1C
This afternoon, FTX asked for our help. There is a significant liquidity crunch. To protect users, we signed a non-binding LOI, intending to fully acquire https://t.co/BGtFlCmLXB and help cover the liquidity crunch. We will be conducting a full DD in the coming days.— CZ 🔶 Binance (@cz_binance) November 8, 2022
Sad day. Tried, but 😭— CZ 🔶 Binance (@cz_binance) November 9, 2022
That's how all hell broke loose.
The juicy part of the story: Okay, so the above was too much number and boring investment talk. Let's get to the interesting part about the story of its founders and core members.
In the eye of the storm are Gary Wang, SBF, Nishad Singh (yes, Indian-origin) and Caroline Ellison, CEO of Alameda (who dated SBF on and off).
Fun fact: SBF apparently offered to help Elon Musk buy Twitter, but the world's richest man felt something off about the 30-year-old and declined his offer.
FTX had also signed a global partnership with the International Cricket Council (ICC). FTX's logos were recently displayed during the T20 World Cup. However, the company's logo was taken down from the sponsors' logo background, Dugouts and boundary triangles after the company declared bankruptcy.
Between the post match presser for the IndvEng semi & the pre-match presser for the final the FTX logo has disappeared from the @ICC sponsor list. It was only one of at least 3 shady sponsors for this year's WC. Here's hoping Aramco & BYJU's meet a similar fate soon pic.twitter.com/NknffzqtLL— Mansi P (@MsKidchaos) November 12, 2022
FTX has a new CEO in John Ray III, a restructuring expert. Meanwhile, Sam Bankman-Fried says he's very sorry.
1) I'm sorry. That's the biggest thing.— SBF (@SBF_FTX) November 10, 2022
I fucked up, and should have done better.
The question that remains to be answered: Will FTX's downfall create a ripple effect in the crypto world?