The current development has come as the FTX is going through an investigation process for financial discrepancies, with millions of its customer’s funds missing from the crypto exchange.
November 11 came as a shock for the world of crypto as FTX, one of the giants of cryptocurrency exchanges, declared bankruptcy. The founder and chief executive officer of FTX, Sam Bankman-Fried, resigned from his post. In addition to FTX, Fried’s hedge fund Alameda Research, and FTX US, FTX’s US-based business, have both filed for bankruptcy under Section 11. The revelation came only after the investigation into the cryptocurrency exchange’s financial irregularities, which included the assets of millions of customers going missing.
Fried covertly transferred $10 billion in FTX client funds to Alameda Research. A sizable portion of this, worth 1.7 billion, has also vanished.
FTX released a note on their Telegram channel claiming that there’s been a compromise with the crypto exchange. Moreover, it said that a financial irregularity had also been noted during the transfer of its $600 million cash.
Fried and nine other members, including an Indian-descent tech specialist Nishad Singh, are under investigation by SEC for the financial irregularities at the crypto exchange that ultimately caused it to fail.
Mr. Singh was one close member of the team of Fried. He used to control the code, the machine engine, and the fund of the crypto exchange.
After all these, The Changpeng Zhao-led Binance, planning to acquire FTX, called off the deal owing to “corporate due diligence”.
What is FTX crypto exchange?
Fried, an earlier wall street trader, and Gary Wang, an ex-Google employee, founded and embodied FTX, a cryptocurrency exchange in 2019 situated in the Bahamas. A crypto exchange is an online platform that gives investors a platform to trade their digital currency in exchange for government-regulated exchanges.
FTX, which has the highest valuation of approximately $32 Billion, has the support of giant investors like Ontario Teachers’ Pension Plan, Tiger Global, Temasek, and the Softbank Vision Fund. At a valuation of $18 billion, the cryptocurrency exchange raised $900 million for the first time in 2019. To do business, traders use FTX’s native cryptocurrency token, FTT.
What led FTX to fall into trouble?
On November 2, CoinDesk, a crypto news channel, reported the secret bondage between Alameda Research and FTX after the currently locked balance sheet of the hedge fund revealed the considerable amount of FTT tokens. However, both Alameda Research and FTX are owned by Fried and are considered two different entities.
After the report made by CoinDisk, on November 6, Binance made a public statement. It revealed that it is most likely to sell its FTT tokens because of the whole “unspecified recent revelations”.
Following the announcement of the Binance, trading in the crypto exchange witnessed an unusual high when traders pulled out $6 billion from the exchange amidst panic. Consequently, the crypto exchange witnessed a liquidity downfall.
To shield its customers from the ongoing liquidity downfall, FTX made an official announcement. It said that it had undergone a strategic transaction with Binance. Fried taking his Twitter account, tweeted, “Our teams are working on clearing out the withdrawal backlog. It will clear out liquidity crunches; all assets will be covered 1:1. This is one of the main reasons we’ve asked Binance to come in.”
Zhao also tweeted and confirmed that it signed a non-binding letter of intent with FTX aiming to take over FTX. Additionally, Zhao shared that Binance reserves the right to terminate the agreement at any time.
But on November 9, Binance took a step back, withdrawing itself from the deal. Binance, in its tweet, confirmed it, “As a result of corporate due diligence, as well as latest reports regarding mishandled customer funds & alleged US investigations, we have decided that we will not pursue the potential acquisition of FTX.com.”
The reaction of Crypto markets over the FTX’s bankruptcy
It took a very long time for the Crypto market first to digest the regulators on cryptocurrency. Because of the issue, CoinDesk, on Monday, witnessed a conflicting trend in cryptocurrency pricing. At 13:50 in the mid-day, the price of Bitcoin increased by 0.75% to $16,808. But the price for Ethereum witnessed an increment of 1.76% to $1,264. However, Dogecoin barely increased by 0.35% to $0.08, and XRP fell 2.34% to $0.34. The Shiba Inu fell 0.84%.
