Sam Bankman-Fried, more commonly known as SBF, is a crypto mogul known for founding exchange giant FTX and quantitative trading firm, Alameda Research. CoinDesk revealed that while Alameda Research and FTX were supposedly separate companies, the balance sheets of these companies had become intertwined. The holdings of Alameda Research were dominated by FTX’s token, denoted by the ticker symbol FTT.
Several days after this information surfaced, a rival exchange and investor in FTX, Binance, announced they would sell all remaining FTT holdings, amounting to $US580 million. Naturally, the price of the FTT token plummeted following the news. This price drop caused immediate panic among FTX users, and a ‘bank run’ on the exchange ensued. After only $US4.5 billion in crypto assets had been removed from the FTX platform, withdrawals stopped being processed without warning.
This situation left $US10 billion of user funds trapped on the exchange, potentially affecting millions of users. Fearing the worst, some affected crypto investors began selling whatever assets they had remaining to get out of the market, causing a rapid fall in Bitcoin and cryptocurrencies across the board. Rival exchange Binance briefly stepped in, offering to buy out FTX and fulfil their liabilities; however, after less than a day of due diligence, they announced the issues were beyond their “ability to help”.
After this, Chinese crypto-mogul and founder of TRON, Justin Sun, offered to back any FTX deposits of TRON-based tokens. Seeing a way out, users instantly flocked to buy the Sun-backed tokens and withdraw, pushing the price up on the platform by almost 50 times the original. Of course, when withdrawn, this meant taking an immediate loss of up to 99%. Many FTX users decided that taking this loss was better than leaving assets on the exchange.
FTX has since filed for bankruptcy, both in Australia and overseas, suffered an alleged hack for almost $US1 billion in user funds, and is now being investigated by the Bahamian Government for criminal misconduct. Quite the downfall indeed.