The Crypto-Ignorant Person’s Guide To What’s Going On With FTX And Founder Sam Bankman-Fried
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Whereas the crypto trade has a repute for unhealthy habits and scams, FTX held itself up as one of many grown-ups. It lobbied for simpler authorities regulation of crypto and supplied to bail out different companies after they went bust.
Who owns it?
The corporate was based in 2019 by Sam Bankman-Fried, higher referred to as SBF, and former Google staffer Gary Yang.
Bankman-Fried, who was CEO, is the 30-year-old son of two Stanford legislation professors. He graduated from the Massachusetts Institute of Expertise with a physics diploma and frolicked as a dealer earlier than beginning up FTX.
He quickly grew to become one of many richest males in crypto, at one level value some $26.5 billion. Recognized for his tousled hair and cargo shorts, he courted the press and was hailed as crypto’s “golden boy.” He defied typical CEO habits, enjoying League of Legends throughout enterprise calls and allegedly dwelling in a polyamorous group with 10 colleagues within the Bahamas.
Bankman-Fried was referred to as an adherent of the “efficient altruism” motion — which asks adherents to decide on their careers and actions to greatest advance humanity — and arrange a basis to offer his wealth away. He was additionally a serious Democratic donor, promising to offer away $1 billion within the 2022 midterms, although he later walked again that dedication.
Whereas FTX’s leaders have been People, together with co-CEO and Republican donor Ryan Salame, the corporate was primarily based within the Bahamas. A widely known tax haven, the island nation has lighter monetary regulation, which means that FTX was capable of do trades and promote merchandise to purchasers that it couldn’t within the US.
What went unsuitable?
In brief, FTX ran out of cash. Extra particularly, it ran out of its purchasers’ cash.
Along with FTX, Bankman-Fried owned a crypto hedge fund referred to as Alameda Analysis. The 2 companies are purported to be separate. That is particularly essential as a result of FTX managed funds belonging to clients.
Nevertheless, on Nov. 2, crypto information web site CoinDesk reported that Alameda held billions of {dollars} of a cryptocurrency created by FTX. This led folks to query how a lot cash was actually in Alameda, and whether or not cash held in FTX was secure.
Bankman-Fried initially denied the report, saying in since-deleted tweets that “FTX is okay” and was the sufferer of rumors unfold by a competitor. Nonetheless, purchasers rushed to take away their funds from their FTX accounts. The very subsequent day, Bankman-Fried introduced that the corporate was affected by a “liquidity disaster,” which means that folks have been asking for more cash than FTX had out there.
Might FTX have been saved?
When Bankman-Fried introduced the disaster, he stated that the most important crypto alternate, Binance, had expressed curiosity in shopping for FTX. This is able to imply that purchasers’ funds would have been protected.
Nevertheless, Binance’s proprietor, Changpeng Zhao, said that the deal was topic to due diligence. Ultimately, Binance withdrew from the deal. The corporate tweeted that owing to “experiences concerning mishandled buyer funds and alleged US company investigations,” it could not rescue FTX.
On Thursday, Bankman-Fried tweeted out an apology:
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