Cryptocurrency turmoil has never shied away from the mainstream headlines over these past few years as it has grown in popularity. Terra LUNA’s crash a few months previous sent shockwaves as billions were lost, a scary sight as LUNA was considered to be a stablecoin. A digital asset backed by the American dollar, mirroring its price. Similar to the likes of USDC.
FTX has recently gotten in the limelight after the cryptocurrency exchange became one of the industries hottest names for all things investing and crypto trading. With the traction this exchange received from their marketing efforts, it is no surprise that the downfall has not gone unnoticed.
Read on to find out more about the rise of FTX, what it actually was, the fallout that has unfolded over the past couple of weeks!
Who is FTX?
FTX are a web3 trading exchange that allowed users to trade, swap, invest and stake their in their favourite cryptocurrencies. The brand was founded only back in 2019 and since then has amassed significant trading volume and user engagement, to the point where they were only just behind the likes of Binance and Coinbase as one of the biggest exchanges on the market. They were the 3rd largest.
Over 1 million users are signed up to FTX with billions in capital being deposited onto the site for trading and investing means. The FTX business is located in Bahamas which is interesting, probably something to do with their Lax tax laws on crypto and other assets, both traditional and digital.
Their founder, Sam Bankman-Fried is at the centre of the controversy. He is a young entrepreneur that managed to amass a whopping $16 billion net worth that has seemed to come crashing down amidst this controversy, filing for bankruptcy in the process.
Sam became a philanthropist as he started dishing out large amounts of his wealth to businesses and government bodies, the most notable being the Democratic party in the United States. Sam’s official job title was “chief executive officer”.
FTX was evaluated back in October as a $25 billion company, receiving funding from the likes of BlackRock, Sequoia & Coleman’s Tiger Global. Looks like these giants will be eating their money and cutting their contributions off as losses.
Social Media backing for FTX
If you are active within the crypto scene and engage with online content you will be familiar with the marketing efforts of FTX. If you are not then you will be after reading this.
The power of influencer marketing has been seen within fashion, gaming and now even in finance. Financial influencers have become rampant on Instagram and YouTube with the lockdown period giving them a much needed algorithmic boost as millions were searching for answers from the finance Gods.
The likes of Graham Stephan, Andrei Jikh, Coin Beureau and Max Maher were some of the leading figures in pushing FTX to their millions of fans, both young and old and also naive as this has panned out.
Millions of dollars were paid out in sponsorships as these creators would promote their referral links for FTX, offering fans sign up bonuses for using the platform. Since the initial headlines, many of these creators have gone ahead and apologised for their participation in pushing the FTX in their content.
Fans have lost out in vast amounts of money as withdrawals have been temporarily blocked all whilst the influencers have received their paycheck, (exactly how the pump and dump scandals in the NFT space concluded in 2021 and in 2022). However it must be noted nobody could have predicted this happening, especially in such a short timeframe as FTX was still receiving funding from investors the months previous.
So what actually happened to FTX?
Hopefully the above has given you a better outline of FTX and how they rose to such stardom for those who are not fully clued up on the company. The events that have unfolded have gone from bad to worse as many of them involve people’s funds and foul play from the organisation’s board of directors, specifically from Sam Bankman-Fried.
In just one day FTX users withdrew a massive $6 billion of funds in just 72 hours, which caused mass hysteria amongst the FTX camp.
There is more that unfolded. Sam worked alongside a separate company that has had ties to FTX. They are Alameda Research, a trading firm that received a staggering $10 billion in funding, at FTX user expense. Highly fraudulent.
A vast amount of Alameda’s fund pot was in FTX’s token FTT in a report published by Coindesk. FTT price plummeted though Binance held a large proportion of the tokens circulation. As collateral for this, Binance offered to buyout FTX, to assist with paying back their user base due to them filing for bankruptcy. The offer was withdrawn swiftly due to “issues that are beyond our control or ability to help.”
FTX and Sam have had their say over this ordeal taking to Twitter, stating the following:
“I fucked up, and should have done better,”
“I also should have been communicating more very recently.” FTX were said to have “a poor internal labeling of bank-related accounts”.
It’s not all doom and gloom
Luckily for Sam as an individual he was not a flashy billionaire. He was famous for not spending big and for giving away his wealth in mass quantities. His Toyota Corolla was the talk of the town amongst his fans and advocates.
Sam has a lot of answering to do also as he was spotted many times in high paced business investment meetings playing League Of Legends. A great thing to be noted doing considering the responsibilities placed in this man’s hands.
As we speak FTX are selling off their assets to gain back their losses and have even been noted to be selling off their cleaning company also. Sadly they won’t be sorting this mess that they have gotten themselves into.