People are losing money – and faith – with crypto.
Sam Bankman-Fried, the previously acclaimed billionaire and CEO of cryptocurrency exchange FTX, saw his fortune and confidence in his platform tumble after a CoinDesk article revealed that a company he also owned relied heavily on assets with no independent value, leading to: panic from FTX customers and in the crypto world, in general, this week.
One fear was that FTX was not solvent i.e. customers would not be able to actually withdraw their coins from the platform. The CEO Bankman-Fried refused these rumors on Monday in a now-deleted Tweet.
In a surprising series of events, a competing company, Binance, then moved to rescue FTX on Tuesday — by buying it. Changpeng “CZ” Zhao, the CEO of the rival crypto exchange, tweeted Binance would buy FTX because it had a “significant liquidity crisis”.
This afternoon FTX called in our help. There is a significant liquidity crisis. To protect users, we have signed a non-binding LOI, with the intention of acquiring in full https://t.co/BGtFlCmLXB and help cover the liquidity crisis. We will be doing a full DD in the next few days.
— CZ Binance (@cz_binance) Nov 8, 2022
Then, in yet another surprising plot twist, news emerged Wednesday that Binance could come back to rescue FTX – and possible as a result, do not support the platform’s client assets – after all, CoinDesk reported, citing an undisclosed source.
The saga has been a bucket of cold water for crypto investors, says micro crypto influencer and longtime token holder in space, Tiffany Fong.
“It’s shocking to see a company that many of us looked at in a hopeful and optimistic way has such problems and has such an illiquid balance sheet,” she said.
The fear inherent in the FTX episode can be traced back to the fall of fellow crypto exchange Celsius, which filed for bankruptcy in July, trapping its users’ assets, and the general decline in value. of cryptocurrency, which has been hammered by the instability of the wider economic environment. For example, Bitcoin, a flagship currency, is down 18% since the beginning of the FTX saga last week and has lost 65% of its value since the beginning of this year.
What’s going on with FTX?
FTX and Binance are both cryptocurrency exchanges. You can use them to exchange a coin from one currency to another. Both also offer other types of products, such as leveraged tokens, which: theoretical less risky crypto assets. Prior to Binance’s plan to buy the company, it was thought that the companies rivals.
Then things started to get bad for FTX. Last week, CoinDesk a story published noted a company closely associated with FTX, Alameda Research, Bankman-Fried’s research firm, (it’s like some sort of crypto hedge fund that trades crypto assets on a larger scale and is not accessible to ordinary retail investors) had a very much of its assets as the cryptocurrency coin FTX itself had created called FTT.
There’s nothing “wrong” with that, as CoinDesk pointed out, but it’s as if all your wealth is based on an asset (or, at least, based on the documents the point of sale had access to) that has value only because you say it it does, unlike anything with objective value on the market.
This scared people. fong said: she started hearing rumors on Twitter about the platform’s insolvency even before the article came out — and then, after the CoinDesk piece, Binance announced on Sunday that it would sell all his FTT. Customers then started withdrawing money from FTX and people started selling FTT, further dropping the price of FTT – and, theoretically, the value of Alameda.
Then, in the blink of an eye, rival trading platform Binance dove in, and the two company executives, Bankman-Fried and Binance CEO Changpeng “CZ” Zhao, tweeted Tuesday that they had signed a non-binding letter of intent for Binance to acquire FTX. But even since then, the Wednesday CoinDesk reportCiting an anonymous source, Binance said it is considering scrapping the acquisition after taking a look at the company’s financial records.
None of this bodes well for people involved in FTX.
Bankman-Fried lost nearly 94% of his fortune, some $14 billion, because of the debacle. Tom Brady has publicly invested in FTX and was an influencer for the company so the money he put into the platform is also at risk, per Yahoo Finance.
It is unclear how much Brady and his now ex-wife Gisele Bündchen, who also signed an endorsement agreement with the company, have sunk in FTX or how much they have lost.
BREAKING: Crypto exchange FTX has announced an endorsement deal with Tom Brady and Gisele Bündchen.
Both Brady and Bündchen will receive shares in FTX and a crypto signing bonus.
In total, FTX has committed to spend more than $350 million on sports partnerships in the past 6 months alone
— Joe Pompliano (@JoePompliano) June 29, 2021
Previously, FTX and Bankman-Fried were seen as the “white knights” as Fong put it, as Bankman-Fried had dived to rescue via buy struggling competitor Voyager Digital. So it was disturbing to find out that FTX needed to be saved, she added.
It’s possible Brady and Bündchen even get questions about how much they knew about shaky business foundations, as crypto-astrologer-influencer Maren Altman has about Celsius.
There also seem to be more official sources poking around. Bloomberg’s Law reported On Wednesday, two US government agencies, the Securities and Exchange Commission and the Commodity Futures Trading Commission, are investigating FTX over questions about its liquidity.
Whatever happens, it’s been a rough day for Fong, despite her long-standing love of decentralized finance. Although she had no significant coins in FTX, Fong lost about $200,000 in the Celsius debacle, and that, combined with the FTX drama, makes her question her confidence in some currencies.
After this, “people [are] losing faith in crypto as a whole,” she said.