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Behind FTX’s Fall: Battling Billionaires Fail To Save Themselves

The crypto market has been in a bloodbath for the last few days, and we’re no strangers to the fact! 

However, while not everybody had an idea of the latest turn of events, things have been complicated on the inside of this recent fall of a billionaire. 

Wonder what the event was like? How it unfolded? Continue reading as we explore the different aspects behind the fall of FTX in the following sections. Let’s get started. 

Breaking The News

As per the latest news, Sam Bankman, former CEO of FTX, broke the news to his staff early on Tuesday (November 10). He said that he was sorry to have completely screwed up.

Adding more, Fried said it was due to Binance’s latest statement. FTX’s fiercest rival intended to launch a surprise acquisition of its primary trading platform to protect the exchange from a “liquidity crunch” earlier that hour. The billionaire previously accused Changpeng “CZ” Zhao, creator of Binance, of sabotage, who now would be the exchange’s White Knight.

Interview sessions with several individuals close to Fried and other undisclosed communication between the companies suggest that the colossal failure of FTX could be traced back months earlier. 

The Fall Of FTX: A Clear Event That Could Be Predicted A Few Months Ago!

As per insider sessions, the fall of FTX was inevitable. It began with the errors that Bankman made, trying to step in to save other crypto firms as the market was crashing due to increasing interest rates. Adding more light into the earlier events, the interviews and meetings suggest the latest events resulted from savage billionaire rivalry. 

The shocking turnabout for Bankman-Fried was topped by Zhao’s announcement of the impending takeover. The founder of the FTX exchange laid its roots in the Bahamas in 2019 and oversaw its growth, becoming one of the biggest, amassing a wealth of around $17 billion.

According to two people closest to the CEO, Bankman-Fried was stuck without needing a buyer and was looking forward to other supporters. After withdrawing, Binance sent a message to the FTX team about “exploring all possibilities” but did not initially inform the FTX team of any concerns about the arrangement. 

Besides, requests for comments from FTX and Binance still need to be answered. On Tuesday, Reuters was informed by Bankman-Fried that he was too ‘overwhelmed’ for interviews. Further messages that were sent were unanswered by him.

Role Of Binance In The Historic Fall

Binance has tied horns with FTX for a while now. Besides, the market often witnessed a crash between the exchange mongers. Binance previously stated that it decided to back out of the purchase after carefully assessing FTX and reading press reports concerning U.S. inquiries into the business.

Both Fried and CZ had recently fought for market share and made public accusations against one another of attempting to harm the other’s companies. Following a few weeks of a heated argument, everything came to a head earlier this week when Binance moved out of the agreement, casting doubt on the future of FTX.

The announcement of FTX’s liquidity crisis, valued at $32 billion in January by investors such as BlackRock and SoftBank, caused a stir in the cryptocurrency community. 

Events Following The FTX Bloodbath

The Market Gets Colder

The industry’s value, whose worth has plunged by almost two-thirds this year because the central banks have restricted lending. Adding to it, the market has been further affected as the price of key tokens crashed, with BTC moving to its lowest price level in over two years.

Following the price of BTC, other significant coins like ETH and Solana took a fall into a new dip. The recent events have left the entire market in a more complex state, pushing back any chances of improved performance.  

Binance On A Bad Note?

Besides, as per Binance, the exchange backed out of the offer to escape regulatory scrutiny. As per the exchange’s CEO, the move was necessary as it would have certainly come along with the takeover, which Zhao had hinted was possible in a note to staff that he shared on Twitter.

Following the events, Binance has received warnings from financial regulators worldwide for trading without breaking money or license, raising laundering regulations. In addition, the United States Justice Department is investigating alleged money laundering and criminal sanctions breaches involving Binance. 

As part of a yearlong series of stories on the exchange’s compliance with financial crime, Reuters revealed earlier this month that Binance had assisted Iranian corporations in trading $8 billion since 2018 despite U.S.sanctions.

Deteriorating Relationship

The latest events have further deteriorated the relationship between FTX and Binance. Zhao purchased 20% of the exchanges for around $100 million six months after FTX’s opening, according to a person having an idea of the transaction. According to Binance, the investment was “intended to expand and explore the cryptocurrency economy together.”

But their relationship deteriorated after 18 months. According to former Binance workers, FTX had expanded quickly, and Zhao now saw it as a true rival with ambitions on a worldwide scale. 

Besides, Reuters also came up with some emails and messages shared between the exchanges. The conversation suggests that when FTX needed to provide details about its significant owners to apply for Gibraltar’s license to open their new branch in May 2021, Binance rebuffed its pleas for assistance. 

The texts reveal that FTX attorneys and advisors contacted Binance a minimum of 20 times between May and July, seeking information on Zhao’s financial background, banking connections, and Binance ownership. The chief finance officer of Binance was informed by an FTX lawyer around June 2021 that Binance wasn’t “working with us effectively” and that the company ran the danger of severely interrupting a vital project for them. 

A Binance legal team representative contacted Zhao’s assistant in response to FTX these past few months. However, she could not obtain a complete response because the questions seemed “too generic.”

Bankman had become impatient by July of the same year. The individual with intimate knowledge of the transaction claimed he paid around $2 billion to buy back Zhao’s shares in FTX. Finally, after two months had passed and Binance wasn’t participating, Gibraltar’s authority authorized FTX.

Zhao revealed last Sunday that part of the amount paid to Binance was made in FTX’s token, FTT. Zhao would subsequently force Binance to liquidate this stake, which sparked the FTX issue.

Attempt At Pursuing

According to three persons acquainted with its operations, Bankman-trading Fried’s company, Alameda Research, saw a string of trade losses in May and June.

According to two sources, these assets include a loan deal of $500 million with Voyager Digital, another defunct crypto lender. The following month, Voyager requested bankruptcy protection, and in a September auction, FTX’s US division paid $1.4 billion for its assets.

A representative for Voyager further said that the business had only utilized $75 million of the Alameda credit line. As a result, the whole scope of Alameda’s losses was unknown to Reuters.

However, on November 2, news outlet CoinDesk reported on a stolen balance sheet that purportedly showed a sizable percentage of Alameda’s assets, worth $14.6 billion, were held in FTT.

The balance sheet only reflects a “subset of FTX and Alameda’s corporate entities,” according to a tweet from the CEO of Alameda, and it is missing $10 billion in assets. Ellison did not respond to inquiries for comment. That did nothing to end the growing speculations over what FTX would mean by Alameda’s financial soundness.

Transfer Surge

Users raced to take $6 billion in cryptocurrency tokens from FTX in 72 hours, according to Bankman-Fried, who said the company had a “giant withdrawal spike” in his letter to colleagues this week. According to Bankman-Fried, daily withdrawals typically came to tens of millions of dollars.

Following Zhao’s tweet announcing that Binance will sell its FTT ownership, Bankman-Fried expressed assurance that FTX would withstand the onslaught of its competition. Withdrawals were “not unexpectedly, much up,” he said, but they could still handle the demands.

The Future Of FTX?

The latest turn of events has put FTX on a bad note with the crypto investors and traders. Following the recent collapse, rumors also suggest the exchange locking in payments for almost every user. 

With so much happening over the last few days, what’s your take on the future of the FTX exchange and the FTT tokens?

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