It had not been long when FTX and Sam Bankman-Fried, the CEO of the exchange, were ruling the headlines. However, the tides seem to have turned with these appearing in the headlines for all the wrong reasons.
The recent crash of one of the most prominent crypto exchanges, FTX, has left a lasting impact on crypto users and the market. As a result, most traders and investors have lost their faith in the sector resulting in a panic sell-off causing great losses.
Unsurprisingly, the concerned authorities have taken notice of the ordeal and are now set to investigate the matter for good. California’s Department of Financial Protection and Innovation recently announced they would start an investigation to determine the true cause of the crypto asset platform FTX‘s failure.
Behind The Scene Of What Went Down
The last week has been a bloodbath. A single week’s development in the crypto world has shaken the industry. This is perfect evidence that shows the volatile nature of the crypto world.
Sam Bankman-Fried, the CEO of FTX, was hailed as a savior of the crypto industry just at the start of this year. Bankman-Fried has earned a great reputation for helping many crypto companies in financial trouble. But the recent developments in the industry have turned the tides against FTX and its subsidiary Alameda Research.
It has not been long since the news broke out that Alameda Research has a sizable asset holding made up of only FTT, FTX’s native token. So naturally, this raised many concerns among the stakeholders in the industry who were earlier very confident about FTX.
But things worsened further when Binance, a significant investor in FTX, announced they would be liquidating their FTT assets soon. Binance clarified that they are making this decision citing concerns about liquidity crunches in FTX.
This announcement was a big surprise for stakeholders, who instantly went into panic mode, triggering a massive sell-off. This resulted in a huge drain of trading capital in the market, bringing down the prices of even some of the biggest cryptos, such as Bitcoin.
FTX’s Take Amidst The Hailstorms
In retaliation to all these, FTX decided to close down withdrawal services for users all over the world except for the U.S. Users should have taken this move as intended by the correspondents at FTX. Instead, this further fueled more distrust among investors, which is not beneficial for the crypto industry in the long term.
However, Sam Bankman-Fried could have mitigated this damage if he would take appropriate measures during the time. Unfortunately, this was not the case, and his response to this entire controversy came a little too late to make any significant difference.
What Is The Stand Of The Authorities?
California’s Division of Monetary Safety and Innovation (DFPI) announced on the 10th of November 2022 that they would launch an investigation to examine FTX’s failure as a crypto exchange platform.
The regulators mentioned within the announcement that the DFPI takes this oversight of accountability on FTX’s part very critically. They added that the division expects all concerned entities offering monetary companies operating within the state to adjust to native guidelines.
The authorities further encouraged people within the state to file complaints in case the ordeal impacted them.
However, the State of California authorities is not the only ones behind FTX, as many other authorities are playing their role here. In addition, many federal agencies are also taking note of all these developments and might soon launch their independent investigations. This comes even after FTX’s claim that the entire controversy has not impacted FTX.US.
Stern Steps Might Be Seen From FTX US
Following these developments, FTX US announced it would halt all operations associated with buying and selling on the platform within the upcoming days. At present, the FTX.US website states withdrawals can stay open.
Amidst all this turmoil, Maxine Waters, the U.S. Home of Representatives Monetary Companies Committee chair, has earned a reputation for his stringent trade rules. For example, Mr. Waters has highlighted that FTX tokens are nugatory, and all its clients are at midnight.
Many other representatives, including Karine Jean-Pierre, the White House press secretary, made a press release stating the administration will intently monitor exercise within the crypto house. In addition, she added the current information highlights the need for better regulations for cryptocurrencies.
Another reiteration came from U.S. Senators John Boozman and Debbie Stabenow. They are dedicated to ending and publishing an upcoming crypto invoice in light of the information and citing the incident.
While all these dramas are unfolding, FTX US has resigned from the Crypto Council for Innovation.
What Does This Mean For Traders And Investors?
Crypto traders and investors are already aware of the volatility of the crypto industry. Hence it is very likely they got into the industry knowing that things could go futile at any moment. However, there is no justification for everything that went down with the FTX collapse since this happened due to the poor administration of FTX and its subsidiary Alameda Research.
This means things would have been fine if FTT tokens didn’t contribute significantly to Alameda Research’s asset holdings. The matter of concern here is that Sam Bankman-Fried was taking many loans against these assets.
Fortunately, the concerned authorities noted all these developments and acted as early as possible. Another sigh of relief for traders and investors here is that even the Federal Authorities are also taking note of these events. As of now, the best users can wait for the conclusion of the investigation undertaken by the authorities in the state of California.
Another good thing is that Binance has announced that it will acquire FTX entirely. This means traders and investors need not worry so much about the safety and security of their assets in FTX.
That said, it would still be better if users found a way to withdraw their funds from FTX and move to a more secure platform for the time being. It is better to keep your assets in a more robust exchange that is not dealing with any current liquidity issues.
