House Of Cards: What Happened To Crypto Exchange FTX?

Critical Thinking Required

FTX went from a crypto exchange leader with a $32 billion valuation to bankruptcy in a matter of days, with potential criminal investigations and class-action lawsuits pending. What happened? FTX is a crypto exchange that was started by Sam Bankman-Fried (SBF). Prior to FTX, he started a hedge fund Alameda Research, which the main purpose was to "act as a liquidity provider on FTX" according to Sam himself. In early November this year, a CoinDesk report showed that Alameda's investment foundation was in FTT, the token that its sister company had invented, not a fiat currency or other cryptocurrency per industry best practices. In addition, due to the sharp price decrease of most cryptocurrencies, FTX lent about $10 billion of customers' assets to Alameda. All this bad news created a "bank run": FTX got over $5 billion worth of withdrawal requests within one day. After Binance, the world's biggest crypto exchange refused to buy FTX out, it had no choice but to start the bankruptcy process. Is this the end of crypto and blockchain? Of course not! But as always, understanding your investments is crucial. If you want to make an asymmetric investment where the amount is insignificant to your overall assets and you don't mind losing it all, go ahead and have some fun. Otherwise, please don't risk a big chunk of your assets on something trendy, and yet most of us don't truly understand.