Why did FTX fail and collapse?
Main topic: Tech
- FTX lent sister company Alameda Research an estimated $10 billion in customer funds.
- They filed for bankrupcy on 11 November 2022.
It started with Coindesk article about Alameda caused withdrawal run on FTX
- Coindesk reported on 2 November 2022 that Alameda Research, the sister proprietary investment firm also owned by Sam Bankman-Fried, was possibly insolvent. It had $8 billion in liabilities and $15 billion in assets, but most of these assets were the highly volatile FTT, SOL, and other Solana tokens.
FTX is estimated to owe clients $9.4B
- Reuters reported that Bankman-Fried was trying to raise $9.4 billion from investors.
- The WSJ also reported that FTX needed $8 billion to cover withdrawal requests. FTX lent $10 billion to its sister company Alameda Research, out of a total of $16 billion in customer deposits.
- Earlier, FTX was looking for $1 billion, according to Semafor.
FTX paused withdrawals on 8 November 2022
- On 8 November 2022, around 12 PM GMT, FTX paused withdrawals.
- That was after processing $6 billion in withdrawals over the past 72 hours.
CEO SBF initially claimed that FTX has assets to pay back clients
- On Twitter, Bankman-Fried initially claimed that FTX has enough assets to pay back clients, but that they are not all liquid.
- He also claimed that his priority was raising money to do "right by users".
Binance and Kraken did not want to purchase them
- On 8 November 2022, FTX and Binance announced that they signing a non-binding agreement for Binance to purchase FTX.
- Just one day later, on 9 November 2022, Binance pulled out, citing evidence of "mishandled customer funds and alleged US agency investigations."
- Kraken was another exchange approached by FTX. They did not reach a deal.
Some users reported getting withdrawals
- According to crypto analytics firm Nansen, starting on 10 November 2022, more than $10 million in withdrawals was processed by FTX. The details of these transactions, and whether FTX has the money to pay all clients, are unclear.
FTX was hacked for $400 million
On November 11, FTX was hacked for around $400 million in crypto. The media reported it was likely an insider job.
- ↑ Allison, Ian (2022-11-02). "Divisions in Sam Bankman-Fried's Crypto Empire Blur on His Trading Titan Alameda's Balance Sheet". www.coindesk.com. Retrieved 2022-11-10.
- ↑ "FTX Needs $8 Billion, Bankman-Fried Tells Investors". WSJ. Retrieved 2022-11-10.
- ↑ Kowsmann, Vicky Ge Huang, Alexander Osipovich and Patricia (2022-11-10). "FTX Tapped Into Customer Accounts to Fund Risky Bets, Setting Up Its Downfall". Wall Street Journal. ISSN 0099-9660. Retrieved 2022-11-10.
- ↑ "Before deal with rival, FTX scoured Wall Street, Silicon Valley billionaires for $1 billion lifeline | Semafor". www.semafor.com. Retrieved 2022-11-10.
- ↑ "FTX appears to have stopped processing withdrawals, on-chain data show". The Block. Retrieved 2022-11-10.
- ↑ "FTX 'effectively paused' withdrawals, CEO Sam Bankman-Fried tells employees". The Block. Retrieved 2022-11-10.
- ↑ "Crypto exchange FTX saw $6 bln in withdrawals in 72 hours". Reuters. 2022-11-08. Retrieved 2022-11-10.
- ↑ Shen, Lucinda (2022-11-10). "FTX approaches Kraken amid scramble to find funding". Axios. Retrieved 2022-11-10.
- ↑ twitter.com https://twitter.com/Blockanalia/status/1590746975703797760. Retrieved 2022-11-10. Missing or empty
- ↑ Sandor, Krisztian (2022-11-14). "FTX Hacker Panicked, Still Holds $339M in Ether, Cryptos: Arkham Intelligence". www.coindesk.com. Retrieved 2022-11-15.