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FTX Trading Ltd. is one of the largest cryptocurrency exchanges known for its expertise in buying and selling crypto derivatives and was once valued at around $40 billion - this is how it went bankrupt and was mired in the scandal.
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FTX - short for Futures Exchange - is a cryptocurrency exchange company.
FTX differentiates itself from other cryptocurrency companies by buying and selling crypto derivatives.
FTX is available in the US, the Bahamas, Japan, Europe, Switzerland and Hong Kong.
In addition to its own token - FTT - FTX allows trading of Bitcoin, Ethereum Ripple and Tether and also more than 300 trading pairs, according to Investopedia.
FTX foundation and company incorporation
- FTX was co-founded in May 2019 by Massachusetts Institute of Technology graduates Sam Bankman-Fried and Gary Wang.
- Bankman-Fried has a background in ETF trading, while Wangs was at Google before FTX.
- As of October 2021, FTX has raised $25 billion worth through investments from Temasek, an investment firm partly owned by the Government of Singapore.
- FTX's valuation peaked at $32 billion, and FTX America was valued at $8 billion by investors following its $400 million acquisition in January 2022.
FTX collapse event
- On November 11, 2022, FTX announced via Twitter Bankman-Fried's resignation as CEO of FTX, his predecessor John J. Ray III, and the company's bankruptcy filing.
- As of November 17, 2022, FTX is officially insolvent with its 101 debtors, all of whom have filed for Chapter 11 bankruptcy.
- Changpeng "CZ" Zhao, CEO of cryptocurrency exchange Binance, announced just days before filing for bankruptcy that Binance would sell FTT tokens due to "'worrying trends' in the balance sheets of companies Bankman-Fried is linked to" . as reported by Forbes , an event that ultimately led to the collapse of FTX.
FTX liquidity crisis
- The collapse of FTX, and eventually Bankman-Fried, resulted from criticism of the liquidity of the FTT token and its trading firm, Alameda Research Company.
- Reuters reports that Bankman-Fried is moving up to $10 billion of FTX client funds to Alameda, with its core assets held in FTT tokens.
- This, coupled with CZ's announcement that they were selling Binance's stake in FTT, resulted in a growing loss of customers, thus bankrupting the entire FTX group.
- The client withdrew from FTX on higher terms just days before filing for bankruptcy.
Arrest of Sam Bankman-Fried
- Bankman-Fried was arrested on December 12, 2022, one month after the FTX crash.
- According to the Justice Department, he was charged with "two counts of wire fraud and one count of conspiracy to commit money laundering...". …a conspiracy to commit merchandise fraud, a conspiracy to defraud securities, and a conspiracy to defraud the United States and commit campaign finance violations.
- Since then, up to five new criminal charges have been filed against Bankman-Fried.
- In his public statements, he has asked a federal judge to drop ten criminal charges against him.