Many mysteries are emerging from the fall of crypto exchange FTX including billions of dollars going missing from the company.
Key Details
- FTX founder Sam Bankman-Fried (SBF) admitted to New York Times DealBook organizer Andrew Ross Sorkin to making many mistakes, but denied ever committing fraud.
- “I made a lot of mistakes,” Bankman-Fried says. “There are things I would give anything to be able to do over again. I didn’t ever try to commit fraud on anyone.”
- Although he alleges that he didn’t commit fraud, questions remain over the fact that FTX had an $8 billion hole in its balance sheet, but Bankman-Fried didn’t give an answer to the mystery.
- Specifically, there was $500 million pulled out of an FTX fund after the bankruptcy filing.
Why it’s news
Many questions still loom in the wake of the FTX fallout including—what happened to the billions that went missing from the company?
Billions of dollars went missing amid the fallout including customer funds and it seems as anyone knows where this money is or how to return it to the company’s former clients.
Things got out of hand for SBF and his company, but he alleges that he “didn’t knowingly commingle funds” leaving the mystery wide open.
John J. Ray III who took over the company during its bankruptcy says that FTX was severely out of control and referred to it as one of the worst corporate failures he’s ever seen.
As the process continues to roll out and the full damage of FTX is unveiled, it is unsure when or if clients will get their money returned as it is still unknown where the missing money has gone.
What led to the fall
The fall happened very fast and left many people confused—including SBF—as to what happened with the company and it turns out it was linked to risky bets gone wrong that the CEO called a poor judgment decision.
Many were unsure as to what happened to FTX in the beginning, but it seems the company took some risky bets that didn’t turn out to be good moves.
FTX has an affiliated trading firm called Alameda Research and FTX lent billions of dollars worth of customer assets to fund risky bets led by the firm, according to people familiar with the matter.
Crypto Contagion
The failure of FTX not only destroyed the reputation of the company and CEO Sam Bankman-Fried but also affected the crypto community as a whole.
Cryptocurrency lender BlockFi Inc. files for bankruptcy related to the recent crypto fallout.
BlockFi’s bankruptcy “underscores significant asset contagion risks associated with the crypto ecosystem, and, potentially, deficient risk management processes,” says Monsur Hussain, senior director at Fitch Ratings.
