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Cryptocurrency What led to the fall of Sam Bankman-Fried's FTX

What led to the fall of Sam Bankman-Fried's FTX (Photo By Tom Williams/CQ-Roll Call, Inc via Getty Images)

By Savannah Young Leaders Staff

Savannah Young

News Writer

Savannah Young is a news writer for Leaders Media. Previously, she was a digital reporter for WATE Channel 6 (ABC)...

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Nov 10, 2022

What Led to the Fall of FTX

The fall of FTX and crypto as a whole was due to risky bets gone wrong.

Key Details

  • FTX, one of the giants in the world of cryptocurrency, has recently plunged in value—and it happened fast.
  • The failure of the large crypto exchange came as a surprise and brought fear to the sector causing many holders to sell causing many digital coins to drop quickly.
  • The fall happened very fast and left many people confused 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.

Why it’s news

FTX is one of the giants in the crypto world. It is a crypto exchange platform that boasts millions of users including big name celebrities.

The exchange was showing no signs of trouble before the huge fall earlier this week, which was a huge shock to the crypto world.

Many were unsure as to what happened to FTX, 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.

FTX CEO Sam Bankman-Fried says Alameda owes the company about $10 billion that it lent to fund its bets. The bad thing is the money that FTX lent to Alameda was customer’s money that they had put into accounts for trading.

Considering FTX had about $16 billion in customers’ money the company lent over half of its money to fund bets that had no promise of winning.

FTX was forced to pause customer withdrawals after $5 billion in withdrawal requests were sent to the company.

“An exchange really shouldn’t have problems getting its customers their deposits,” says U.K. economist Frances Coppola. “It shouldn’t be doing anything with those assets. They should literally be sitting there so people can use them.”

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.

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