FTX Failed: The Inside Story of What Caused the Exchange's Collapse

FTX Failed: The Inside Story of What

Caused the Exchange's Collapse

FTX, a crypto exchange, failed in 2022 it was led by the founder and CEO, Sam Bankman-Fried, and will have a big impact on the crypto market. This failure is related to the choices made by Bankman-Fried.

The aftermath of collapse: Hack, Arrests and legal proceedings:

• FTX was a crypto exchange that collapsed in November 2022 due to concerns about leverage and solvency.

• The collapse made the crypto market lose billions and drop below a value of $1 trillion.

• FTX tried to get bailout funds and another exchange, Binance, thought about buying part of the company, but later changed its mind.

• The CEO of FTX left the company and they filed for bankruptcy.

• After the collapse, there was a report of a hack where a lot of tokens were stolen.

• The founder of FTX, Sam Bankman-Fried, was arrested and brought to the US where he pleaded not guilty to criminal charges.

What Happened to FTX?

FTX was a crypto exchange, it failed in November 2022, and it took 10 days. The reason for the failure was a news report that said a trading company run by the CEO had a lot of FTX's own tokens.

A news report said that the CEO's company had a lot of its own tokens, this made people worry that the company didn't have enough money to survive.

What do we know about FTX Exchanges'

bankruptcy?

FTX, a cryptocurrency exchange, filed for bankruptcy at the end of last week, after another exchange, Binance, decided not to help them.

FTX, a crypto exchange, went bankrupt. The new leader said in the papers that they made many mistakes, like using software to hide that they took customer's money for themselves. He also said he didn't believe the financial reports made by the old leader were true.
When FTX went bankrupt, it put the savings of many customers in danger as they may not be able to get back the assets they deposited on the platform. The new team was able to recover some money, but it was a small amount of what they needed.

What are the implications of this on the crypto

industry?

The crypto industry has had a hard time getting people to trust it, especially the government and investors. After the collapse of FTX, some government agencies are investigating if the company used customers' money to support another company run by the CEO. This collapse has also affected other companies in the industry. The value of FTX's token, FTT, has dropped a lot, and other main crypto coins like Bitcoin and Ethereum also lost value.

What were the reasons behind the collapse of

FTX?

Traders use FTT, which is the native token of FTX, to pay for transaction fees and other operations. In the past, Binance's CEO Changpeng Zhao sold his stake in FTX to Sam Bankman-Fried, which was partly paid for by FTT tokens.


On November 2, CoinDesk, a crypto publication reported that a leaked document showed Alameda Research, a hedge fund run by Sam Bankman-Fried, held an excessive amount of FTT tokens, which raised concerns. Alameda Research's need for funds to run its trading business was one of the main reasons FTX was created in 2019, but the way the two entities were structured meant that if one of them faced trouble, it would impact the other as well, which was the case when the crypto prices began to drop in the spring.


Binance, later on, November 6, announced that it would sell its FTT tokens due to recent revelations, which caused the price of FTT to plummet and traders panicked, pulling out of FTX as they feared it would be another failed crypto company. FTX, as a result, was overwhelmed with withdrawal requests amounting to around $6 billion in three days. The company appeared to have entered a liquidity crisis, meaning it did not have enough money to fulfill the requests.

What actions did Binance take in response to the

situation with FTX?

On November 8, Binance announced that they had made a deal to buy FTX, a crypto exchange, to save it. But Binance's CEO, Changpeng Zhao added that they have the option to cancel the deal at any time. At the same time, Sam Bankman-Fried, the founder of FTX stated that this deal will protect the customers and FTX can now complete the withdrawal process. He also denied any conflicts between FTX and Binance and said "we are in the best of hands"

The Consequences of the collapse of FTX

The sudden failure of the cryptocurrency exchange has caught the crypto community off guard.

• The Rise and Fall of Sam Bankman-Fried: An exploration of the man behind FTX and his journey in the industry.

• Understanding FTX's Operations: A look at how FTX differs from traditional stock exchanges, which have stricter regulations and prohibited activities.

• Sam Bankman-Fried's Legal Battle: The legal proceedings surrounding the case of the former CEO of FTX and his agreement to pay minimal compensation before his trial.

• The role of Ryan Salame in the scandal: An examination of the former FTX executive's involvement in the case and his decision to notify the regulators of the wrongdoings at the exchange.