Is FTX Crash an End To Crypto? Here’s how a multi-billion dollar scam unfolded

There have been a lot of articles asking the same question: “Is FTX crash the end of crypto?” The short answer is no. Why? Did Lehman Brothers’ bankruptcy in 2007-08 and the subprime mortgage crisis of 2007-08 signal an end to the stock market? It didn’t. Was it bad? Yes. Was it a setback? Yes!
Is FTX crash a significant setback for crypto market. Unfortunately, yes.
The crypto market has been severely affected by the FTX-Alameda crises. It will take time for it to recover.
You might be interested in how this story ended. From a buzzing company (FTX), to a charismatic personality (SBF), to a bankrupt entity, and a disgraced figure with so much legal trouble. This has undoubtedly scared a lot of crypto enthusiasts and investors.
Also read: Will Trump Return to Twitter?
Chain of Events to FTX Bankruptcy
Leaks in Alameda Balance sheet
Coindesk published an exclusive report based upon a leaked balance sheet from Alameda Research, FTX CEO Sam Bankman Fried’s trading company. The report revealed that Alameda has a balance sheet full of FTT tokens which are issued by FTX.
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It meant that Alameda’s trading company, SBF, was able to rely on a foundation made up largely of a token created at his sister company, rather than an independent asset such as a fiat currency, or another cryptocurrency.

FTX uses FTT to reward traders who trade discounts. Alameda holds significantly more tokens that are traded on the market. This suggests that it would be difficult for Alameda to liquidate its holdings at current prices.
Binance decides to sell FTT Token Holdings
Changpeng Zhao, Binance CEO, announced via Twitter on November 6th that he was selling all of his FTT token holdings. Binance was an early investor of FTX and received approximately $2.1 billion in BUSD and FTT tokens. CZ compared FTT with the Luna token, which Binance used to support.
FYI, Binance and FTX have been battling for supremacy on the crypto exchange market for quite some while.

Binance received approximately $2.1 billion USD in cash and FTT as part of Binance’s exit FTX equity last fiscal year. We have decided to liquidate any FTT remaining on our books due to recent revelations. 1/4
CZ Binance (@cz_binance), November 6, 2022
The Domino Effect: FTT Token Prices Drop
Investors were scared by CZ’s announcement. In just 72 hours, panicked investors had withdrawn $6 billion in just 72 hours. FTT token prices fell below $22. FTX was also facing a liquidity crisis.
CZ Offers Assistance, But Later Backs Out
CZ Binace, CEO of Binace, intervened to save the FTX on November 8. CZ announced that his company had agreed to purchase FTX from Sam Bankman-Fried for an undisclosed sum. CZ tweeted that they had signed a non-binding letter of intent (LOI), to fully acquire the FTX cryptocurrency trading platform.
CZ reports that Binance was contacted by FTX executives due to a liquidity crisis. He has now agreed to “help them out.”

FTX reached out to us today. There is a severe liquidity crunch. To protect users, we signed a non-binding LOI, intending to fully acquire and help cover the liquidity crunch. In the coming days, we will conduct a full DD.
CZ Binance (@cz_binance), November 8, 2022

1) Hello all, I have some announcements to make.
Things have come full circle, and’s first, and last, investors are the same: we have come to an agreement on a strategic transaction with Binance for (pending DD etc. ).
— SBF (@SBF_FTX November 8, 2022
But things didn’t go according to plan. They pulled out of the deal on November 9, citing news about the mishandling customer funds and alleged U.S. agencies investigations as the reasons. The FTT token had lost more than 90% of its value since the beginning of the crisis.

As a result of corporate due diligence, as well as the latest news reports regarding mishandled customer funds and alleged US agency investigations, we have decided that we will not pursue the potential acquisition of
— Binance (@binance), November 9, 2022
FTX Exchange Files Bankruptcy; SBF Steps down as CEO
FTX filed for Chapter 11 under the United States Bankruptcy Code on November 11. This was to initiate a process of reviewing and monetizing all assets of the company for the benefit of all stakeholders.

Press Release
— FTX (@FTX_Official) November 11, 2022

1) Hello all
Today, I filed FTX and FTX US as well as Alameda in support of voluntary Chapter 11 proceedings in the US.
— SBF (@SBF_FTX November 11, 2022
Sam Bankman-Fried was also the founder of the company and resigned as CEO. John J. Ray III was named the new CEO.
Reports emerge of a FTX hack
Reports suggested that FTX wallets had been hacked and that exploiters had taken insider assistance to gain root access. In just a few hours, more than $600 million worth of abnormal transfers were reported. The exploiter then swapped all crypto assets to DAI or ETH, which cannot be frozen.
Sources tell Reuters that $1 billion worth of client deposits went missing from the bankrupt cryptocurrency exchange. There are many allegations of mismanagement of customer funds. Prosecutors believe that FTX and its founder SBF could be charged with criminal acts for using customer funds for Alameda Research, his other company.
Bahamas and SBF
Sam Bankman-Fried, founder of FTX, informed Reuters on November 12th that he was in Bahamas. This refuted Twitter speculation that he had flown from South America.
FTX discovered that Bankman-Fried, FTX co-founder Gary Wang, and Bankman-Fried made “unauthorised” transfers at instructions from the Bahamian government. They were “essentially in custody of Bahamas authorities.”
This is not the end of the story. Keep watching.

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