FTX Trading Ltd d/b/a FTX.com announced that it, West Realm Shires Services Inc. d/b/a FTX US, Alameda Research Ltd, and approximately 130 additional affiliated companies (together, the “FTX Group”) had commenced voluntary proceedings under Chapter 11 of the United States Bankruptcy Code in the District of Delaware to begin an orderly process to review and monetize assets for the benefit of all stakeholders.
It needs no rocket scientist to predict that the FTX bankruptcy will have far-reaching impacts. FTX founder Sam Bankman-Fried has presented himself as a public and political figure who was seen as a figurehead, even as a Crypto King, to many outside the crypto scene. Binance and its founder Changpeng Zhao were deeply involved in this crash. Against this background, the consequences of the FTX case for the entire crypto scene and the vision of a new blockchain-based money economy will be even more dramatic and maybe game-changing. Brace for tough crypto times.
The Crypto King And His Publicity Stunt
The truth is that Sam Bankman-Fried (SBF) was unknown in the crypto scene until he founded his quantitative crypto tradinHelmeda in 2017. Then in 2019, he founded FTX. He had little idea about crypto, as he confessed in various interviews. For him, it was a way to get rich quickly. The 30-year-old MIT graduate raised around $1.8 billion from investors between 2019 and 2022 for FTX. At the peak of the hype, FTX was reportedly valued at $32 billion.
SBF has also spent the money with both hands, striking sponsorship deals and paying A-Celebrities for their involvement. FTX was played out on a global stage as a play for the future of money. FTX had signed big-name investors and promotional deals, including the U.S. football star Tom Brady and his ex-wife, the Victoria-Secret model Gisele Bündchen, or the NBA legend Stephen Curry. FTX invested several hundred million U.S. dollars into its public presentation, including $135 million for the naming rights to a sports arena in Miami.
Moreover, SBF, a staunched Democrat (Bitcoin.com), donated dozens of millions to their political campaigns. According to Open Secrets, the 30-year-old SBF has been the party’s second-biggest individual donor in the 2021–2022 election cycle, with donations totaling $39.8 million. Only George Soros donated more (about $128 million) to the Democratic cause.
It will take a lot of time before now-disgraced politicians and celebrities forget the FTX disaster. As a result, the entire crypto sector will suffer and be under general suspicion.
The Binance Narrative
The question is whether SBF is the only culprit in the current crypto disaster. On Twitter, Binance founder and CEO Changpeng Zhao (C.Z.) and SBF have blamed each other. C.Z. was one of FTX’s early investors in 2019 and allegedly invested $100 million. Binance has also taken a long-term position in the FTX Token (FTT). Unfortunately, the bromance between SBF and C.Z. soured; consequently, in July 2021, SBF bought back C.Z.’s FTX stake for $2 billion. The sum was partly paid in FTT tokens.
Binance and/or C.Z. had vast amounts of the FTT tokens and dumped them a few days ago, causing the price to collapse. This, in turn, ultimately helped plunge FTX into a liquidity crisis. Whatever the truth is, it sounds like a game of two kids who are, unfortunately, among the leaders of the crypto scene.
Investors & Partners
The FTX collapse also causes millions in losses to well-known hedge fund BlackRock. In October 2021, FTX, valued at $25 billion at the time, raised $420 million from 69 investors. BlackRock was one of them, along with Temasek, Tiger Global, and Ribbit Capital.
Crypto exchange Kraken disclosed that it holds “approximately 9,000 FTT tokens on the FTX exchange.” However, Kraken said that it was “in no way affected” by the FTX disaster.
What is certain is that in the following months and years, investors will be much more cautious about crypto projects. This will damage many startups that may not find funding despite good concepts and products. This lack of funding may slow down the innovation cycle needed to make blockchain the infrastructure for the Future of Money. For this, we must thank Sam Bankman-Fried and Changpeng Zhao very much.
