FTX Disaster, What went Wrong?

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More than 2 billion dollars was lost in the FTX disaster due to problems relating to a lack of liquidity on the platform. Within 3 days, about 80% of the value of the FTT token was lost. FTX was once seen as a survivor and a champion in the struggling market. What went wrong with the FTX?

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Sam Bankman-Fried was the man behind the FTX platform. Because of his innovative contribution to the crypto industry, he was referred to as ‘the saviour’. He has contributed immensely to the development of the crypto industry within a couple of years. The FTX platform was launched in 2019 and within a few years, it grew to become the 4th in the rank of crypto exchange platforms. And it became a formidable competitor of Binance, which is number one in rank among the crypto exchange platforms. Binance also had an investment in the FTX platform. The FTX was not the first project by Sam Bankman-Fried. It was the second project. In 2017, he co-founded Alameda Research which also became a huge success. Therefore, he became a major owner of both of these successful projects.

Bangkok, Thailand - November 14, 2022 : iPhone 13 showing its screen with Crypto.com, Gate.io, FTX, popular cryptocurrency trading applications.

Some Contributing Factors to the Crash
When it comes to the issue of conflict of interest between the two successful projects Sam responded that both companies are separate entities. But people had a fear that either FTX or Alameda may be gaining his preferential attention. It could be that FTX won more of his attention as the company’s explosive success attracted major investors even from Silicon Valley. Also, many celebrities showed interest in the platform. Binance was also part of the earliest investors in FTX. The growth of FTX was explosive and it became a major competitor even with Binance. As the platform continues to grow it often has conflict with Binance.

In early November, customers begin to experience problems, relating to difficulties of liquidity of assets. This created desperation among customers and they began to withdraw their funds. Then a leaked balance sheet from Alameda Research surfaced on social media and seems to reveal the close links between itself and FTX. Although the management assured customers that all was well, the matter got worse when Binance withdraw a huge chunk of money from the FTX platform. then Binance later made an offer to buy FTX, but, then it later backed out. Later on in the month, a journal made a shocking revelation that assets from FTX were transferred to Alameda to fund risky bets. So the speculations made by many about the connection between Alameda and FTX turned out to be true. As a fact, customers’ money was being transferred from FTX to Alameda for a risky venture. On November 11, FTX filed for bankruptcy and left remnant investors unable to access their assets.

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