The downfall of the FTX crypto asset platform will never end

The empire of Sam Bankman-Fried (SBF) collapsed in just a few days in early November. Since then, the saga has gone from turn to turn. The fortune of SBF, which was almost $15 billion until recently, is now zero. A lawyer who worked on the startup’s bankruptcy assured the Financial Times that the SBF ran the cryptocurrency exchange as its “personal fiefdom” until its collapse. “Significant sums” were spent on non-business items.

Money donated to Alameda Research

The bankruptcy proceedings, which began on November 11, allow us to delve into the financial details of the company. SBF has been able to attract high-profile investors such as Sequoia, SoftBank, a Samsung subsidiary, and the Ontario Teachers’ Pension Fund. But none of them was on the board of directors of the company. However, FTX’s leadership seems more than dubious. SBF has reportedly used more than half of the $16 billion in capital contributed by its clients to fund its own Alameda Research, a Bahamas-based hedge fund founded in 2017.

James Bromley of Sullivan & Cromwell said the team found that “significant funds” had been transferred from the FTX platform to the Alameda Research Foundation and that “significant amounts of money had been spent on things not related to the business.” Apparently, Alameda used the FTX funds to invest billions of dollars in funds like Sequoia Capital and companies like SpaceX and Elon Musk’s Boring Company. The SEC (Securities and Exchange Commission) has launched an investigation into this matter, and the US Department of Justice (DoJ) is also showing great interest in this bankruptcy.

Buying property in the Bahamas

Nearly $300 million worth of real estate was purchased in the Bahamas, evidence of filings related to the bankruptcy. It turned out that these assets were country houses and real estate, which were used by top managers of FTX. Meanwhile, Reuters reports that over the past two years, Sam Bankman-Fried’s parents and company executives have purchased at least 19 properties in the Bahamas worth nearly $121 million. Most of these properties are luxury beachfront homes. A spokesman for the SBF parents told Reuters they were trying to reclaim the company’s property before the bankruptcy proceedings began and were awaiting further guidance.

Lawyers working to liquidate FTX are trying to identify all the assets in order to pay off creditors. But the case is overshadowed by allegations of fraud and major mismanagement of the company.

Back to FTX drop

The collapse of FTX, one of the largest exchanges in the world, resulted in about 1 million creditors facing losses totaling billions of dollars. However, valued at $32 billion during the latest fundraiser, the platform collapsed in just a few days. An article published in early November by specialist publication CoinDesk showed that Alameda’s capital is 40% FTT, the FTX platform token. Investors, fearing that they would suffer the same fate as Celsius and Voyager Digital, then began to withdraw their capital from the platform, threatening FTX with insolvency. The cryptocurrency exchange has finally frozen the withdrawal of funds on its platform, unable to respond to numerous requests.

Initially, its competitor, the world’s leading cryptocurrency exchange Binance, announced its desire to buy the platform. Even though the two leaders hardly like each other. Binance finally gave up less than 48 hours after the flash audit. FTX filed for bankruptcy protection on November 11 after Binance decided to liquidate its FTT tokens and others followed suit.

FTX’s total cash balance is $1.24 billion. But that’s far from the $3.1 billion the platform owes to its top 50 creditors. Another question on everyone’s lips: after Voyager Digital, Celsius and FTX, will other cryptoasset platforms suffer the same fate?

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