It is an earthquake in the very dark world of cryptocurrencies. FTX, the world’s second largest exchange platform for these cryptoassets, announced Friday, November 11 its bankruptcy filing and the resignation of its president and founder, Sam Bankman-Fried.
The company he created in 2019 collapsed in just a few days, after the revelations of a specialized information site. He explained that Sam Bankman-Fried, also called “SBF”, had used more than half of the 16 billion dollars (as much in euros) of capital deposited by his clients to finance his own crypto-financial company, Alameda.
It all happened in less than a week
On November 7, he spoke of “unsubstantiated rumours” and ensured that « FTX (was going to) good ” . But customers started to withdraw their funds en masse. On November 8, the other major cryptocurrency platform, Binance, announced the acquisition of FTX. ” At his request “, explained on Twitter Changpeng Zhao, his boss and great rival of FTX. But on November 9, Binance threw in the towel, after doing a quick audit of the situation.
Now placed under the protection of Chapter 11 of the US bankruptcy law, FTX is now trying to save what can still be saved. At the beginning of November, the value of the company was estimated at 32 billion dollars, which makes Bloomberg say that this is “of one of the fastest and greatest destructions of wealth in history”.
Discovery of unauthorized transactions
The new CEO, John Ray, now in charge of restructuring, explained, on Saturday November 12, to put “every effort to secure all assets”, after the discovery of unauthorized transactions. Precautionary measures have been taken “to move all digital assets to cold storage”that is, one of the cryptocurrency wallets that would not be connected to the Internet in order to protect them from hackers.
Despite this, “just 24 hours after the bankruptcy filing (…), FTX wallets have been emptied of more than 663 million dollars”, assures the cryptocurrency analysis firm Elliptic, in a note published on November 12.
The lack of regulation is exposed
According to New York Times, the company is now under investigation by the US Securities and Exchange Authority (SEC) and the Justice Department in New York. They will have to determine the extent of the embezzlement and especially how nobody could see anything at this point. The investigation should thus bring to light the lack of regulation of the cryptocurrency sector, the concentration of activity between a few companies and the guarantees they can provide to their customers.
Could the scale of the FTX scandal, which comes after the collapse of other platforms in recent months, represent a systematic risk for the sector? It is too early to tell. But many voices are rising in the United States to demand stricter regulations.
Some are also worried about the indirect consequences on the stock markets, in particular the Nasdaq, the American Technology Stock Exchange, while portfolio managers have invested heavily in cryptocurrencies, whose prices have collapsed since the start of the year.
A very media-rich billionaire
But if the bankruptcy of FTX occupies so much center stage today, in addition to the amounts at stake, it is also because its young founder had chosen to expose himself publicly. 30 years old, at the head two months ago of a fortune estimated at 17 billion dollars, according to the magazine ForbesSam Bankman-Fried was a figure in the sector, one of the few also to shine a light.
Auditioned many times by Congress, he was one of the main defenders of cryptocurrencies before the regulatory authorities. The son of renowned academics, a graduate of MIT in Boston, he had also multiplied sponsorship operations to attract sports stars. Involved in politics, Sam Bankman-Fried had also been one of the backers of the Democratic Party during the mid-term elections, providing 40 million dollars.
Based in the Bahamas, where taxation is low, ” SBF “had pledged to donate part of his money to great causes, such as animal welfare or the fight against global warming. But after all his revelations, the founder of FTX seems much less frequent. Miami Heat, the Miami basketball club, has just announced that its stadium, the FTX Arena, will be renamed.