Bankrupted crypto company FTX: CEO Bank man's net worth drops from $16 billion to 0, the biggest ever drop in a businessman's wealth
Sam Bank man-Fried, co-founder of crypto company FTX Trading Ltd., had a net worth of $16 billion in just a few days. This is the biggest drop in the wealth of a businessman in history. At one point, Sam Bank man's net worth reached $26 billion. The reason for the decline in net worth is the insolvency of FTX Trading Limited following a liquidity crunch.
FTX was the second largest affiliated crypto trading company in the world. The Bloomberg Billionaires Index is now showing a value of 0 for FTX US trading. It was valued at $32 billion after a fund-raising round in January. Sam Bank man, 30, has now resigned from his CEO position in the company. He will be replaced by John J Ray III as CEO.
'King of Crypto' apologizes
Sam Bank man, known as the 'King of Crypto', tweeted on Friday, writing, apologize. Hopefully we will find a way to recover soon. Bankman-Fried holds about 70% stake in this company.
How did FTX go bankrupt?
To understand this, one has to understand what FTX and Binance are.
What are FTX and Binance?
FTX and Binance are cryptocurrency exchanges. That is, they allow customers to trade in digital currency. According to industry data tracker Coin Market Cap, these two exchanges process the majority of all crypto trades in the world.
It was run by Sam Bankman-Fried. Its headquarters are in the Bahamas. The largest exchange is Binance, which is run by billionaire Changing Zhao. It has no official headquarters and operates largely outside the US. One of the early investors in FTX was Binance.
Why did FTX get in trouble?
FTX contains a native cryptocurrency token called FTT, which traders use for operations such as payment of transaction fees. Last year, Zhao sold his stake in FTX back to Bankman-Fried.
For this, Fried partially paid with FTT tokens. On November 2, crypto publication Coin Desk published reports on a leaked document that revealed financial malpractices. This document shows that Alameda Research, a hedge fund operated by Bankman-Fried, held an unusually large amount of FTT tokens.
This photo is from when FTX CEO Sam Bankman-Fried appeared in a Senate committee hearing on cryptocurrencies earlier this year.
FTX and Alameda are separate businesses, but the report claimed that they had close financial ties. Following this report, Binance announced on November 6 that it would be selling its FTT tokens “due to recent revelations”. This caused the price of FTT to drop and traders rushed to exit FTX, fearing that the crypto company would sink.
FTX received an estimated $6 billion in withdrawal requests in three days. FTX got into a liquidity crunch due to the sudden withdrawal request, i.e. it was not in a position to process the withdrawal request.
Binance said it will buy FTX
Amid FTX's liquidity crunch, Binance on Tuesday said it would buy FTX. However, Zhao also clarified that Binance could exit the deal at any time. Following its agreement, Banks man-Fried said the deal would protect customers and enable FTX to complete the trader's withdrawal process. In the meantime, he also tried to dispel of a conflict between FTX and Binance.
Binance CEO Changing Zhao in the picture. Amid FTX's liquidity crunch, Binance said on Tuesday that it would buy FTX.
The deal breaks up between Binance and FTX
On Wednesday, Binance announced that it would no longer be buying FTX. He told Corporate Due Diligence the reason for breaking the deal. Binance also cited regulatory scrutiny and misreporting of funds. Binance also said that whenever a major player in an industry fails, retail consumers suffer. On Friday, FTX filed bankruptcy with the resignation of Bankman-Fried.
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