Updated: Nov 17
Last week, the cryptocurrency exchange FTX filed for bankruptcy. As a trading platform, FTX is a site where customers can exchange cryptocurrencies for other currencies or money. Two weeks ago, a document was leaked saying that a fund run by the CEO of FTX held a large amount of FTX tokens, which was not necessarily allowed. Many of the large holders of this token started to sell as they began to worry about the validity of the token, causing the price to fall drastically. This was the beginning of FTX's downfall as the company lost almost six billion dollars in the span of a couple days.
Additionally, it was revealed that FTX tapped into customer funds without consent, which if done on Wall Street, would be illegal. With these funds, the company made extremely risky investments without the knowledge of the shareholders. Many of the problems that led to the collapse of FTX stemmed from the fact that they used tactics that are considered illegal in the stock market. Once FTX went bankrupt, it sought to be acquired by Binance, a different Crypto exchange company, but the deal did not go through, sealing the coffin for FTX.
As a result, the Miami Heat have terminated their arena naming-rights deal with FTX. Over the weekend, the team announced that they are currently working to find a new partner.
The collapse of FTX may negatively impact crypto in the long term as it weakens people’s faith in the concept. With crypto markets on a downtrend, this is just another rude awakening to the instability of many cryptocurrencies. Plus, this now leaves Binance as the dominant power in the industry, potentially creating a monopoly.
The CEO, Sam Bankman Fried, has faced a large amount of scrutiny over the past week due to the current commotion. He has not said much about what is going on outside of a few tweets and interviews. Bankman Fried recently said that he is currently trying to do what is best for the consumers and figure out a way to gain back some of the money. He is currently living in the Bahamas, though the United States may extradite him for questioning.
By: Max Lehmann (10th) and Bennett Szafranki (12th)