{"id":12923,"date":"2022-12-19T18:27:55","date_gmt":"2022-12-19T08:27:55","guid":{"rendered":"https:\/\/insights.namescan.io\/?p=12923"},"modified":"2022-12-23T10:53:13","modified_gmt":"2022-12-23T00:53:13","slug":"the-ftx-collapse-a-domino-effect-on-the-crypto-industry","status":"publish","type":"post","link":"https:\/\/namescan.io\/insights\/the-ftx-collapse-a-domino-effect-on-the-crypto-industry\/","title":{"rendered":"The FTX collapse \u2013 a domino effect on the crypto industry?"},"content":{"rendered":"<p><span data-contrast=\"auto\">FTX was a top cryptocurrency platform where users could buy and sell crypto. However, within a few days, the 32-billion-dollar company was worthless. FTX entered into bankruptcy, creating waves of shock in the overall crypto industry.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">FTX&#8217;s CEO, the 30-year-old Sam Bankman-Fried, a generous philanthropist and leader in crypto, is now questioned for the mismanagement of billions of customer funds.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n<h2 aria-level=\"2\"><span data-contrast=\"none\">How it all started<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559738&quot;:40,&quot;335559739&quot;:0,&quot;335559740&quot;:259}\">\u00a0<\/span><\/h2>\n<p><span data-contrast=\"auto\">Everything started when CoinDesk published an article about liquidity concerns of Alameda Research, a trading firm related to FTX. The article revealed that Alameda held a position of $5 billion in FTT, the native token of FTX and not in a fiat currency or other cryptocurrency.\u00a0<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">Following the news, the CEO of Binance, Changpeng Zhao (CZ), on 6th November, publicly announced that Binance would liquidate its FTT position \u2013 about $529 million &#8211; as part of its risk management practices.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n<h2 aria-level=\"2\"><span data-contrast=\"none\">The beginning of the end<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559738&quot;:40,&quot;335559739&quot;:0,&quot;335559740&quot;:259}\">\u00a0<\/span><\/h2>\n<p><span data-contrast=\"auto\">CZ&#8217;s announcement created what traditional finance calls a &#8220;bank run,&#8221; causing extensive pressure on FTX, which struggled to meet customer withdrawal requests estimated at $6 billion in the following few days.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">In two days, FTT&#8217;s value dropped by 80%. On 8th November, Binance announced that it had entered into a non-binding agreement to acquire FTX, which would solve the liquidity issues.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">However, in the next 24 hours, Binance withdrew from the deal over concerns of mishandled customer funds.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">On 11th November, FTX filed for bankruptcy.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n<h2 aria-level=\"2\"><span data-contrast=\"none\">A domino effect on the crypto industry?<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559738&quot;:40,&quot;335559739&quot;:0,&quot;335559740&quot;:259}\">\u00a0<\/span><\/h2>\n<p><span data-contrast=\"auto\">Many financial crime experts compared the FTX collapse and warned about a potential domino effect on the rest of the crypto industry.\u00a0<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">For example, BlockFi filed for bankruptcy on 28th November 2022 due to a $275 exposure to FTX. BlockFi has more than 100,000 creditors and estimates that it has between $1 billion and $10 billion in assets and liabilities.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">Other crypto platforms announced their exposure to FTX, such as:<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n<ul>\n<li><span data-contrast=\"auto\"><\/span> <span data-contrast=\"auto\">Binance<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\"><\/span><\/li>\n<li><span data-contrast=\"auto\"><\/span> <span data-contrast=\"auto\">Genesis Trading<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\"><\/span><\/li>\n<li><span data-contrast=\"auto\"><\/span> <span data-contrast=\"auto\">Galois Capital<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\"><\/span><\/li>\n<li><span data-contrast=\"auto\"><\/span> <span data-contrast=\"auto\">Galaxy Capital<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\"><\/span><\/li>\n<\/ul>\n<p><span data-contrast=\"auto\">Most companies stated they are not at risk, although some have significant exposure to FTX. Nevertheless, the collapse of FTX will negatively affect the crypto industry, shaking investors&#8217; trust in crypto.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n<h2 aria-level=\"2\"><span data-contrast=\"none\">Pending investigations<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559738&quot;:40,&quot;335559739&quot;:0,&quot;335559740&quot;:259}\">\u00a0<\/span><\/h2>\n<p><span data-contrast=\"auto\">Following the failure of FTX, John J. Ray III has replaced Sam Bankman-Fried as the CEO who stated: &#8220;I have over 40 years of legal and restructuring experience\u2026 Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here&#8221;.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">The collapse of FTX resulted from basic corporate controls, including risk management and lack of financial information. FTX collapse raised several questions:<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n<ul>\n<li><span data-contrast=\"auto\"><\/span> <span data-contrast=\"auto\">Why FTX transferred clients&#8217; funds to Alameda Research.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\"><\/span><\/li>\n<li><span data-contrast=\"auto\"><\/span> <span data-contrast=\"auto\">Whether FTX has violated securities laws<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\"><\/span><\/li>\n<li><span data-contrast=\"auto\"><\/span> <span data-contrast=\"auto\">Corporate governance issues<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\"><\/span><\/li>\n<li><span data-contrast=\"auto\"><\/span> <span data-contrast=\"auto\">Mismanagement and fraud on the part of Sam Bankman-Fried<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\"><\/span><\/li>\n<\/ul>\n<p><span data-contrast=\"auto\">Additionally, celebrity boosters of FTX, including prevalent athletes and investors, were sued for falsely representing a deceptive product to dupe vulnerable investors.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">The effects of the FTX collapse are to be felt by its creditors (estimated to be more than 1 million) and in the overall crypto industry.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">The ultimate and potential domino effects of the FTX collapse on the crypto industry are yet to be seen.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>FTX was a top cryptocurrency platform where users could buy and sell crypto. However, within a few days, the 32-billion-dollar company was worthless. FTX entered into bankruptcy, creating waves of shock in the overall crypto industry.\u00a0 FTX&#8217;s CEO, the 30-year-old Sam Bankman-Fried, a generous philanthropist and leader in crypto, is now questioned for the mismanagement [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":12930,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[85],"tags":[],"class_list":["post-12923","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blog-post"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.4 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>The FTX collapse \u2013 a domino effect on the crypto industry? - NameScan Insight<\/title>\n<meta name=\"description\" content=\"Shock waves were felt throughout the cryptocurrency community when news of FTX&#039;s insolvency spread. 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