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FTX Scandal: What Went Wrong?
Cryptocurrency exchange FTX filed for Chapter 11 bankruptcy on November 11, 2022, after the company’s valuation dropped from $32 billion to bankruptcy in only a matter of days.
The collapse of the cryptocurrency exchange dragged founder and CEO Sam Bankman-Fried’s $16 billion net worth to near-zero.
FTX was responsible for dropping the crypto industry below $1 trillion.
On November 16, a class-action lawsuit was filed in a Florida federal court, alleging that Sam Bankman-Fried created a fraudulent cryptocurrency scheme designed to take advantage of unsophisticated investors from across the country.
Which celebrities were affected by FTX?
Celebrities named in the lawsuit include Steph Curry, Shaquille O’Neal, Shohei Ohtani, Naomi Osaka, Larry David, and Kevin O’Leary who allegedly helped Bankman-Fried promote the exchange.
FTX became one of the largest crypto exchanges in just three years with a valuation of $32 billion.
Bankman-Fried used aggressive marketing, including a Super Bowl ad campaign, and the purchase of naming rights to the home of the Miami Heat basketball team.
He became known for his political lobbying and donations as well as for working to support the cryptocurrency industry more broadly.
As values plunged in early 2022, he facilitated deals totaling about $1 billion to bail out cryptocurrency companies struggling as a result of the declines in token prices.
Conflict of Interest Created Mass Selloff in FTX
FTX’s collapse took place over a 10-day period in Nov. 2022.
The catalyst for the crisis was a Nov. 2 scoop by CoinDesk that revealed that Alameda Research, the quant trading firm also run by Bankman-Fried, held a position worth $5 billion in FTT, the native token of FTX.
The report revealed that Alameda’s investment foundation was also in FTT, the token that its sister company had invented, not a fiat currency or other cryptocurrency.
That prompted concern across the cryptocurrency industry regarding SBF’s companies’ undisclosed leverage and possession of assets.
Here’s when things really started going downhill for FTX.
Binance, the world’s biggest crypto exchange, announced on Nov. 6 that it would sell its entire position in FTT tokens, roughly 23 million FTT tokens worth about $529 million.
Binance CEO Changpeng “CZ” Zhao said the decision to liquidate the exchange’s FTT position was based on risk management, following the collapse of the Terra (LUNA) crypto token earlier in 2022.
By the next day, FTX was experiencing a liquidity crisis.
Bankman-Fried attempted to reassure FTX investors that its assets were stable, but customers demanded withdrawals worth $6 billion in the days immediately following the CoinDesk report.
Bankman-Fried searched for additional money from venture capitalists before turning to Binance.
EDXM is a new crypto exchange being developed by Wall Street giants such as Citadel, Virtu, and Fidelity for digital assets such as cryptocurrencies.
EDXM plans to offer delivery settlement versus payment settlement, a settlement method that’s used in traditional securities trading.
Other promises include extremely low transaction fees due to tight spreads enabled by greater liquidity.
The crypto exchange is also supposed to be different from some other crypto providers that are the market maker, exchange, and custodian all in one, which can be a conflict of interest and is typically not done in traditional markets.
Sort of like how Citadel is a market maker, hedge fund, and dark pool.
The head of strategy at Paxos says EDXM will provide transparency for the crypto market.
Some investors might argue that Citadel and its partners should provide more transparency in the stock market first before making such claims for the cryptocurrency market.
While some on Wall Street might think EDXM could lift the crypto industry, others look at the partnership as a means for Wall Street to take advantage of investors elsewhere.
After the organization’s programmers announced a provisional date for its major system upgrade, Ethereum’s value continued to rise.
Ether was trading at $1,400, up about 40 per cent over the previous weeks.
In 2022, ETH has fallen short of expectations set by BTC, which experts attribute to rising expectations for the organization’s shift from PoW to PoS and a more significant market pullback from risky resources.
After the Fed Reserve forcibly increased loan rates, crypto groups announced restrictions and banned transactions, and the industry continued to experience administrative issues.
After several setbacks, another arrangement of successful testing provides assurance that the timeframes are still possible.
As August 2022 approaches, it may very well be worthwhile to keep up with these updates since, according to some, another bout of instability could occur if the upcoming testing plan fails to meet the presumptions.
According to experts, the cryptocurrency market is also reflecting the increased uncertainty that arises with conflict, continued financial expansion, and the shifting US fiscal system.
The crypto market’s reaction to the financial exchange, wider acceptance, and recent price declines are a few more factors that experts point out as contributing to the current trend in crypto prices.
Authorities have also started to address interest in tighter crypto regulations including, surprisingly, the potential of making an official digital currency.
Recently, the price of bitcoin has gone through a relatively terrible period.
Following a gain of $4,100 in December 2021, Ethereum has fluctuated between $2,100 and $4,000 over the following days.
Despite the slow commencement to 2022, many analysts are still positive and predict that Ethereum’s value may actually reach and beyond $12,000 in 2022.
Despite the latest downturn, Ethereum actually had a decent outlook for the year 2021.
When Ethereum hit $4,850 in November 2021, it set a new record. It continued that pace into December before dropping down before the month was done.
Indeed, despite the sudden slump, the price of Ethereum was still significantly higher in January 2021 than it had been earlier in the year.
After experiencing significant areas of strength on its own, bitcoin has also slowed down over the past month, similar to Ethereum.
If you’re new to the crypto world, I’m going to provide you with a list of cryptocurrencies to watch.
Cryptocurrency has earned early investors millions and even billions of dollars in ROI.
You might be thinking, is it too late to buy crypto? The short answer is absolutely not.
And if you’re not invested in crypto yet, I’m going to leave a link at the end of this article of my step by step guide on how to buy cryptocurrencies.
Welcome to Franknez.com – if you’re part of the Patreon you’ve seen when I add a cryptocurrency to my crypto portfolio. Today I want to talk cryptocurrencies and why these powerful assets will keep on surging.
Let’s get started!
Now, a lot of you might be familiar with Dogecoin, Bitcoin, and Ethereum.
These are some of the most popular cryptocurrencies out there.
Just recently Shiba Inu Coin began trending as well.
These so called ‘speculative’ plays have earned investors gains unlike anything else in the markets.
These are only some powerful crypto plays that are nowhere near done growing primarily because of their communities!
#1. Ethereum (ETH)
Shark Tank star and Dallas Mavericks owner Mark Cuban just said, “as an investment, I think Ethereum has the most upside.”
And he’s not the only one who speculates ETH is in it’s infant stage either.
But before I continue, this article won’t be about the technical side of the cryptocurrencies themselves but rather a worldview of the crypto’s upside as an investment.
“In a recent Forbes article, a panel of crypto experts including Sagi Bakshi and Lex Sokolin predict that ETH could rise as high as $19,842 by 2025 and that by the end of 2022 it could be the most widely transacted cryptocurrency due to its expanding utility in the marketplace”, via Crunchbase.
At the publication date of this article, ETH cryptocurrency is trading close to $3.1k.
Joe McCann, an angel investor and crypto margin trader believes the Ethereum could even reach as high as $50,000.