Sam Bankman-Fried – The FTX/Alameda Research Collapse

I have been keeping up with the latest crypto crash of 2022. Hot off the heels of The Terra Luna collapse of earlier this year, which, in turn, caused the collapse of Celsius, Voyager, and others, the FTX collapse has impacted BlockFi (which also filed for bankruptcy protection), and could cause Gemini to collapse as well.

From what I’ve read and listened to, it could be that Alameda Research was leveraged to its hilt, with a possible hardcoded exemption on the FTX exchange. Since AR never needed to fork over cash for margin calls, it was just a matter of time before it made FTX collapse, under the right circumstances. AR had suffered heavy losses earlier this year, $4-5B, and the company seemed to have been scrambling ever since, making riskier and riskier bets in order to recoup the loss. Another big red flag was that most of the assets of these two SBF companies were in FTT tokens, a token minted for FTX, which held no real value except for discounts for trading, but could be targeted with enough capital. Unfortunately, Binance held $2.2B of FTT, which they offloaded on the open market, starting a run on FTT.

There is also a possibility of a backdoor on the exchange, which was used to funnel funds to AR to wipe its debt off the books. The reliance and minting of FTT, being leveraged over and over again, creating wealth from nothing, is basically a Ponzi scheme. Once Binance uncovered part of this, they declined to acquire FTX.