IT WAS NOT the type of enjoyable weekend that most individuals get pleasure from within the Caribbean. Sam Bankman-Fried, who has change into probably the most hated man in crypto after his exchange imploded final month, spent the previous few days within the Bahamas getting ready for his public testimony earlier than American lawmakers—scheduled for December thirteenth. Then on the night of December twelfth Mr Bankman-Fried was arrested on the request of American prosecutors. The following day the Securities and Trade Fee stated he had been charged with defrauding buyers.. The velocity of Mr Bankman-Fried’s rise and fall has been dizzying (see chart 1).
His success was constructed on three corporations: FTX, a Bahamas-based crypto trade; FTX.US, an American trade; and Alameda Analysis, a crypto-trading fund. Of the three, FTX was the crown jewel. It was based in 2019 and rapidly grew to become a crypto-crowd favorite. Mr Bankman-Fried attracted mighty investors, together with Sequoia, a Silicon Valley venture-capital agency, and Temasek, a Singaporean sovereign-wealth fund, which boosted his credentials. At its peak in January FTX was price $32bn, making it the business’s third-largest trade.
Its rise tracked the growth of the broader business. Peak crypto was reached in 2021, when the market capitalisation of all cryptocoins climbed to just about $3trn. Buyers couldn’t get sufficient of digital property. NFTs, or non-fungible tokens, leapt from obscure corners of the web into the mainstream, as an example, when Christies, a British public sale home, offered one for $69m in March that 12 months. That September the worth of an FTX Token (FTT), a mechanism for sharing the agency’s income, hit its excessive of roughly $80.
It has been downhill (or slightly down, then up, then down once more) for crypto ever since. The market worth of all cryptocurrencies now stands at $840bn. That crash may be partly blamed on a wider asset sell-off this 12 months, wherein extra speculative investments (of which crypto is the flagbearer) have taken the largest hit.
However the fall of Mr Bankman-Fried has turned what was already going to be a tough future for crypto right into a determined one. Bother at FTX grew to become public data on November 2nd, when CoinDesk, a information web site, revealed Alameda’s balance-sheet. It revealed an incestuous relationship with FTX, in principle a separate entity. It later emerged that FTX had lent billions of dollars-worth of shoppers’ crypto-assets to Alameda, which the buying and selling agency is alleged to have used to make dangerous bets. Changpeng Zhao, the boss of Binance, now the world’s largest exchange, introduced that his agency would liquidate its holdings of FTT, precipitating a run on FTX. A suggestion by Binance to rescue its rival was withdrawn after it checked out FTX’s books. FTX and Alameda filed for chapter shortly after.
The fallout from FTX’s implosion continues. Different exchanges have since confronted huge withdrawals. Three—AAX, BlockFi and Liquid—have been taken out of action. So has Genesis, a lending platform. The business is now braced for a mighty crackdown and a flurry of recent rules.■
