One of the world's largest cryptocurrency exchanges went bust in a day. And the wealth of its founder, Sam Bankman-Fried, fell from nearly US$16 billion to zero within days of filing for bankruptcy protection in the United States on November 11.
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In the short term, FTX collapsed due to FTT – a token issued by the company and promised to buy them back using a portion of its profits. Alameda – FTX's hedge fund – uses FTT to make risky loans
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In the medium term, deeper issues related to the relationship between FTX and Almeida caused FTX to collapse. The Exchange did not have the capability to accept wire transfers. Therefore, customers need to send money to Alameda
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FTX failed because the entire system of the company was in disarray. There was lack of presence of reliable financial information within the company
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There is no special protection for clients of unregistered crypto firms like FTX. While some people may get their money back, no one will get everything they lost.
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According to the founder of FTX, $8 billion in capital would be needed to make each depository complete.
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However, there is currently no document providing details on all of FTX's investors and there are doubts about the accuracy of the company's balance sheet.