The Disappearing Billions: FTX Crypto Collapse Shockwaves Spread
FTX founder, Sam Bankman-Fried. Photo/Getty Images
Billions of dollars may have disappeared from the implosion of cryptocurrency exchange FTX.
The scandal has already led to the Miami Heat basketball team ending its relationship with Sam Bankman-Fried, who on Friday quit as CEO of the Bahamas-based firm.
Reports from the US claimed that Bankman-Fried secretly funneled $US10 billion (NZ$16.39b) of client funds into his trading company, Alameda Research.
The New York Post said Bankman-Fried’s girlfriend Caroline Ellison ran Alameda Research.
Two senior FTX officials claimed they saw the evidence that money was missing in copies of financial records Bankman-Fried shared with company executives last week, according to Reuters.
“There are initial indications that $473 million in crypto assets were stolen from FTX late last night,” crypto research firm Elliptic said in a blog post.
Cointracker said FTX websites and apps may have been hacked, and Coinbase advised people to stay away from those websites and apps.
“Prior to this week’s turbulent events, FTX Global was a top three global crypto exchange by trading volume,” Cointracker added.
“On November 8, it halted users’ ability to withdraw money, sending shockwaves across the crypto world, and many token prices began to crash.”
The saga has scandalized social media and left some crypto users scrambling for answers.
“All crypto users are affected by market conditions even if they did not directly use FTX,” Cointracker added. “The reason for fear in the crypto markets is that many other companies had their assets on FTX.”
The NY Post said Miami-Dade County and the NBA’s Miami Heat renamed FTX Arena and ended their relationship with the “broken company and disgraced founder”.
The county and the basketball team were now looking for a new naming rights sponsor.
Researchers from Cornell University described FTX as a cryptocurrency exchange where customers exchanged dollars for various cryptocurrencies such as Bitcoin.
“Suppose multiple individuals began withdrawing their crypto holdings from FTX at the same time,” a Cornell blog added.
“There could be any number of reasons why they have chosen to withdraw their holdings, but people in the network who have not withdrawn their money now are concerned that there may not be enough funds to cover their own accounts.”
The result was an “information cascade” in which the next people in the network imitated individuals with whom they are connected, who had decided to withdraw.
NFL superstar Tom Brady, a seven-time Super Bowl champion, was among the investors in FTX and last year was made a brand ambassador for FTX.
Bankman-Fried appeared to deny some of the allegations.
“I’m putting all the details together, but I was shocked to see things unravel the way they did earlier this week,” he tweeted this weekend.
He told Reuters he “disagrees with the characterization” of the $10 billion transfer.
“We didn’t transfer secretly,” he said. “We had confusing internal labeling and misread it,” he added, without elaborating.
When Reuters asked him about the missing cash, he replied: “???”