News about FTX’s questionable financial situation along with Binance liquidating their FTT tokens in a movement to “protect their interest”, has caused the FTX’s FTT token to come crashing down over 85% as this triggered a public bank run.
Binance then announced that they intend to fully acquire FTX, and are are looking to start the due diligence process soon. However, after a single day of Due Dilligenge, Binance has already pulled out of the deal in yet another twisting turn for this surreal week in crypto.
In this article we’re going to deep dive into the latest developments of the FTX collapse, by analysing all the verifiable information, and related events that have come out since the initial collapse.
FTT Token Pulse Check
Unlike Terra LUNA, the FTT token didn’t continue to fall another -85% from its previous position. I haven’t by any means recovered, but since its collapse on November 8, the token has seen a small retracement before starting to retreat back to the lower $3 levels. This suggest that the market panic temporarily subsided due given the news that Binance intended to acquire FTX, and retraced once Binance pulled out of the deal.
CZ vs SBF & the FTX Finances
In this situation, the relationship between SBF and CZ helps us understand just how bad the FTX financial situation actually is. There have been numerous public occasions where it becomes apparent that the two really don’t like each other very much.
Just how bad is the FTX financial situation, for SBF to accept help from his biggest rival? The “help” that Binance offered is nothing short of a cold, calculated shark move in order to acquire FTX and crush their competition at pennies to the dollar. And even at this rate, it has still been deemed too risky for Binance to take the plunge.
When Binance announced they will liquidate FTT, CZ must have been completely aware of how such a move will reverberate in the market. Now here’s the kicker. CZ made a genius move to acquire their biggest rival in probably the best orchestrated financial takeover that we have ever seen in crypto, only to back off in under 24 hours. So the biggest question is — just how bad is the FTX situation?
FTXs Finances
With news like this, FUD can spread like wildfire over the Internet and many people have already started asking the question: “is this Terra LUNA all over again?”.
Here is a collection of Financial insights that are publicly available and may help uncover the real financial situation at FTX:
- FTX used Customer funds to prop up Alameda Research in May. According to recent report by Reuters, Sam Bankman-Fried has transferred at least $4 billion U.S. dollars in FTX funds in order to support its sibling company Alameda Research after it suffered a series of losses as a result of bad deals. Included in these deals was a $500 million U.S. dollar failed loan agreement with Voyager, another high-yield staking / crypto investment company that filed for bankruptcy in July this year. Reuters could not determine the full extent of losses Alameda suffered.
- On the second of November, Coindesk leaked a balance sheet showing that the vast majority of Alameda Research’s $14.6 billion funds were in fact in FTT, and their Liabilities rose to almost $8 billion (not FTT). Alameda CEO Caroline Ellison failed to address those concerns, along views that Alameda’s funds in FTT seem to cause some sort of a strange conflict of interest, shook Binance’s confidence which led to the $540 million FTT dump, and the 85% FTT collapse.
- According to The Guardian Sam Bankman-Fried has asked investors for $8 billion U.S. dollars in order to cover the significant liquidity crunch according .
Post Collapse Developments
- FTX is currently being investigated for how it handled user funds, in relation the propping up Alameda Research, along with any other investment where user funds were used.
- El Salvador did not, in fact, hold its BTC on FTX. Contrary to the FUD that was spread on the Internet on Nov 10 2022, El Salvador does keep any of its BTC reserves on the collapsing exchange, according to a discussion between Binance CEO CZ and El Salvador President Nayib Bukele.
- The Cryptocurrency market is down in the dumps. The News about FTX collapsing, the real possibility that it will not be bailed out, has caused the cryptocurrency market to tank with BTC reaching a low of $15.8k on Nov 10 before jumping back up to $17.4k later in the same day. It is currently still early to tell how this is going to play out in the wider market, but expect that this situation is far from over and will continue to ripple through the cryptoverse in the months to come.
- According to WSJ, SBF has just revealed this week that Alameda Research is said to owe FTX around $10 billion. This confirms that the ripples are far from over as there are likely many other small(er) fish that depend on Alameda Research. If FTX and Alameda Research fall, it’s reasonable to expect some more collateral damage here and there. Only time will tell.
- SBF has made a public statement on Twitter owning up to essentially him screwing up, and has promised that the first order of business for FTX is to make right by the users.
- FTX have announced that they are working with Tron in order to provide FTX users a way to swap assets from their FTX wallet to any external wallet.
- Binance has just released, in full transparency a balance sheet showing the company’s current asset reserves.
Finally, I would just like to say that if you are an FTX user, please take any opportunity you can in order to move your funds off the exchange. There is a possibility that FTX will never recover or will not be able to fully do right by the customer.
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