In this article, we talk about FTX exchange, the reasons for bankruptcy and distrust of users and the fall in the digital currency market. After a week of dealing with problems, this big crypto exchange finally declared bankruptcy and its young and 30-year-old CEO (Sam Benkmanfried) also resigned!
This incident has affected the price trend of important cryptocurrencies such as Bitcoin and caused their price to fall. Since the end of May and the drop in the price of the crypto market, this exchange provided financial support to several companies that were going bankrupt and saved them, but in the last ten days, it faced a crisis and found many financial problems. Although the biggest competitor of this exchange, Binance, wanted to save the FTX exchange, but gave up its decision and stopped buying this exchange. Unbelievably, FTX officially declared bankruptcy on Friday night, November 11, 2022, and its famous CEO, Mr. Benkman Fried, resigned. Benkman Fried is the one who has been compared many times with the successful American billionaire Warren Buffett.
We can say that after Binance, FTX was the biggest platform for trading digital currency. The headquarters of this famous exchange was located in Bamaha country. This exchange made a lot of effort to simplify and broaden the US rules related to crypto as much as possible.
On the other hand, the competitor of this exchange, Binance, is managed by a 45-year-old person named Changpeng Zhao, known as Si Zi, and does not have a specific headquarters, and most of its activities are carried out outside the United States. This exchange is one of the first investors of FTX exchange. It is interesting that Binance has been under the supervision of American institutions several times for allegedly circumventing the laws.
The records of both exchanges show the fact that both of them were making illegal risky transactions (of course, according to the laws of the United States of America). Binance and FTX have repeatedly criticized the regulations imposed on the cryptocurrency industry. Both exchanges have smaller companies that, despite being independent, focus on the American market and their structural duty is to comply with the laws of this country.
The reasons for the crisis and bankruptcy of the FTX exchange (FTX)
FTX exchange has a dedicated token called FTT. This token is used to pay fees. In 2021, the CEO of Binance transferred his shares in this token to Bankman Fried and received large amounts of this token in return.
In early November 2022, it was revealed that a hedge fund called Alameda Research managed by BenckenFried held a large amount of FTT tokens. Apparently, this fund and FTX had an unusual financial relationship and were somehow dependent on each other. After this revelation, Binance announced that it was selling all of its FTT tokens.
After this, the price of FTT token fell sharply and many investors withdrew their funds. To the extent that more than six billion dollars were withdrawn from this exchange in three days, and even the FTX exchange faced a challenge to fulfill the requests and it seemed that it did not have enough liquidity.
Meanwhile, Binance released a statement on Tuesday, November 8, announcing its agreement to purchase FTX. The statement also stated that Binance could withdraw from the deal at any time. On the other hand, Bankman Fried emphasized in an announcement to preserve the terms of the contract towards its customers and gave the possibility to its counterparty to continue its withdrawal request. The company was trying to improve the relationship between Binance and FTX as much as possible and sell its exchange to its long-time rival.
Declaration of bankruptcy of FTX exchange
Only one day had passed since the announcement of the purchase of FTX exchange, when Binance announced its unwillingness to buy this exchange. He also stated the reason for this withdrawal was the company’s detailed review and analysis and acknowledged that the research and reports of the regulatory bodies of the United States of America regarding the mismanagement of users’ funds by this exchange played an important role in this decision.
Binance further explains: “With the bankruptcy of every company and the resistance of the crypto ecosystem, we are witnessing the misuse of Carbaren’s funds, and then the final collapse in the free market.” Finally, on Thursday, it was announced that the FTX exchange agreed with Tron to transfer some tokens to other wallets, which unfortunately did not work out either!
Since Sunday, due to the illegal supply of four hundred million dollars of FTT tokens, the exchanges Hobby Global and Binance started blocking the deposits of this cryptocurrency. The token had an unlocking program and a periodic market release that went live on Sunday. Examining the blockchain data showed that these tokens were issued from the source address.
Binance explained that it stopped FTT deposits due to the possibility of suspicious resources in the market and even asked other exchanges to do the same. Justin Sun, sponsor of Hobby Global, followed suit. The value of this currency fell by 20% in less than twenty-four hours. It is worth noting that compared to last week, the value of FTT has decreased by more than 92%.
The reasons for the impact of the FTX exchange crisis on other cryptocurrencies
You may ask why the crisis of this exchange had a negative effect on other digital currencies. FTX was considered one of the most stable companies in the crypto industry. After Binance started selling FTT tokens and the FTX exchange crashed, it had a big impact on other cryptocurrencies.