Sam Bankman-Fried's (SBF) crypto empire saw its rattling following Binance's decision to sell off its 23 million FTT tokens, worth more than $500 million.
The selloff decision by the Binance CEO, CZ, came after revelations of the illiquid status of the token. The status of the token makes up as much as half of the assets held by Alameda Research.
SBF has, for a long time, been a king of crypto. Now Alameda and FTX are rumored to be on the brink of insolvency.
So, what exactly went wrong for SBF and FTX?
The Successes Seen by SBF and FTX
SBF has been an idol for an extended period due to his Arbitrage trading, founding FTX and Alameda and being hugely successful on investments like Solana.
He accrued an impressive estimated net worth of 10-14.5 B at his peak.
In recent times, FTX has been extremely busy leading huge fundraising rounds for new projects. Aptos and Sui are the two most recent examples. Despite Luna causing chaos, he used the situation as leverage to continue an aggressive expansion plan.
FTX has been on the rescue of major platforms in the space, accruing a name for itself:
The bailing of BlockFi for $240m.
The bid for Voyager's assets.
The consideration to bail out Celsius.
However, in the background, some cracks were starting to appear.
Woes Following SBF and FTX
The start of the issues was when Alameda CEO Sam Trabucco suddenly resigned. Eyebrows started to rise.
A month later, FTX President Brett Harrison stepped down.
These resignations occurred just before it was revealed that FTX was facing legal trouble in the form of a securities regulator probe.
Additionally, SBF has a clear interest in politics. The recent evidence has been his involvement in the upcoming midterm elections, to which he has donated almost $50m.
This comes after his plan to donate $1b in the 2024 U.S. presidential election (which he later backtracked on). Sam has political interests at heart.
Although public sentiment was becoming more negative towards Sam, the DCCPA draft bill marked a real turning point for the public's perception.
A draft of the bill was first leaked online. Sam has seemingly been supporting the bill. But despite Sam trying to play the "good guy" on Twitter, there were clear red flags throughout the bill which could pose significant threats to DeFi.
The public damage for Sam was immense. Sentiment shifted as people realized his intentions might be different from what was first thought. This shift in sentiment was the precursor for what was to come next and a significant contributor to the severity of the recent FUD.
Concerns started to bubble on Wednesday when Alameda's balance sheet was leaked. It revealed that "the net equity in the Alameda business is FTX's own centrally controlled and printed-out-of-thin-air token" - Cory Klippsten.
More rumors started increasing, and the FUD machine entered full force. Allegations of FTX's insolvency started circulating.
The resulting step was by CZ, executing a transfer of $FTT to Binance. FTX's primary token, $FTT, was dumped.
As a result, it dropped 15% from its weekly highs. However, it has found strong support around the $22 region.
FTX's Insolvency
Where there is smoke, there is often fire. The chances of FTX being insolvent are pretty slim. Thus, the state of the situation is still in doubt.
But why take chances in crypto when there are viable alternatives?
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