Sam Pinkman Fred, founder of FTX (one of the world's largest cryptocurrency exchanges) lost $15 billion of his fortune in a single day, amid the announcement of the cryptocurrency exchange's owner that it has begun protections from creditors under Chapter 11 of the Act. An American bankruptcy, while its co-founder has resigned as the company's chairman, is the latest exciting chapter in the career of one of the world's most prominent crypto exchanges.
Reuters reported that "FTX" was struggling to raise about $9.4 billion from investors and competitors, as the popular cryptocurrency exchange sought to save itself after massive customer withdrawals.
The impasse is a quick setback for Sam Pinkman Fred, 30, a celebrity in the cryptocurrency world, whose fortune was estimated by Forbes at $17 billion just two months ago.
The “Bloomberg Billionaires” Index estimates the value of the “FTX” branch in the United States, which Bankman Fried owns about 70% of, at only one dollar due to the possibility of stopping trading on it, compared to 8 billion dollars during the fundraising cycle in January. second last.
In addition, Bankman Fried's stake in Robin Hood Markets - which was valued at more than $ 500 million - was also written off from his wealth account, after Reuters published a report that this share was owned by him through the company "Alameda Research". And she may have used collateral for her loans.
In addition, "Alameda" and "FTX" in the United States were included in the bankruptcy protection file.
And the FTXUS stock exchange in the United States announced last Thursday that clients should close any investment positions they wish to close, and that trading operations may stop within a few days.
In the Bahamas, where FTX.com is headquartered, the authorities have frozen the assets of its local subsidiary in the trading business and its associated parties.
Bankman-Fried is under investigation by the US Securities and Exchange Commission over possible violations of securities trading rules, according to a source familiar with the events.
The logo of the "FTX" platform (Al Jazeera)
What do we learn from the FTX disaster?
The FTX exchange seemed to be among the best-running brokers in the cryptocurrency market, as even as other companies faltered amid the widespread meltdown of the cryptocurrency market this year, CEO Sam Benckman-Fried presented himself as a savior, bought out competitors, and included their clients. .
The problem was that the currency exchange's extreme leverage (effectively borrowing from some clients to lend to others) made it highly dependent on the trust factor;
Thus, if customers begin to doubt their ability to pay, they will likely rush to withdraw their money, as is usually the case with traditional banks.
This is what happened over the past week;
Which forced Bankman Fried to seek - in vain - for a rescue plan from rival exchange "Binance", and this led to him incurring huge losses in his wealth, and triggering a broader sell-off in cryptocurrencies.
The shortfall in FTX's liquidity - estimated at $8 billion, according to Bankman Fried - does not bode well for the remaining customers, and it is still not clear yet the underlying cause of this shortfall, and if other repercussions will follow, and what is quite clear is that What the FTX has experienced can be witnessed by any other leveraged institution in the crypto world.