The past week has been a whirlwind of activity in the crypto market, and one that will be remembered for a very long time. 2022 will definitely go down as one of the most important and significant formative years for the crypto market. This is because for the first time since the birth of Bitcoin back in 2008-09, the crypto industry, for the first time was being taken seriously and talked about on the global stage. Terms like Web3 and cryptography were becoming more commonplace amongst general masses and not just tech enthusiasts.
It was also the year that saw some of the biggest crypto scams unfolding on a grand stage. While on percentage terms, we are still probably better off than before back in 2018, when the ICO boom bust – the quantum of funds lost, stolen or compromised has been significantly more this time around. This is thanks to the fact that the crypto bull run that began soon after Covid-19 struck pushed the overall crypto market cap to nearly $3 trillion at its peak, about exactly a year ago back in November 2021 – when the market peaked out.
2022 saw some of the biggest crashes, ranging all the way from the Terra LUNA crash, Axie Infinity Ronin bridge attack and most recently, the collapse of the once, third largest crypto exchange by volumes in the world – the FTX exchange. In this article, we’ll be taking a closer look at the timeline of events that led to the collapse of the FTX exchange.
Timeline of the FTX collapse: In brief
|2 November, 2022||CoinDesk publishes a document containing the balance sheet of Alameda Research that shows how overleveraged they are FTT tokens.|
|6 November, 2022||Binance CEO Changpeng Zhao announces that the company will be offloading all its reserves of FTT.|
|7 November, 2022||FTX’s Sam Bankman-Fried claims all is well with the crypto exchange and that assets are safe.|
|8 November, 2022||FTT token falls below $22 level announced by the CEO of Alameda Research, resulting in a 75% freefall. Shortly after, Binance’s CZ announces its intention to acquire FTX post due diligence.|
|9 November, 2022||Binance officials backs out of the deal post the corporate due diligence over mishandling of customer funds.|
|10 November, 2022||Tron’s founder Justin Sun announces a solution to help FTX. SBF announces that they are shutting down operations at Alameda Research.|
|11 November, 2022||FTX releases official press release stating they have filed for a Chapter 11 of the United States Bankruptcy Code.|
|28 November, 2022||Crypto platform BlockFi files for Chapter 11 Bankruptcy in New Jersey, citing exposure to FTX as a major factor in their collapse.|
What caused the FTX collapse?
2 November, 2022 – the beginning of the end
This was the way when it all began to unfold. Popular crypto news publication, CoinDesk published an article that revealed the balance sheet of FTX’s sister firm that dealt in the hedge fund business – Alameda Research. According to the documents presented, it was found that Alameda held billions of dollars worth of FTT, FTX exchange’s native crypto token. And it doesn’t stop there – in fact those FTT tokens were further put up as collateral to raise further debt – something that wasn’t revealed to the public.
SCOOP: Sam Bankman-Fried's @AlamedaResearch had $14.6 billion of assets as of June 30, according to a private document CoinDesk reviewed. Much of it is the $FTT token issued by @FTX_Official, another SBF company.@IanAllison123 reportshttps://t.co/9kigf7VXph
— CoinDesk (@CoinDesk) November 2, 2022
6 November – Binance enters the game
The news of Alameda Research’s highly leveraged positions on crypto tokens created by its own sister company, FTX exchange spread through the crypto community like wildfire. The news had hurt the sentiments of those who used to look at Sam Bankman-Fried as one of the stalwarts of the crypto space and finding out that there was unscrupulous activities happening behind the scenes – that hurt.
Now Binance had been an early investor in FTX and had a huge amount of FTT tokens in its own balance sheet. But, now the gavel fell and Binance’s Changpeng Zhao, popularly known as CZ announced that he is going to sell all the FTT tokens on Binance’s books.
As part of Binance’s exit from FTX equity last year, Binance received roughly $2.1 billion USD equivalent in cash (BUSD and FTT). Due to recent revelations that have came to light, we have decided to liquidate any remaining FTT on our books. 1/4
— CZ 🔶 Binance (@cz_binance) November 6, 2022
Just minutes later, CEO of Alameda Research, Caroline Ellis announced that the firm will buy up all the FTT tokens Binance was offloading from its books at a price of $22.
7 November – the SBF-CZ Twitter spat explodes!
Right after this, Sam Bankman-Fried emerged with his own series of tweets, claiming that the competitor is ‘trying to go after us with false rumours’. He even went on to say that ‘FTX is fine. Assets are fine’. He categorically went on to deny any and all the allegations that were being raised against him, and his companies – FTX and the trading firm Alameda Research.
These tweets have since been deleted due to the reasons mentioned below.
8 November – the FTT collapse begins
In under two days from Ellis’ tweet claiming that Alameda Research was prepared to buy the FTT tokens Binance was offloading, FTT’s value fell below the $22 mark – thus indicating that they had failed to sustain the value of their token in the open market. This indicating a falling investor sentiment in the token and clearly showed that a crash was surely on the way.
On 8 November, 2022 – FTT token lost nearly 75% of its value in under 24 hours.
On the same day, Binance co-founder and CEO – and one of the most influential people in the crypto industry – Changpeng Zhao, also known as CZ announced his intention to acquire FTX exchange to help users who were stuck on that exchange. This move would have effectively eliminated one of its biggest competitors in the market.
This afternoon, FTX asked for our help. There is a significant liquidity crunch. To protect users, we signed a non-binding LOI, intending to fully acquire https://t.co/BGtFlCmLXB and help cover the liquidity crunch. We will be conducting a full DD in the coming days.
— CZ 🔶 Binance (@cz_binance) November 8, 2022
Within a day of claiming that everything was fine SBF tweeted about a ‘strategic transaction’ with Binance.
1) Hey all: I have a few announcements to make.
Things have come full circle, and https://t.co/DWPOotRHcX’s first, and last, investors are the same: we have come to an agreement on a strategic transaction with Binance for https://t.co/DWPOotRHcX (pending DD etc.).
— SBF (@SBF_FTX) November 8, 2022
9 November – Binance walks away from the deal!
In one of the quickest turn-around-times on a corporate due diligence done by a company intending to acquire another – Binance, within a day of announcing that it intended to acquire the firm mentioned that it is backing out of the deal.
As a result of corporate due diligence, as well as the latest news reports regarding mishandled customer funds and alleged US agency investigations, we have decided that we will not pursue the potential acquisition of https://t.co/FQ3MIG381f.
— Binance (@binance) November 9, 2022
Binance made a series of tough allegations against the crypto exchange that further triggered the FTX collapse – ranging all the way from mishandling customer funds, and US agency investigations. Around this time, more and more information and reports began emerging from within the firm regarding habitual drug use and misappropriation of funds on a grand scale.
By this time, the FTT token had nearly lost 90% of its value since before this predicament began. Even the founder, Sam Bankman-Fried – who was one of the youngest billionaires under the age of 30 – fell from having a net worth around $16 billion to under a billion by this time as the FTX crisis unfolded.
10 November – a new player emerges
Tron founder, Justin Sun jumped into the fray as Binance exited the potential takeover of the failing FTX exchange.
Further to my announcement to stand behind all Tron token (#TRX, #BTT, #JST, #SUN, #HT) holders on #FTX, we are putting together a solution together with #FTX to initiate a pathway forward. @FTX_Official
— H.E. Justin Sun 孙宇晨 (@justinsuntron) November 10, 2022
Around the same time, FTX’s SBF took to Twitter to announce that he is winding down operations at Alameda Research – the center point of the whole story and where everything began, acknowledging that he messed up and things could have been done differently.
15) First, one way or another, Alameda Research is winding down trading.
They aren't doing any of the weird things that I see on Twitter–and nothing large at all. And one way or another, soon they won't be trading on FTX anymore.
— SBF (@SBF_FTX) November 10, 2022
11 November – the end of an era!
Within a few hours of winding down operations in its trading firm, Alameda Research, 11 November marked the last day in the FTX collapse. In a formal press release, FTX announce that it is finally filing for Chapter 11 of the United States Bankruptcy Code in order to begin an orderly process to review and monetize the remaining assets of the firm for the benefit of all global stakeholders in the company.
Press Release pic.twitter.com/rgxq3QSBqm
— FTX (@FTX_Official) November 11, 2022
FTX founder Sam Bankman-Fried also resigned from his role as the CEO of the company and stated that he will ‘assist in the orderly transition’. John Ray III was appointed as the new CEO and is reported to be the same individual who previously oversaw the Enron Corporation bankruptcy of 2001.
Additional read: How is BNB price performing amid FTX Collapse?
28 November – Crypto lender BlockFi files for bankruptcy
In the latest effect of the FTX collapse, major crypto lender BlockFi has filed voluntary cases under Chapter 11 of the US Bankruptcy Code in New Jersey. The firm in its press release said that it was deeply hurt by the FTX collapse due to its exposure in FTX created a liquidity crisis.
Today, BlockFi filed voluntary cases under Chapter 11 of the U.S. Bankruptcy Code.https://t.co/adaAx6me4r
— BlockFi (@BlockFi) November 28, 2022
FTT technical overview
FTT’s technical analysis remains sombre for the time being. It has lost nearly 95% since the beginning of the month of November and technical factors fail to provide any outlook whatsoever in situations such as these. This is because FTT price collapse has pushed it below any and all sustainable levels of support on the charts and hence a recovery from these levels would purely be a news based circumstantial one and not anything technical.
On the on-chain metric front, things remain poor too, as we have analysed in one of our recent articles – with high transactions hitting an all-time-high – presumably with the intent to sell, even more so now as FTT price is currently trading around $1.5, down from $26-27 at the beginning of the month.
Additional read: FTT on-chain metric analysis
What should investors keep in mind?
Crypto is still a very young and a nascent industry that has a huge room for growth in the future. Investors need to be aware before investing that it is a very volatile market, probably one of the most volatile amongst all asset classes that we have today. These kinds of breach of trust and legal complications are bound to occur due to, one – lack of regulations in the market and two – presence of bad actors who try to mess with a system that is truly trying to change the current financial landscape of the world.
One must also be aware of the fact that this is currently a bear market and this is a time when many of the products that work well during a bull market tend to fail. It is but natural in a market that is so young and new that mistakes are made. However, it is pertinent that investors learn from these mistakes and do thorough research before investing their money into the crypto market.
Additional read: Crypto bear market survival guide
CoinDCX delists FTT token
In response to FTT’s deteriorating tokenomics and sub-par standards as a crypto token to remain listed on our crypto bourses – CoinDCX has decided to delist the FTT token (FTT/USDT and FTT/BTC trading pairs) from the CoinDCX Pro and web version, as on 13 November, 2022, 7pm.
Also read: Simple Steps to Sell FTT Token
Mastering risk management is key to thriving in crypto trading.
Crypto transactions are getting explored more for the easy 6 steps!