FTX, short for ‘Futures Exchange’, was built on Alameda Research’s reputation as one of the largest crypto traders by volume in the industry. FTX operates an international exchange outside the Bahamas. A separate exchange, FTX US, was established in 2020 to legally serve US customers. In 2021, before everything started to unravel, FTX was valued at around $30 billion, making it the second largest crypto exchange after Binance.
Sam Bankman-Fried, former CEO of FTX, one of the largest stock exchanges in the world, explained the reasons for the stock market crash in his article. He stated that the collapse of FTX was caused by a number of adverse events.
Former CEO of FTX, Sam Bankman-Fried, stated that the failure to obtain loans due to the collapse of the Terra ecosystem in May followed. He stated that the collective fund withdrawal requests of the users brought the end of his company. Sam Bankman-Fried also acknowledged that the company’s poor margin and risk management was a factor in causing FTX to go bankrupt.
Sam Bankman-Fried said that the company’s financial structure has been sound so far. Namely, he mentioned that he owed $2 billion against FTX’s $60 billion collateral. With the sharp collapse in the crypto money market, the collateral values have halved. These negativities in the market increased the company’s debts many times over and increased it to 8 million dollars in a short time. By November, the stock market’s collateral had been withdrawn to $17 billion. He stated that after this incident, the amount of his collateral decreased to 9 billion dollars due to fast withdrawal requests. Sam Bankman-Fried made no disclosures about the transfer of client funds to Alameda Research, the exchange’s subsidiary.
Sam Bankman-Fried said that he made his bankruptcy decision because he was under intense pressure. Bankman-Fried, who resigned after filing for bankruptcy on November 11, is currently not affiliated with FTX.
