The crypto space has been plagued by liquidity issues since the beginning of this year and companies have been finding it difficult to stay afloat. One after the other, prominent names like Celsius, Three Arrows Capital, Terraform Labs, Hodlnaut, Voyager, Zipmex, Vauld, etc. revealed that they were in a fix. Now, the crypto town has a new damsel in distress—FTX.
Wait, what?
Everything seemed to be on track for FTX—one of the world’s largest crypto exchanges—until recently. When other companies were in trouble earlier, it gladly lent out a helping hand. Amid market volatility, for instance, it injected around $250 million into BlockFi in July.
Around that time, Bankman-Fried opined that being there for one another and helping contain losses during challenging periods was the right way forward. He said,
“I do feel like we have a responsibility to seriously consider stepping in, even if it is at a loss to ourselves, to stem contagion. Even if we weren’t the ones who caused it, or weren’t involved in it. I think that’s what’s healthy for the ecosystem, and I want to do what can help it grow and thrive.”
In fact, in Q3, SBF said that FTX was “starting to get a few more companies to reach out” to them and revealed that the exchange had over $2 billion that it could use in crypto industry deals if needed. Alongside, the FTX executive also asserted that the industry had moved beyond “other big shoes that have to drop.”
Leave aside from helping other companies grow and thrive, SBF is now not even in a position to mend its own exchange’s torn and tattered big shoe.
Is SBF’s crypto empire on the verge of collapse?
The past few days have been quite dramatic. Initially, it was revealed that the balance sheet of FTX’s corporate sibling, Alameda Research, was too heavily reliant on illiquid tokens. The company’s CEO Caroline Ellison then tweeted clarifying that more than 10 billion worth of assets were not reflected there.
Then, FTX’s liquidity crisis was brought to light, and the exchange “asked” CZ and Binance for help. A non-binding letter of intent was eventually signed. Just when it seemed like Binance would bail out FTX, the largest exchange issued a statement saying that it will “not pursue” the potential acquisition of FTX. It stated that the issues faced by FTX were “beyond” its control and ability to help, shattering revival hopes.
Oh boy! Another headache for SBF
Apart from worrying about FTX’s potential buyout, looks like SBF has another “buyout” drama to cater to. Referring to a prison, Crypto YouTuber Ben Armstrong—aka Bitboy—recently stated on Twitter that he had a place for SBF that came with a pillow, a blanket “too short” to cover the feet, and three hot meals. He further said,
“People thought he was going to be able to buy his way out of prison. Now the message has changed a little bit.“
A couple of hours later, Armstrong also tweeted that he had “zero sympathy” for SBF and was going to “enjoy” sending him to prison. He added that he was sitting on “so much hard evidence” and SBF had “no chance of escaping.”
It is important to note that Armstrong recently filed a lawsuit against fellow crypto content creator Atozy [real name Erling Mengshoel Jr.] for allegedly defaming him in a video titled “This YouTuber Scams His Fans … Bitboy Crypto.”
Per Atozy, Armstrong had been dishonest as a self-proclaimed expert on cryptos to promote a project that ended up crashing. In fact, Bitboy has time and again received criticisms and backlashes from the wider crypto community for allegedly misleading viewers about various tokens and projects. BitBoy eventually dropped the defamation suit saying that he’d not sue someone over their opinion.
That said, his latest assertions of having hard evidence against SBF should be taken with a grain of salt until official disclosures are made.
Nevertheless, others from the space like Economist Peter Schiff are on the same page and feel that SBF is a part of what “maybe” be one of “the biggest financial frauds” in history. He was also bothered by the fact that no government was doing anything.
Contrary to the claim made by Schiff, it should be noted that US regulators have already launched an investigation against FTX to analyze whether the exchange handled customer funds properly. Reportedly,
American regulators are also looking into the platform’s relationship with its American counterpart FTX US and Bankman-Fried’s trading house Alameda Research.
In fact, another report by Bloomberg reconfirmed that FTX was being investigated by the SEC for potential violations of securities rules. Citing an unnamed source, the report noted,
Sam Bankman-Fried is being investigated by the US Securities and Exchange Commission for potential violations of securities rules as the regulator deepens its probe into his crumbling FTX crypto empire, according to a person familiar with the matter.
The source further revealed that the SEC was scrutinizing the executive’s involvement in recent moves that helped push his exchange into a liquidity crisis. Alameda Research, FTX’s sister company is already under the radar, and the Justice Department is also looking into the situation.
Firms back out one by one
Things have evidently become very sketchy now, given that Binance has backed off from the buyout and SBF deleted his past tweets claiming funds were safe.
In fact, a day back, even Coinbase’s CEO Brian Armstrong revealed that his company did not have the plan to try and buy FTX’s US subsidiary. He said that there were reasons why the acquisition wouldn’t make sense.
Alongside, other prominent names from the space like Sequoia Capital have also wiped off their exposure to FTX, hinting that the company could be in a much worse position than portrayed.
Per stalwarts like Arthur Hayes, “no one” can bail out the company at this stage.
Sun shows a ray of light
Post every dark night, the sun rises and brings light to the horizon. In FTX’s case, it now seems like ‘Sun’ could literally bail out the beleaguered company. Per a development that’s still shaping up, FTX seems to be in talks with Tron Founder and Huobi Advisor Justin Sun as a potential funder. SBF told his employees on Slack that the company still had a theoretical possibility to raise funds and would prioritize the same next week.
Sun, however, feels that the damages done can be mitigated. He took Twitter to claim that he was putting together a solution together with FTX to “initiate a pathway forward.” Post acknowledging that the ongoing liquidity crunch, despite short term in nature, was harmful to the industry development and investors, he said,
“My team has been working around the clock to avert further deterioration. I have faith that the situation is manageable following the holistic approach together with our partners.“
In another update after that, Sun claimed that “ark building” to help FTX users weather through the “crypto storm” was already in progress. Well, like always, the future is unknown, and only time can tell if Sun is indeed able to rescue FTX and the ones associated with it or not.