FTX’s demise threatens all of crypto
The Future. The downfall of FTX is sending shockwaves throughout the entire crypto industry — losing customers’ savings, making assets unavailable, and strangling other lenders who are now trying to complete an avalanche of withdrawals. The whole episode is reminiscent of the fall of Lehman Brothers back in 2008, which led to the financial crisis. Is the crypto world about to experience a similar collapse?
Blockchain blast radius
According to Axios, FTX had such deep ties in the crypto industry that many other top firms are feeling the fallout.
- Gemini, a lender, run by the Winklevoss twins, had to pause withdrawals from their Earn program that allowed customers to deposit their coins for high-interest payments.
- That’s because Gemini’s partner lender, Genesis, said it couldn’t meet customer demand this week.
- Top lender BlockFi is reportedly considering filing for bankruptcy.
- Marketplace Voyager Digital, which FTX was going to acquire for $1.4 billion, is back on the auction block after filing for bankruptcy in July.
- And crypto hedge funds like Galois Capital and Ikigai Asset Management have said that a vast percentage of their funds are wrapped up in FTX’s missing assets.
And among the many, many people who have lost their assets in FTX, anyone who purchased one of the Coachella NFTs — including the ten sought-after lifetime passes — are now unavailable.
Even the celebrities who appeared in FTX commercials — Tom Brady, Gisele Bündchen, Shaquille O’Neal, and Larry David — are getting sued for shilling for the company.
Built to fail
As for FTX, the marketplace’s business is proving to have been a house of cards all along.
- Founder Sam Bankman-Fried (aka SBF) filed for bankruptcy and stepped down as CEO. He’s now kind-of on the lam (but incessantly posting on Twitter) as the DOJ and SEC are investigating him.
- John Ray III, the executive who restructured Enron after its infamous 2001 bankruptcy, has taken the reins of FTX. In a court filing, he said FTX was the biggest “failure of corporate control” he’s ever seen… and that’s saying a lot.
- Ray also said that the financial info the company kept was “untrustworthy” and that SBF used software to “conceal the misuse of customer funds.” He’s only been able to recover above $740 million of the $8 billion owed.
And with SBF candidly revealing to a Vox reporter how unethically he ran the company, the drama is far from over.