Back in 2019, FTX was the new incoming crypto exchange platform on the game and it had to make people excited about it so that people actually start using this,
So what Sam Bankman-Fried and Alameda Research did was issue cryptocurrency based on his own platform called the FTT tokens, these FTT tokens were associated with the platform,
But again these FTT tokens have no value because this was just another crypto token that was whipped out of thin air, there is no reason why this particular token should have value, so Sam and Alameda did exactly this,
They gave a reason why FTT tokens should have value. The investors or the FTT token holders were eligible to have preferential access, meaning FTT token holders enjoyed lower transaction fees, no cost withdraws, and other fun stuff, ud83eudd73
This particular set of perks attracted people to the FTX platform and soon after the FTT tokens price started to inch up because of demand, the platform decides to burn (to buy) their own tokens so that there are fewer tokens in the ecosystem and this would artificially drive up the FTT token prices,
Well nobody’s complaining, everyone’s happy, people who invested in the FTT tokens are happy with returns and they can trade on the platform for a cheaper price than others,
But the interesting thing was that Alameda Research, the firm associated with Sam Bankman-Fried, owned a lot of these FTT tokens so when the price of these FTT tokens was rising the net worth of Alameda Research was rising too, As Alameda Research’s net worth was rising on paper, they were suddenly able to borrow more real money and to everyone’s surprise, Alameda was borrowing this money from the FTX platform itself, the borrowed money was funded by the money generated by the FTX customers. ud83eudee3
This was a set up to fail and it was going to happen anytime soon.
When I said Alameda Research owned a lot of FTT tokens, no one knew how much they actually owned, until a week ago when it was leaked, they held 3.66 Billion Dollars worth of unlocked FTT tokens and 2.16 Billion Dollars worth of FTT collateral and they had 8 Billion Dollars worth of loans that needs to be paid back which is backed on FTX platform,
So when this report was leaked, CZ the Binance founder, who also held huge amounts of FTT tokens, tweeted saying he’d sell all the tokens because of concerns around it,
This was was the last straw and broke the back of FTX, Investors panicked at the situation and in 3 days there were withdraws worth 6 Billion Dollars, this brought the FTT tokens to value crashing down, and with the value coming down the balance sheet of Alameda Research was crushed as most of their assets were in FTT tokens,
It was only a matter of time before this spread to FTX, the platform which funded Alameda Research with their customers’ funds came down crashing like a house of cards.
FTX was valued at 32 Billion Dollars, now probably nothing.
