Reason for the bankruptcy of the FTX platform
There are two companies, the first is the cryptocurrency trading platform FTX and the second company we can call an investment fund is Alameda Research which invests customers' money in the currency market.
The relationship between the two companies was one based on the exchange of interests conflicts of interest since the founder of the two companies is the same person, Sam Bankman-Fried, a graduate of the MIT Institute and a former investment portfolio manager despite his very little experience Alameda Research, supervised by Caroline Ellison, entered the company as a junior trader graduate of Stanford University. By virtue of her friendship with Sam, she became a director of the company despite her little experience and also limited her serious competence in the field.
The interest relationship between FTX and Alameda Research was more the fact that FTX allowed Alameda Research to use FTX customers' deposits destined for trading the platform to cover its transactions with the crypto market known as liquidity and high risk, i.e. the use of FTX customer funds as hedge for transactions
Did it stop there? No, FTX released FTT, which is a FTX platform token and is used as a basic cryptocurrency to exchange other currencies on the platform such as the Binance platform's BNB, This token Alameda Research entered into $5 billion deals according to CoinDesk In other words, anyone who can create token and trade it on their platform at will and raise its price at will, but will need to transfer it to real financial assets. Sam had his own bank, Alameda Research, which he finances through his clients' deposits with FTX and my father also uses to withdraw FTT with its unreal financial value.
After the US Federal Rate Hike and the sharp descent in the cryptocurrency market and the CoinDesk report that most of Alameda research's assets are the FTT token of the FTT platform this created great concern for investors in Alameda Research and at the same time FTX customers This report made them discover their illegal relationship and at the same time Binance released a tweet that it would sell the FTT for the same reasons. This made the FTT price collapse while at the same time requests for withdrawals by customers estimated at $ 6 billion that could not be covered, resulting in SAM declaring FTX bankrupt.
The result is now significant losses not only to investors in FTX but also to all investors in cryptocurrencies, as well as Sam the director of FTX is involved in illegal business, which is concerned with his own use of customer deposits without their knowledge undisclosed leverage and also providing information to Public Wrong to achieve special objectives misleading conduct.
It is certainly the covid and overly optimistic that led these investors or individuals to put their money into a company like Alameda research, especially those who invested retirement money there. The company offers 15% fixed interest annually without any decline. This is actually virtually impossible because investing in capital markets is based on risk in all financial assets except for those entering the fixed income such as government bonds on which the annual return is no more than 5%. The cryptocurrency market is the most liquid and risky financial market and should never be entered with money that the owner is unwilling to lose. Also, the lack of public awareness of the area of investment in financial markets was one of the reasons why Sam's wealth reached $34 billion