The story behind the downfall of the 'King of Crypto'
Sam Bankman-Fried, whose net worth was $16 billion last week, lost it all and had to step down as CEO.
The fall of giants is not a rare occurrence in the world of business. But when it happened to Sam Bankman-Fried, the 'King of Crypto' it shook the whole crypto and tech industries.
A week ago, Sam's net worth was $16 billion; it crashed down to zero in a day, and his company FTX has now filed for bankruptcy. For a crypto world that is marked by tales of losses, it has been quite a shock to learn that more than 94 per cent of Sam's wealth has gone down the drain.
Sam has stepped down as CEO, but this is only the beginning of his hardships as he will have to face federal investigations into the company’s finances.
FTX is estimated to have 1.2 million registered users spread across the world who use the platform to buy cryptocurrency tokens like Bitcoin.
So, what exactly caused this downfall that is now called the biggest financial disaster in crypto history?
According to industry experts, Alameda Research, a sister company, was trading billions of dollars from FTX accounts and leveraging the exchange’s native token as collateral. This is a clear violation of FTX's terms of service and the US Securities Law.
Though FTX has been seeking funding for many quarters to tide over its financial crisis, the fall was totally unexpected.
"As widely reported, unauthorized access to certain assets has occurred," is what Ryne Miller, Lawyer for FTX, tweeted, giving a hint to the web of complications that the company is facing.
It is alleged that Alameda Research, instead of holding any money, was borrowing billions from FTX users, and then trading it. Now Alameda Research, led by Sam’s friend Caroline, is also shutting down.
A week ago, FTX was a $32 billion cryptocurrency powerhouse, and now it is buried in a massive financial crisis. Since the news of the crash spread, the company has stated that it has stopped trading and withdrawals, and moving digital assets offline.
Sam started the FTX crypto exchange in 2019 in partnership with Garry Wang, who was then working for Google. The company's rise to fame and fortune was so magical that Sam became a superhero in the world of crypto. And then he fell.
We will remain in close touch to determine the appropriate next steps as it proceeds.