The second largest cryptocurrency exchange in the world Futures Exchange popularly known as FTX has come to a screeching halt following liquidity crunch. FTX crypto founder Sam Bankman-Fried has also stepped down from his position as Chief Executive Officer.
Earlier this week, Bankman-Fried reached out to Binance founder Changpeng Zhao to solicit for help to cover the liquidity crunch. Which Sam also made public in a tweet. But Zhao pulled out and everyone wants to know why.
For the past three years, the multi-billion dollar company FTX has become widely recognized as a reputable cryptocurrency exchange platform for trading digital currencies. Despite not adhering to U.S. regulation, FTX crypto has developed into one of the world’s largest exchanges.
Binance CEO purchased 20% stake in FTX barely a year after the crypto firm’s inception. Bankman-Fried acquired Zhao’s stake in FTX crypto last year which he compensated in part with FTT, the company’s native cryptocurrency token.
Why FTX Crypto Crashed
Upon discovery of a significant quota of FTT tokens in Alameda Research’s possession via information leakage, Binance bowed out of their deal to help FTX. Alameda is a trading firm jointly run by Alameda CEO Caroline Ellison and Sam Bankman-Fried, who were rumored to have been romantically involved.
As a result of the disclosure, Binance via a tweet on twitter declared their intentions of selling the FTT tokens, a move that launched FTX crypto into cash crisis. As they struggled to process mass withdrawal requests. The FTT tokens fell in value while investors and traders continuously pulled out of FTX. In the span of three days, over $6 billion withdrawals were made.
Running to Binance for assistance was FTX’s strategy to protect its customers from the impending credit crisis. But the swift detour by Binance from the supposed deal has left FTX in a lurch. In a statement regarding the development, reports of mishandled funds as well as corporate due diligence appear to be the reasons for backing out.
Sources with in-depth information and knowledge of the matter disclosed that aside selling unregistered securities, lobbying politicians and investors to establish crypto-friendly regulatory rules , divulged that Alameda Research played a crucial role in FTX’s collapse.
The price of FTT tokens has since plummeted, continuing a downward spiral that rocked the cryptocurrency market. Now, due to the FTX debacle, Bitcoin and Ethereum prices have dropped below $16,000 and $1,100 respectively.