How SBF bought FTX's one-way ticket to bankruptcy, leaving crypto markets in shambles

  • Sam Bankman-Fried poached top Wall Street and Silicon Valley talent to build a haphazard business operation.
  • The bankruptcy filing reveals dubious shortcuts SBF's inner circle used to run the $32 billion FTX crypto empire.
  • Bitcoin price is back in the green, although its bullish outlook might only last a while.

The first bankruptcy hearing involving FTX, a fallen crypto empire, revealed how funds were mismanaged by "a small group of inexperienced and unsophisticated individuals." According to James Bromley, the talent hired by Sam Bankman-Fried (SBF) were subject to no checks and balances to control the vast estate.

Cryptocurrency markets have been in a tailspin since the FTX crisis started, with experts predicting a longer crypto winter – perhaps until the end of 2023.

Meet the top Wall Street talent that led FTX to its knees

The founder and former CEO of the defunct FTX hired talent from a renowned firm on Wall Street referred to as Jane Street Group. This star company has been trading crypto for over a decade and enjoyed a high-ranking status before piles of avoidable messes from FTX unraveled, shattering the industry.

Jane Street Group boasts over 2,000 staff nestled in lower Manhattan. It is often eyed for its love for risky market situations and an unmatched preference for stealth. Jane Street Group has maintained its top spot in financial markets by digging into the health of trading partners, modeling potential catastrophes and, above all, restricting employees from making public comments.

Nevertheless, the culture at FTX was nothing compared to that at Jane Street Group – to a large extent, it was the opposite. SBF carefully recruited into his inner circle top talent but with no ethics to build a haphazard crypto operation that has left over one million creditors counting losses.

Caroline Ellison, the CEO of Alameda Research, FTX's trading arm, is a Jane Street Group alumnus. It is alleged that she was SBF's one-time romantic partner. Brett Harrison, who was at the helm of FTX US, also hailed from the Wall Street firm.

Other top names in SBF's circle include Sam Trabucco, who assisted Ellison in managing Alameda before his exit in August, had left Susquehanna International Group to work for SBF. FTX's head of technology, Gary Wang, was once a Google employee, while Constance Wang, the firm's chief operating officer (COO) worked at Credit Suisse Group AG at one point in his career.

FTX found itself in the rabbit hole mainly because of SBF's inner cycle. The pile of evidence now in bankruptcy court shows how FTX did not have any regard for risk control and bookkeeping. They orchestrated secret dealings with some executives receiving unsecured loans. Company funds were used to purchase personal assets.

The Crypto market recovers, is this a dead cat bounce?

Bitcoin (BTC) price reclaimed support at $16,000 before stretching its leg to $16,655. A daily close above the 50-day Exponential Moving Average (EMA) (in red) at $16,527 could have functioned as a springboard to the expected run-up to $20,000.

BTC/USD four chart

BTC/USD four chart

However, a rally is unlikely to hold amid the uncertainties associated with the FTX contagion. Investor confidence is still lacking, a situation that may continue to deprive Bitcoin price of the necessary momentum to sustain an uptrend.

A four-hour to a daily close below the 50-day EMA could exacerbate declines, forcing Bitcoin price to seek refuge at $16,000 and $15,450, respectively.

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