- As per FTX's former CEO, Sam Bankman-Fried, Alameda borrowed more money from the exchange than it had as collateral.
- SBF, along with Tom Brady and Steph Curry, has been named in a class action lawsuit seeking $11 billion in damages.
- FTX token (FTT) price has lost more than 94% of its value since the exchange's collapse on November 6.
FTX exchange and its native token FTT together triggered one of the biggest crashes this year, which the crypto market is still reeling from. In the wake of piling lawsuits and regulatory noose tightening, FTX's CEO Sam Bankman-Fried (SBF) has come forward to explain what went wrong and inform on future plans.
FTX faces class action lawsuit
FTX exchange CEO SBF has been named in a class action lawsuit by an Oklahoma resident, according to a filing on November 15. The plaintiff claims violation of Florida's law and damages worth more than $11 billion to consumers.
Along with the CEO, celebrities such as Tom Brady, Stephen Curry, Shaquille O'Neal, Kevin O'Leary, and many more have been named in the class action. The lawsuit holds them responsible for the damages suffered by FTX users, stating,
"All parties who either controlled, promoted, assisted in, and actively participated in FTX Trading and FTX US (collectively, the "FTX Entities"), offer and sale of unregistered securities in the form of yield-bearing accounts (YBAs) to residents of the United States."
The lawsuit came days after the cryptocurrency exchange filed for bankruptcy, which SBF states were one of his biggest regrets.
SBF unsatisfied with the bankruptcy decision
In an interview with Vox, FTX's former CEO said that one of the biggest reasons behind FTX's downfall was the "messy accounting" that emerged during the Terra-LUNA collapse.
As per SBF, after Alameda faced losses in May 2022, FTX attempted to rescue it by lending money from the exchange’s balance sheet. However, due to the messy accounting, FTX failed to realize that Alameda had borrowed far more money than the collateral required.
He further stated that he intended to pursue more fundraisers, but FTX's bankruptcy filing barred him from doing so. The executive believed that raising more money would have helped FTX end the $8 billion liquidity crisis, and withdrawals would have resumed within a month.
He added that his only goal from here on is to secure this funding to make account holders whole again.
SBF Twitter conversation with Vox
Surprisingly, SBF also stated that all his statements about making regulations were mostly just for Public Relations (PR). He added that regulators only made everything worse and that they did not protect consumers at all as they can’t distinguish between the good and bad.
FTX Token (FTT) price continues to lose value
FTX exchange’s collapse began after Binance CEO Changpeng Zhao (CZ) publicly announced that he was going to offload his FTT holdings. While the exchange in question attempted a deal, it fell through, triggering a massive selling frenzy.
As a result, the FTX token (FTT) price crashed 91% between November 6 and 9, taking the rest of the market down with it. Although Bitcoin price and Ethereum price tried to weather through the initial fallout, the markets gave in, catalyzing a chain reaction that caused the total market capitalization to shed 22% since November 6.
Total crypto market capitalization 1-day chart
While retail investors are coming to terms with their losses, so are institutions. One such entity is Temasek, a Singapore government-owned holding company. An announcement on November 16 revealed that Temasek was going to write down its $275 million investment in FTX.
Regardless of Temasek’s losses, Bitcoin price continues to consolidate around $15,500, allowing altcoins to recover. As a result, the total market capitalization has bounced back to $787 billion, but investors need to be cautious as there are major regulatory developments or reactions yet to happen that could trigger another sell-off.
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