A sequence worthy of the best films.
Last week, Binance boss Changpeng Zhao (nicknamed "CZ") , announced in a tweet that his group - 120 million users - was not going to get its hands on FTX after all, which is none other than one of its main rivals.
What happened? How did FTX go bankrupt in the space of a few days? A look back at one of the most incredible sequences in the short history of cryptos.
What happened?
It all started last Sunday. In a tweet, "CZ" explained that his group was going to sell all its "FTT", the token issued by its American rival FTX.
FTT tokens offer their holders advantages on the FTX exchange platform.
"CZ" said it wanted to sell just over $500 million worth of FTT, which it had held since the sale of its shares in FTX. Above all, he said the sale was linked to "recent information" - from Coindesk - that the financial balance sheet of investment firm Alameda Research was largely made up of... FTT tokens.
What's the problem?
The fact that Alameda Research holds FTTs is not a problem in itself. The (big) problem is that Alameda Research is owned by Sam Bankman-Fried (nicknamed 'SBF'), who is also the boss of... FTX. In other words, the two companies owned by the same man support each other. Not very reassuring! 😅
According to Coindesk, Alameda reportedly has $3.66bn in FTX and $2.16bn listed as FTX "collateral". The remaining few billion is said to be tokens from projects backed by Sam Bankman-Fried, including Solana, Serum, Maps, Oxy and Fida.
Alameda chief executive Caroline Ellison clarified on Sunday that the figures disclosed by Coindesk represented only a "fraction" of the company's holdings, and that it had an additional $10 billion in assets.
This, however, was not enough to allay the fears of some in the markets. Quickly, the FTT token sold off in droves, dropping well below the $20 mark, a level it hasn't touched for almost two years...
Most importantly, investors began pulling their funds out of FTX.
How did Sam Bankman-Fried react?
The FTX boss insisted until Tuesday that his platform was doing "fine". "A competitor is trying to come after us with false rumours," he tweeted, adding, "FTX is fine. Assets are fine. FTX can cover all customer assets."
Sam Bankman-Fried, who did not mention the Alameda situation, concluded with a dig at Binance: "I would love it, Changpeng Zhao, if we could work together for the ecosystem."
What triggered the buyout?
SBF's words did nothing. Within two days, tens of thousands of FTX customers had withdrawn their funds from the platform.
According to a message posted by the young boss on the company's Telegram account, the company recorded around $6 billion in net withdrawals in the space of 72 hours! FTX was soon overwhelmed and had no choice but to stop withdrawals. On Tuesday, customers could no longer retrieve their funds by midday.
At the end of the day, CZ and SBF simultaneously announced an agreement to allow FTX to resume operations and manage the liquidity problems 💸.
But yesterday, CZ therefore announced that it would not be buying the company, which would doom FTX... and potentially all its users. In a letter sent to investors, which included a number of giants such as Sequoia and SoftBank, SBF explained that it was "sorry" and would do everything it could to limit the losses.
This turnaround is quite incredible. At the beginning of October, in an interview with The Big Whale (available here in Premium access) , SBF had explained that FTX was in great shape and was even planning to make "major acquisitions", particularly in Europe.
What could have caused this "battle"?
Interviewed earlier this week, "CZ" explained that it had taken the decision to sell all its FTT tokens solely to best manage market "risks", a few months after the collapse of the Terra Luna project. In the spring, the collapse of Luna had caused major upheaval and brought down several players in the sector such as Celsius.
But the explanation surely lies elsewhere. For some weeks now, tensions between the American and the Chinese-Canadian have been rising steadily over regulation.
Had SBF become too troublesome for CZ? It's hard to say. In any case, it marks a turning point in the sector.
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