On November 12, local time, Sam Bankman-Fried (SBF), founder of cryptocurrency exchange FTX, announced on social media that more than 130 affiliated companies (collectively known as FTX Group), including exchange FTX.com and affiliated trading company Alameda Research, have voluntarily filed for bankruptcy in accordance with Chapter 11 of the US bankruptcy law in order to "evaluate and realize assets in an orderly manner in the interests of global stakeholders." Under U.S. law, a company filing for such bankruptcy can continue to operate while a debt repayment plan is in place. The exchange has suspended cryptocurrency withdrawal operations.
After the news, Bitcoin fell by more than 5% at one point and fell below the integer of $17,000. As of press time, the price of Bitcoin is $16,804.
The SBF also announced his resignation as FTX CEO and replaced by John J. Ray III, who also said it would appoint Stephen Neal as the company's new chairman of the board.
In bankruptcy filings obtained by the US media, FTX said it has more than 100,000 creditors and that the company currently has assets between $10 billion and $50 billion and liabilities between $10 billion and $50 billion.
Ray, the new head of FTX, said: "It is appropriate to file for bankruptcy under Chapter 11 of the Bankruptcy Code, which will provide FTX Group with the opportunity to assess its situation and develop processes to maximize the protection of investors' interests".
But Ray also stressed: "FTX Group has valuable assets that can only be effectively managed through an organized, joint process. I would like to assure every employee, customer, creditor, contractor, shareholder, investor, government agency and other stakeholders that we will carry out this work diligently, thoroughly and transparently. Stakeholders should understand that events have been moving fast, that the new team has only recently been involved, and that they should review the submissions on the litigation record form for more information in the coming days. ”
Crazy financing, FTX's rapid expansion path
FTX is a digital asset derivatives exchange founded in May 2019. Users can trade Bitcoin, Ethereum and other cryptocurrencies in it, as well as related derivatives. FTX completed a seed round of financing in August 2019, raising $8 million, with the participation of blockchain investment funds Proof of Capital, Consensus Lab, FBG, Galois Capita and others.
In July 2021, FTX completed a $900 million Series B funding round, valuing the company at $18 billion after the investment, making it the largest financing in the history of the crypto industry. The company participated in this round of financing, including Sequoia Capital, SoftBank, Paul Tudor Jones Family Office, etc. FTX announced at the time that this round of financing is a strategic financing, hoping to achieve a strategic layout of cooperation with investors in traditional markets through financing.
On January 31, 2022, FTX announced the completion of a $400 million Series C financing at a valuation of $32 billion. Participants in this round of funding include SoftBank, Paladin, Tiger Global Fund, and the Ontario Teachers' Pension Planning Commission.
In addition to FTX's own financing, FTX US, which serves U.S. investors, announced in January 2022 that it had completed a US$400 million Series A financing at a valuation of US$8 billion, with participation from Palatine, SoftBank Vision Fund II, Temasek and others.
After establishing a foothold in the United States, the company began to expand globally. On March 7, 2022, FTX established its European subsidiary, FTX Europe, and obtained a regulatory license from the Cyprus Securities and Exchange Commission (CySEC) to provide crypto derivatives trading services to European users. On March 21, FTX established its Australian subsidiary, FTX Australia, which has obtained Australian regulatory approval to conduct business. On April 4, FTX completed the acquisition of Japanese crypto asset trading platform Quoine and its parent company Liquid, and offered products and services to Japanese customers.
Why the crash?
After strengthening the regulation of cryptocurrency transactions in major countries around the world, cryptocurrencies represented by Bitcoin began to adjust at the end of 2021. Bitcoin, for example, reached an all-time high of $68,580 in November 2021 and then fell all the way. The current price is less than $17,000. The decline has been more than 70% in the past year.
Similarly, digital currency exchanges, which provide trading venues for cryptocurrencies, are also gradually in trouble.
According to CoinDesk, Alameda will be in bankruptcy, and most of the assets on its balance sheet belong to FTX's self-issued FTT tokens. This news instantly caused a market panic, and FTT was sold off on a large scale, causing FTX to fall into a liquidity crisis.
On November 9, Binance, the world's largest cryptocurrency exchange, was originally planning to acquire FTX. But just one day after due diligence, Binance founder Peng Zhao publicly stated: "FTX's problems are beyond our control and ability to help." At this point, the embattled FTX entered the "Lehman moment" of total collapse.
SBF Legend Life
According to Yahoo News, SBF was born in California to a law professor at Stanford. From 2010 to 2014, SBF moved to the Massachusetts Institute of Technology, majoring in physics and minoring in mathematics. In an interview with Yahoo, he said the experience was not fulfilling, and "what I learned in college ended up being of no use other than social development." However, on the academic side, all this is useless. Schools don't help with most jobs. Everyone knows it's true, but some people really don't want to say it's true, but it is what it is. ”
While at MIT, he interned at Jane Street Capital, a prominent hedge fund, and began trading ETFs. After graduating from university, he stayed with the company and worked there full-time, mainly trading various types of ETFs, futures, foreign exchange and stocks. He even designed an automated OTC trading system for Jane Street Capital. After becoming familiar with the operation of the traditional financial system, he also observed the shortcomings of the cryptocurrency financial mechanism at that time (including the failure to provide leverage, liquidity problems, quotation accuracy problems).
In 2017, he independently founded Alameda Research, a service company focusing on cryptocurrency quantitative trading, providing accurate quotation services, arbitrage, quantitative trading and other services for cryptocurrency exchanges. However, the SBF is not content to be the only backer of the technology behind cryptocurrency exchanges. In 2019, he founded FTX.
Unlike traditional cryptocurrency exchanges, which focus on spot trading, FTX has initially targeted financial products derived from cryptocurrencies and provided many targets that are not currently available on cryptocurrency exchanges, such as leveraged tokens, equity tokens, prediction commodities, and so on. At its peak, FTX offered a total of 312 products, including innovative varieties such as cryptocurrency indices, leveraged tokens, and two-way option contracts in addition to spot trading, contract trading, and staking.
Not only the crypto market itself, FTX also turns various political issues into trading content, attracting people who have no interest in cryptocurrencies and traditional finance to invest. For example, FTX launched the futures contract TRUMP-2020 in February 2020, which allows investors to predict whether Trump will be re-elected to buy and sell, helping FTX attract many people interested in politics to open accounts and trade. According to statistics, on November 4, the day of the US election, the single-day trading volume of FTX futures contracts related to Trump and Biden even exceeded $10 million (at present, all election contracts "except TRUMPFEB" have been settled according to the delivery rules of the original election).
Subsequently, his wealth grew exponentially, reaching $26 billion at one point.
In 2021, in an exclusive interview with New York magazine, SBF talked for the first time about how he quickly accumulated wealth. In 2018, he identified Japan and South Korea, two markets that were overlooked by European and American investors. At that time, Japanese and Korean users poured into the cryptocurrency industry, and everyone rushed to buy bitcoin, resulting in the price of bitcoin in Japan being 10% higher than that of the United States, and South Korea attracting sellers from all over the world with a 30% premium.
However, South Korea's strict currency entry and exit policies at that time made it quite difficult to convert won to US dollars. SBF said he even considered buying a plane to buy bitcoin in person in Seoul, the South Korean capital. But in the end, SBF decided to travel to Japan and spend nearly a month with partners in rural Japan, earning a premium profit every day. He said he had made up as much as $25 million a day and called it the craziest trading moment he'd ever experienced.
In an exclusive interview, SBF explained to New York his life view: making money is about donating money, which means that people should pursue a highly profitable career in order to donate more money to benefit society. Therefore, for him, making as much money as possible will be his biggest goal at present.
On May 23, 2022, SBF was selected as one of the "Top 100 Global Influential People" list of Time magazine in 2022, and SBF is also the only person in the crypto industry to be selected as one of the top 100 people of the era.
(Originally titled "Coin Circle Avalanche!") FTX Group filed for bankruptcy and the founder resigned! Once crazy financing expansion, why is it caught in the "Lehman moment"? 》）