The Grind:
Recently, FTX, one of the world’s largest cryptocurrency exchanges, collapsed suddenly, leaving a several-billion-dollar hole and sending shockwaves through the entire digital asset industry. But weeks before the collapse, its founder hypocritically led a charge calling for more stringent regulations on the crypto space. He singled out DeFi, a technology segment of the industry that, funny enough, is our best hope at preventing similar disasters from occurring in the future.
First, what exactly happened? This story is extremely involved and intricate, but it was essentially a bank run, on an institution that was secretly insolvent and fraudulent.
The Details:
FTX essentially had fraudulently taken customer funds to speculate, and quickly ran out of money when customers came calling after a large holder of the company’s token (essentially stock) announced plans to sell. It’s a very long and involved story, but this article has a good timeline of events.
What’s interesting is the political connections held by Sam Bankman-Fried, FTX’s young founder. He was the second-largest single donor to the Democratic Party (behind only George Soros) this year, his parents had connections to leftist political causes, and his romantic interest and CEO of one of his companies Alameda Research, Caroline Ellison, has been said to have family ties to US Securities and Exchange Commission chair Gary Gensler. And recently before the untimely demise of his empire, Bankman-Fried made a public and controversial push for more regulations of the digital asset space. Read more…