Greedy Individuals and Companies are Destroying Crypto
The collapse of the second-largest cryptocurrency exchange FTX and all of its affiliated companies this week has caused massive damage to the whole crypto landscape. Not only will millions of users lose billions of dollars, but the trust in the system may have been irreparably damaged. And once again, it was entirely avoidable and only the greed of a few individuals caused the disaster.
Coffeezilla made a great point in his video about the subject when he compared a cryptocurrency exchange to a casino. It doesn’t matter whether the prices go up or down, the company will always earn money from the trading fees. As long as they don’t do anything stupid, it’s basically free money. But of course, they did something stupid.
It turns out, FTX lent out customer funds even though their terms of service said that customer assets would remain on the platform. The loans went to the crypto trading firm Alameda Research which was also founded by the FTX founder Sam Bankman Fried also known as SBF. As collateral for the loans, they got the FTX-issued FTT token. As soon as FTX started experiencing problems, the FTT token quickly lost its value and FTX wasn’t able to fulfill customers' withdrawal requests.
Additionally, FTX spent a lot of money on sponsoring the Miami Heat FTX arena, partnerships with stars like Tom Brady or Steph Curry, and YouTube promotions. They also bailed out other struggling crypto companies like Voyager and BlockFi. All of this led to a hole of almost 10 billion dollars in their balance sheets.
Now that some stories are getting out, it looks like the leadership of the companies was at the very least incompetent, and very likely criminal. Sam Bankman Fried was praised as the most generous billionaire and almost seen as the savior of crypto with his ambitious plans and ideas. Now he seems nothing more than a fraudster and the Department of Justice and the SEC are already looking into the collapse of FTX.
FTX is the latest domino to fall in the line of prominent crypto disasters this year alone. It started with the collapse of the Terra Luna ecosystem, followed by companies like Voyager, Celsius, and BlockFi. The one thing that is shared by most of the failures is…