FTX goes Bankrupt Amid Scandal

Jacob Gregor, President

Over the past week, the crypto world took a stab to the heart when news broke that CEO of FTX, Sam Bankman-Fried was involved with tampering and misappropriation of funds that were from huge investors. FTX is a crypto currency exchange platform where you can buy and sell coins instantly. One the FTX.US website, on the front page has a display of “names who trust FTX,” these names include Tom Brady, FTX Arena (home of the Miami Heat NBA team), Major League Baseball, and Stephen Curry. It is easy to see how FTX came up with the amount of funding they had when these people and organizations with huge followings have invested into FTX. 

On their website, they advertise that you can “sign up and trade in less than 3 minutes.” This can appeal to younger audiences because of how easy it is to set up an account and start trading cryptocurrencies. It is also possible not only to buy cryptocurrencies, but NFT’s as well. 

So what happened? How could the third largest cryptocurrency exchange file for bankruptcy? The answer to this is very complicated. When businesses exercise what they intend to do, things usually don’t escalate to bankruptcy. The money had disappeared and was liquidated out of the company. Lenders and people who helped fund FTX are now out of money, and if Sam Bankman-Fried did not come up with 8 billion dollars from other investors, they would be forced to file for bankruptcy, which ultimately happened. 

Another very interesting anecdote of this sticky situation is that Sam Bankman-Fried is one of the biggest democratic donors over the past couple of years. In the recent midterm elections, he contributed a whopping 40 million dollars to the campaigns of democratic candidates, including president Joe Biden. This was the second most in campaign donations before George Soros. George Soros donated an enormous amount of money to the democratic campaigns, totaling nearly 128 million dollars. 

Among everything that has happened, a scam artist like Sam Bankman-Fried is a terrible look for democratic candidates who have accepted campaign donations from him. To counter this bad look, candidates have used the donation amount given and donated it to charities for a good cause. For example, according to a Fortune.com article, Democratic Senator Kirsten Gillibrand donated Sam Bankman-Fried’s $16,000 donation to Ariva Inc., a charity that promotes “individual wealth and economic development in low-to-moderate-income communities,” (https://fortune.com/crypto/2022/11/15/politicians-sam-bankman-fried-donations-ftx-charity/).

It is unclear whether Sam Bankman-Fried will be held responsible criminally for his actions. The justice system will need to prove whether he has lost all of this money by deception. If it is just a case of mismanagement, he will not be serving any prison time. As of right now, it seems as if investigators have a good idea that this was criminally intentional deception. An interesting point to include is that if Sam Bankman-Fried is found guilty, so will other high executives of FTX. Time will only tell how the court sees the evidence at hand. 

With cryptocurrencies growing exponentially since the start of the Covid-19 pandemic, cryptocurrencies seemed like a brute force that had to be tapped into to make a serious profit. Although this still may be the case for some, it is important to know who you are dealing with and what company you choose to invest your money with. For Tom Brady, Steph Curry, MLB, and FTX Arena, they are out of some big money. Let this be a lesson to all, no matter how successful you may have been in the past, make sure you do your research in order to make your best decision financially, or you could end up contributing to the next biggest cryptocurrency scam.