Fraud, Failure, and FTX

Luke Rexing, Contributor

The markets have been in turmoil, as many would say that we are currently in a recession. Rising inflation has led to a feedback loop that is seemingly uncontrollable. The same is the case for crypto currencies, which have taken another large hit. One of the leading cryptocurrency exchanges, FTX, filed for bankruptcy on Friday. 

FTX was an exchange that promoted the liquidity and transactions of coins and tokens. Sam Bankman-Fried, Chief Executive Officer of FTX, claims that the company was “overconfident and careless.” The company experienced volumes of roughly $10 billion per day, and was leveraged too much for its own good. With incredibly high leverage, combined with crashing markets and bank runs, the company inevitably imploded. Binance, another cryptocurrency exchange briefly had eyes on acquiring FTX, along with its estimated liabilities of ~10-50 billion dollars. However, they backed out at the last minute to save themselves the trouble. During further investigation, Binance revealed that regulatory investigations along with mishandled funds, so they ultimately decided to pass on the crumbling empire. 

“I’ve certainly failed before. You all know that now, all too well. But all I can do is to try. I’ve failed enough for the month. And part of me thinks I might get somewhere.”

— Sam Bankman-Fried

Bankman-Fried is currently located in the Bahamas, where he and several other peers worked on FTX in a 5 bedroom penthouse. Quickly following the demise of the company, the penthouse went up for sale for 40 million dollars. There are Officials both in the United States and in the Bahamas working to get Bankman off of the islands and back to where he will be able to answer to the Members of the House Financial Services Committee. 

Bankman was once the beloved genius of silicon valley, being featured on almost every magazine imaginable. Nonetheless, even after his 15 billion dollar net worth was extinguished, he plans on keeping his focus on the customers. There are individual users and clients that still have about $8 billion within the company, and Sam’s focus is first going to them, then the investors. 

There are many others who lost big alongside Bankman, including celebrities and stars who found themselves intertwined after agreeing to endorsement contracts with FTX. This includes ambassadors and professional athletes like Tom Brady, Steph Curry, Trevor Lawrence, and Shaquille O’Neal. It also includes the ever famous Kevin O’Leary AKA Mr.Wonderful. Many if not all were promised compensation in cryptocurrency, but likely have their funds suspended and/or frozen. Additionally, Bankman-Fried was a self proclaimed “effective altruist” and contributed 39 million dollars to the Democratic Party during the recent midterm elections. According to the Daily Wire, he had been preparing to spend as much as 1 billion dollars during the 2024 election to make sure the Democrats maintained control. It appears that the left will no longer be able to inherit these fraudulent funds.

As someone who holds cryptocurrencies like Bitcoin and Ethereum, it is tough to see the markets tumble. However, as someone who is young (and also not a financial guru/guide), I have made the decision to hold. Maybe the prices will go to zero. Maybe they will skyrocket. Both seem unlikely right now, but I can afford to make mistakes while I am young. As a student and member of this ever astonishing society, it seems that I have become desensitized to many of the scandals and malevolence of the modern era. Perhaps it is a good thing to be numb to it, but it is certainly not a good idea to turn a blind eye. There is consistently conflicting, incriminating, and overall distressing news on every corner. It certainly will not end, but it would be nice to see a change of pace. Ideally, my generation will be the one to turn things around.