BTC Balances on FTX Fell by 91% In the 3 Months Leading To Its Fall

The crypto industry has been in turmoil lately following the collapse of crypto firm FTX. This news not only shocked traders but caused concerns about the overall stability of cryptocurrency as a viable investment option. The fact that such a major crypto player can go under highlights how precarious crypto investments can be.

The details behind FTX going belly up have been slowly coming to light. From the available information, the firm’s fall was inevitable. Crypto publication Banklesstimes.com has reported that in the three months preceding FTX’s collapse, its BTC balances had dropped by an astonishing 91%. The exchange held 54,363.85921379 BTC on 10th August 2022, which fell to 4,455.84110945 coins on November 10th.

BanklessTimes’ CEO holds that FTX’s collapse underscores the need for robust oversight and governance of crypto exchanges. It also highlights the fragility of such platforms and speaks to the importance of developing more resilient deterrents to such happenings.

The recent FTX bankruptcy is a stark reminder of the importance of effective management and risk mitigation when it comes to cryptocurrency exchanges. Poorly managed exchanges can leave users vulnerable to disruption and instability, pressuring the crypto market as a whole.

BanklessTimes CEO

What Went Wrong for FTX?

Since its inception in 2019, FTX quickly grew to one of the top three crypto exchanges globally, with an incredible valuation of over $32B. But unfortunately, it came crashing after an exposé revealed its shifty dealings with Alameda Research. The latter was a trading firm that the former FTX CEO Sam Bankman-Fried (SBF) owned.

The scoop showed that Alameda’s primary asset was FTT, FTX’s native token. This revelation worried investors since FTX also used FTT as collateral on its balance sheet, essentially tying both firms’ capital to a highly volatile asset. Consequently, Binance announced it would liquidate its FTT holdings sending the token spiraling and investors scrambling to withdraw their funds from FTX, fearing its collapse.

As the withdrawal orders piled to $6B, FTX experienced a liquidity crunch necessitating the suspension of further withdrawals. Binance withdrew from an agreement to bail out FTX after conducting due diligence on the exchange. The latter claimed that the exchange’s financial situation was beyond its ability to help.

Then followed the announcement that the SEC and CFTC had instituted investigations into the exchange’s affairs. SBF announced the winding down of Alameda Research to try to save FTX. Last-ditch efforts to raise the exchange’s liquidity became a cropper leading to its filing for bankruptcy and the disgraced SBF stepping down from the firm.

SBF is Facing a Litany of Charges

Following FTX’s collapse into bankruptcy last month, Sam Bankman-Fried is now facing eight federal charges related to the crypto exchange crash. These serious criminal counts include wire fraud, securities fraud, and money laundering – all of which could potentially result in lengthy imprisonment if Bankman-Fried is found guilty.

SBF is insistent that he wasn’t involved in any fraudulent activities despite the SEC dubbing FTX’s downfall as one of the biggest and most flagrant frauds in recent times. He has accepted a U.S. extradition request and is flying from the Bahamas to answer charges at a Manhattan court. His legal representative, Jerone Roberts, attests that this move was based on SBF’s wish to put FTX customers right.