Link:
https://www.theguardian.com/business/2023/oct/03/sam-bankman-fried-ftx-crypto-trial-start
Date: THU, OCT 05 2023
Media: TheGuardian
- What happened?
Bankman-Fried, founder of the FTX cryptocurrency exchange, was charged with financial crimes.
Through some reports, it came to light that FTX could not give customers their funds and forced the company to file for bankruptcy. In which the following month Bankman was arrested on conspiracy and fraud charges for diverting billions of dollars in investments, as well as money in risky operations and other illegal things.
He was also charged by the Manhattan attorney’s office, where he was responsible for using client funds to pay the bill for loan expenses at Alameda, as well as the purchase of high-priced real estate, and making extensive political donations.The FTX hedge fund was Alameda.
The Bankman-Fried financial downturn began in November 2022, in which it came to light that Alameda had billions in FTX-owned cryptocurrencies, and that it was also used as support for loans to FTT. When the CEO of FTX’s top competitor Finance said he was going to sell his $50 million in FTT. At that time all customers of both FTT and FTX took their money immediately, in which they feared they would see a total collapse throughout the industry. That’s when FTX went bankrupt.
- Whom and where it affects?
It mainly affects Sam Bankman who is the guy in charge for the fraud and all the customers of cryptocurrency that he had and that he made lose a lot of money. And this issue affects the area of cryptocurrencies making them lose a lot of value and also the banks that are working with such crypto coins.
- What sort of public or private institutions are involved?
All the banks that work with the FTX crypto since they probably made a lot of people that invested in the coin lose money, the lawyers buffet that are in court against Sam Bankman and also the company that Sam founded.
- Why is it important for Banking and Finance?
Due to the collapse of FTX, many clients, lenders and investors lost millions of dollars, a possible burst of cryptocurrency bubble, hinting at the high level of volatility that cryptocurrencies can have. Therefore, many people, upon seeing this great drop, decided to transfer their funds from different types of cryptocurrency exchanges to banks or different entities that pose a lower risk.
- What do you think will be the consequences in the foreseeable future?
The consequences for Sam and its company are pretty clear, and they´ll be fraud and bankruptcy and probably a prison sentence for the accused; as for the banking activity, all the banks that worked with the crypto currency will have to rebuilt their financing since they lost a lot of money according to the crypto coin as well as the customers that had money invested on the FTX coin. As for the crypto world it could be seen as a warning of what could happen to them if they don’t do things right.
Keywords: FTX, Cryptocurrency Bubble, Sam Bankman, Exchange.