[Feature] The Aftermath of FTX’s Meltdown

The saying goes, “It never rains but it pours.” That is to say when one bad thing occurs, more bad things will follow one after another; and that is what is happening to FTX currently. A “battle” ensued between Binance and FTX last week, but ultimately, FTX lost the war and they lost big time. The untimely collapse of FTX, billionaire Sam Bankman-Fried’s (SBF) crypto empire, had a chain reaction, affecting not just the company but many others as well.

The struggle was real but the attempts were futile; that was apparent when FTX posted an announcement on the evening of November 11 via Twitter that is has filed for Chapter 11 bankruptcy to initiate an orderly process to review and monetise assets for the benefit of all its stakeholders. This announcement shook the entire crypto market although it was not surprising considering what had transpired prior.

The announcement mentioned about SBF’s resignation and the appointment of John J. Ray III as its new Chief Executive

SBF confirmed it with his very tweet

A clarification on certain entities was posted a day later

SBF’s last tweet at the time of writing

With that said, prominent sports sponsorships signed by FTX are falling through. Star athletes like Naomi Osaka, Steph Curry, and others, who became FTX’s global ambassadors in exchange for an equity stake in the company, appear to have lost big time. In addition, SBF also made purchasing deals to the naming rights of sports stadiums, one of which was Miami Heat. With FTX filing for bankruptcy, the team and county have officially terminated their naming rights for FTX Arena and are currently looking for replacement sponsors; the 19-year deal was actually worth about $135M. Another similar deal was signed with UC Berkeley for the naming rights at California Memorial Stadium, which was a 10-year deal worth $17.5M ─ it was undisclosed whether the transaction was paid in full and the fate of the naming rights remain unclear.

Another disaster to befall the already crippling exchange happened hours after they filed for bankruptcy. FTX said that is was investigating “unauthorised transactions” flowing from its accounts as researchers documented $515M of suspicious transfers possibly resulting from a hack or theft. Reportedly that it was likely done by a company insider who used a mixture of different exchanges to consolidate the crypto tokens into three wallets that are now being watched closely. According to Arkham Intelligence, a crypto analysis service, the amount remains in wallets related to one of the people involved in the hack. Arkham discovered that after tracing the person’s transactions, they “appeared to be in a panic” and “lost a large amount of their token holdings” to “slippage”.

Arkham tweeted today (November 15) about the attack on FTX

FTX’s Telegram channel had a note pinned to it stating the above. FTX customers watched their account balance rerate to $0

The breakdown of the crypto that the hacker holds

Founder and chief executive of Hacken, Dyma Budorin, said yesterday that the attacker had access to all the FTX cold storage wallets that were exploited ─ most likely possible in the hands of FTX executives since private keys are required for this access. Hacken followed the blockchain transactions and discovered that the looter mistakenly identified themselves while attempting to use the Kraken crypto exchange. Chief security officer of Kraken, Nick Percoco expressed that they know the identity of the user and that person is said to be a U.S. citizen.

Hacken detailed the hack in their tweets

SBF did an interview with The New York Times on Sunday which stretched past midnight voicing numerous regrets over FTX’s collapse despite saying, “You would’ve thought that I’d be getting no sleep right now, and instead I’m getting some.” When asked if FTX had improperly used billions of dollars of customer funds to prop up Alameda Research, a trading firm he founded, he did not offer much detail. The relationship between FTX and Alameda was the root of his downdall. This relationship is being examined by the Justice Department and the Securities and Exchange Commission (SEC).

SBF concurred with critics in the crypto community that he expanded his business interest too fast across a wide swath of the industry, “Had I been a bit more concentrated on what I was doing, I would have been able to be more thorough. That would have allowed me to catch what was going on on the risk side.”

He declined to comment on his current location, citing safety concerns.

Federal prosecutors in New York have begun contacting possible witnesses, according to a person familiar with the matter, with regards to his management of FTX. Those associated with FTX have begun reaching out to lawyers for potential representation. SBF declined to discuss the prospect of jail time when asked. “People can say all the mean things they want about me online. In the end, what’s going to matter to me is what I’ve done and what I can do”, he expressed.

To occupy his time recently, he played the video game Storybook Brawl, saying, “It helps me unwind a bit. It clears my mind.”

When questioned about his cryptic tweet, SBF said, “It’s going to be more than one word, I’m making it up as I go along.”