REKT Reminders

The liquidation of FTX, a Bahamas-based cryptocurrency exchange, began in November 2022. The collapse of FTX, caused by a liquidity crisis of the company's token, FTT, served as the impetus for its bankruptcy. Prior to its collapse, FTX was the third-largest cryptocurrency exchange by volume and had over one million users. 
 
On 2 November 2022, CoinDesk published an article stating that Alameda Research, a trading firm affiliated with FTX and owned by FTX chief executive Sam Bankman-Fried, held a significant amount of FTX's exchange token, FTT. Following the allegations, Binancea competing cryptocurrency exchange and a prior investor in FTXannounced it would sell its FTT, leading the market price of the token to crash. The move also triggered a spike in withdrawals from FTX, causing the exchange to freeze withdrawals and creating a liquidity crisis. On 8 November, Binance signed an offer to acquire FTX, but then withdrew the offer. On 11 November, FTX, Alameda Research, and over 100 affiliated entities filed for bankruptcy. Bankman-Fried resigned as FTX CEO. 
 
The collapse of FTX has had a wide impact on cryptocurrency markets and was described by federal prosecutors as "one of the biggest financial frauds in American history. Bankman-Fried's net worth, estimated at $16 billion prior to the collapse, was reported as having been wiped out, and several institutional investors of FTX wrote off their investment stakes in the company. Some $473 million in funds were later taken from FTX in an "unauthorized transaction." The collapse of FTX has resulted in a ripple effect across the cryptocurrency industry, with the price of Bitcoin falling to its lowest level in two years. Anonymous sources cited by the Wall Street Journal on 10 November 2022 stated that FTX had lent $10 billion from customers' accounts to fund Alameda Research earlier in 2022, a move forbidden by FTX's terms of service. The same sources stated that Bankman-Fried, Alameda Research CEO Caroline Ellison, and other FTX executives were aware of the decision. FTX and its handling of customer funds are under investigation by the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), and the Department of Justice (DOJ) in the United States. Anonymous sources cited by Reuters said that between $1 billion and $2 billion in consumer funds could not be accounted for.