November could have been a better month for the crypto exchange FTX and trading company Alameda Research. Sam Bankman-Fried (SBF), the founder of the two businesses, resigned from his CEO position and filed a Chapter 11 bankruptcy for FTX. After allegations against FTX, mainly for risky business practices that SBF never mentioned, certain crypto firms stated that they have no involvement with the shady activities.
When crypto communities started pointing fingers at other establishments, including Tether, Coinbase, Bitfinex, and Circle, the corresponding founders and chief technical officers tweeted that they were not exposed to FTX or Alameda. Some investment companies, such as Sequoia Capital, had already pulled out their money from the failed crypto exchange before SBF filed for bankruptcy on November 11.
CEOs Keeping Their Distance
The trust in crypto companies hit a new low when SBF tweeted that customer funds were safe before FTX found itself in chaos. He deleted the post and immediately apologized for how he messed up and should have done better. Of course, people did not easily forgive him after everything that happened, as they shouted out that he should be jailed.
The fall of FTX led many people to ask if other exchanges and crypto firms are doing the same risky business as Sam Bankman-Fried.
Jeremy Allaire, CEO of Circle, posted a series of tweets about the company not being exposed to any FTX or Alameda material. “FTX has been a customer of Circle Payment APIs for the past 18 months, providing card and ACH services for customer transactions. Circle’s crypto payments beta product uses FTX and other exchanges for BTC/ETH liquidity.”
Paolo Ardoino, CTO of both BitFinex and Tether, disclosed on Twitter that the two companies did not participate in FTX’s antics. The clarification responded to several people asking if Tether was somehow exposed to FTX and Alameda Research.
Brian Armstrong, CEO of Coinbase, assured that his crypto exchange does not tamper with customers’ funds unless under the direct request of the customer. He also guaranteed that users could exit the business anytime, no matter the situation. To top it all off, he said that Coinbase works closely with policymakers to ensure the customers’ safety.
Alameda and FTX So Far
The fallout happened when reports were released about Alameda Research allegedly using customers’ digital assets for trading.
Chaopeng Zhao (CZ), CEO of Binance, pressured Sam Bankman-Fried into proving that FTX has cash reserves. When SBF failed to do so, users in FTX began to exit the platform. However, the exchange halted withdrawals, and the people who wanted out were suddenly sandwiched between the fires of FTX and Alameda Research.
FTT, the exchange’s token, dropped significantly from $26 to $1.5 in just a few days. The controversy also led the entire crypto market to its knees with new bottom floors. Bitcoin plummeted from $21,000 to $15,500, Ethereum sunk from $1,636 to $1,142, and Cardano from $0.4267 to $0.3301. Solana, one of the most significant investments from SBF himself, had one of the worst drop-downs, from $36.77 to $13.17.
The Chapter 11 bankruptcy allows FTX and Alameda Research to continue operations without SBF as CEO. John Jay Ray III, the new chairman, promises to fix and improve the exchange and right the company’s wrongs.
