Notes

Warning: What Can You Do About FTX Right Now
The recent collapse of the cryptocurrency exchange FTX and the arrest of founder and ex-CEO Sam Bankman-Fried has raised many questions regarding the future of blockchain and Non-Fungible Tokens (NFTs). This scandal is not good news for NFTs, as it has raised doubts in a market that many were already skeptical of. Despite FTX's failure, the collapse of one exchange does not necessarily mean that blockchain and NFT technology is doomed as a whole.

What is Alameda Research exactly?
Alameda Research was a quantitative cryptocurrency trading firm, co-founded in September 2017 by Sam Bankman-Fried and colleague Tara Mac Aulay. On Twitter, Mac Auley confirmed she left the company in April of 2018 due to "concerns over risk management and business ethics."

Two years after Alameda was founded, Bankman-Fried launched FTX as a crypto exchange completely independent of Alameda (or so we thought). Although they were established as two separate entities, Alameda played a huge role in the growth of FTX, acting as FTX's main market maker.

To support his claim that FTX and Alameda were "wholly separate" entities, Bankman-Fried stepped down as CEO at Alameda in 2019. It turned out that the two entities were closer than Bankman-Fried had claimed. Not only did executives at Alameda and FTX often work out of the same Bahamian penthouse, but FTX CEO Bankman-Fried and Alameda CEO Caroline Ellison were rumored to have romantic ties. The relationship between the companies doesn't end there.

What is FTX?
FTX Trading Ltd. was a cryptocurrency exchange that was founded by Sam Bankman Fried and Gary Wang in April 2019. Prior to its bankruptcy in November of 2022, the exchange had over 1 million users and was the third-largest crypto exchange by volume. FTX stands for Futures Exchange.

What is FTT?
FTT is the native token for FTX. FTT tokens were designed to reward loyal users and traders by allowing them to reduce trading fees. FTT holders received a better referral rate, daily ERC20/ETH withdrawals of up to 1000 and a greater probability of airdrops. The exchange token also has a central collateral pool, which means that the collateral pool will rise in value when markets become volatile. This limits transaction fees and ensures users can easily trade.

FTT tokens offer many benefits that seem attractive at first glance. However, if the token was more expensive or difficult to use as collateral, customer funds might have been less likely to be affected.

Who is the FTX CEO?
Before the company went under, the CEO of FTX was Sam Bankman-Fried. Prior to starting his companies, Bankman-Fried graduated from the Massachusetts Institute of Technology (MIT) and worked at Jane Street Capital, a proprietary trading firm. Right before he founded Alameda, he worked at the Centre for Effective Altruism as the Director of Development.

A Short Timeline for FTX
May 2019
FTX is founded by Sam Bankman-Fried and his roommate, Gary Wang.

November 2019,
Changpeng Zhao of Binance purchases a 20% stake in FTX for approximately $100 million.


August 2020
FTX acquires cryptocurrency portfolio tracking app, Blockfolio, for $150 million.

July 2021
FTX raises $900 million at an $18 billion valuation from over 60 investors and Bankman-Fried buys out Zhao's stake for approximately $2 billion.

September 2021
FTX moves its headquarters from Hong Kong to the Bahamas.

January 2022
FTX announces that its $2 billion venture, FTX Ventures, has raised $400 million in Series C financing at a $32 Billion valuation.

February 2022
FTX.US announced that it would soon offer stock trading to US customers.

July 2022
FTX finalized a deal giving it the option to buy digital asset lender, BlockFi, for about $240 million.

September 2022
FTX.US won the auction for digital assets of Voyager Digital, a bankrupt crypto brokerage, for $1.42 billion. (In December 2022, FTX went bankrupt and rival exchange Binance was able to bid for Voyager's assets at approximately $1 billion.

October 2022
Bloomberg reports on the close relationship between Almeda and FTX.

November 2022
CoinDesk publishes a report that further exposes Alameda's and FTX’s close ties. FTX then files for bankruptcy in days that follow.

What is the FTX Scandal?
https://collectid.io/what-the-ftx-collapse-means-for-the-future-of-blockchain-and-nft-technology/ reported on November 2 that Alameda Research held a position in FTT worth $5 billion. Alameda's investment fund was also in FTT tokens. This raises concerns about Bankman-Frieds' unreported leverage and solvency.

The concerns caused rival exchange Binance to sell all their FTT tokens and customers followed suit, resulting in a bank run that cost FTX billions of dollars. FTX's liquidity crisis spurred a non-binding agreement with Binance to purchase FTX, which Binance ultimately did not move forward with after considering FTX's reported mishandling of funds and their pending investigation.

On November 10, the Securities Commission of the Bahamas froze the assets of one of FTX's subsidiaries, FTX Digital Markets Ltd. FTX Japan suspended its operations and the FTX Australian subsidiary was placed under administration.

FTX filed for bankruptcy on November 11th, after it was found that they did not have sufficient assets to satisfy customer demand. Shortly thereafter, FTX reported that an alleged hack totaling close to $500,000,000 in FTT had been transferred out of FTX accounts. Bankman-Fried blamed these transfers on an internal mislabeling issue, however, there is no clear financial reporting from the crypto exchange on why those funds were mishandled.

Bankman-Fried's balance sheets were not audited. This meant that there was no reliable record of the company's funds. It is evident that this lack of tracing was intentional, as FTX was funneling customer funds from FTX to Almeda - a reported amount of $10 billion with somewhere between $1-2 million unaccounted for. Despite Bankman-Fried's claim that FTX was an independent firm and that Alameda Research was protecting funds entrusted by the exchange, it appears that the fraudulent marketing of the exchange as well as the misuse of customer funds were deliberate.

CoinDesk's report raised concerns within the cryptocurrency industry about Bankman-Fried companies' leverage, solvency, and risk. This led to the collapse of the exchange, a 10-day down spiral, and Bankman-Fried being arrested.

What is FTX Founder Bankman-Fried Being Charged with?


Bankman-Fried was arrested on December 12 following a lawsuit against FTX alleging that Bankman-Fried's company was a fraudulent cryptocurrency scheme designed to take advantage of inexperienced investors across the U.S., including several celebrities and professional athletes. Later in December, he was released on a $250 million bond pending his trial. He is now being accused of the following 8 offenses after an investigation by the United States Securities and Exchange Commission and Commodity Futures Trading Commission.

Two counts of conspiracy to commit wire fraud
Two counts of wire fraud
Conspiracy to commit money laundering
Conspiracy to commit commodities fraud
Securities fraud conspiracy
Conspiracy to defraud America and commit campaign finance violations
The ex-CEO pleaded not guilty to his federal fraud charges on January 3, 2023.

What does the FTX scandal mean for the future of blockchain and NFT?
It's easy to wonder about the future of other cryptocurrency exchanges, NFTs, and blockchain as the dust settles over the recent FTX flop. With blockchain and NFTs as relatively newer concepts for people, it is easy to assume that this new technology caused the downfall of the crypto exchange. However, the root of FTX's collapse was not a problem with the security and reliability of the blockchain and NFTs, but rather a problem of deceit, improper financial reporting, and the misuse of customer funds. The safety, security, authenticity, and proof they provide is what the blockchain and NFTs are all about.

Although it is difficult to predict what will happen, these are some predictions about where things might be heading:

Blockchain technology will continue to mature and evolve, with a greater focus on scalability and user experience.
Due to the increasing popularity of blockchain technology, especially in the financial sector, the industry does face scalability issues as a newer technology. Many scalability problems have resulted, including increased transaction times, network transaction fees and electricity consumption (enough power to power the whole country of Switzerland). These issues can make systems slow and more costly for users. These issues can be addressed to improve the user experience and address sustainability issues.

As a way of authenticating and monetizing digital assets such as music and art, NFTs will continue their growth.
While the FTX bankruptcy and collapse created doubt in the finance industry, this only appears to be a setback. NFTs in general still look bright. Here are a couple of predictions of anticipated areas for NFT growth:

Gaming and metaverse: Expected to increase dramatically in video games and in the metaverse, NFTs. Assets in-game (e.g. In-game assets (e.g. Beyond gaming, you can access metaverse events like concerts, conferences, parties, and tickets through digital avatars, assets and memorabilia via an NFT.
Ticketing. Events such as concerts and sporting events will use increasingly NFTs to allow attendees in and offer dynamic, in-event promotions and offers.
Music - More musicians may use NFTs to promote their talents, interact with fans and earn royalties from their NFTs.
The Digital Twin: The idea of a physical item's "digital twin" will increase over the next year. To improve sustainability, traceability, customer engagement, and experiences, companies will equip their products using NFC technology.
Growth isn't always linear, just like any other industry. NFTs market may have ups and downs, but overall it has bright future as more people are aware of this new technology.

What do you think? What are your thoughts on NFTs and blockchain? Comment below to share your views!


Here's my website: https://collectid.io/what-the-ftx-collapse-means-for-the-future-of-blockchain-and-nft-technology/