FTX cryptocurrency has found itself in hot water due to fraudulent money schemes, mismanagement of funds, and even embezzlement. In early November, FTX filed for bankruptcy after being valued at over $30 billion earlier in the year. With over $1 billion in missing customer funds, and $10 billion transferred to its sister company and trading firm Almeda Research that later went missing, FTX appears to be a complete farce.
Even employees were taking advantage of FTX funds, buying personal homes with business money. There were additional property holdings of over $74 million in the Bahamas alone. These homes, as well as any other FTX assets, have been frozen, and properties are being managed as an investigation is underway.
The founder of FTX and its sister company and trading firm, Almeda Research, is Sam Bankman-Fried. Once touted as the next Warren Buffet, he would often help to rescue struggling cryptocurrencies through buying them up. He was seen as an angel investor, but since the collapse of FTX, an additional 130 other companies have failed due to his fraud. This has led to several hundred employees’ financial ruin, and a huge dip in the crypto world.
Bankman-Fried was painted as a genius by the media. He was the son of two Stanford professors and studied physics at MIT. With this pedigree, it is not difficult to assume that he had brains. His genius for manipulating people to make himself very rich due to the investment and trust of others has certainly proven true.
It is said that Beckman-Fried, when meeting for business and with investors, often presented himself in a weird way, sleeping on couches before meetings. He was even caught playing video games in meetings. This boy wonder also invested in many things to help earn him social points in the media, investing in climate change, pandemics, and political campaigns. Beckman-Fried later said these investments were an act in order to paint himself as ethical, calling it a “dumb game we woke westerners play.”
The Future of Crypto
With the collapse of FTX, and the subsequent collapse of other cryptocurrencies that FTX had “saved,” it is only a matter of time before more regulation will be put into place to help protect investors from future fraud.
The Commodity Futures Trading Commission (CFTC), a federal agency that helps regulate trade, is already calling for more crypto oversight. What this means for the future of crypto has yet to be determined, but it appears FTX has acted as the catalyst or perhaps linchpin in creating this federal oversight. Prior to this scandal, cryptocurrency and its investors had evaded more regulation and oversight, arguing that that is part of the allure of crypto.
Cryptocurrency has always been a more risky investment, but compared to stocks, those investments appeared to have a higher return. Traditionally, the higher the return, the higher the risk, and this is proving true for cryptocurrencies, especially in the wake of the FTX crash.
For a currency that has limited to no actual assets besides the virtual money that it sells for government-sanctioned money, cryptocurrency has certainly caused an upheaval in the market. This upheaval will persist, especially as the fallout continues after this most recent scandal.