When cryptocurrency exchange FTX raised $400 million from investors like Softbank, Temasek, Tiger Global, and others in January 2022, its net worth took off.
The funding, surprisingly, soon brought its value to $32 billion. In November, he was bankrupt.
As FTX built its reputation with big-name investors, it was also allied with high-profile celebrities, including NFL great Tom Brady, his then-wife supermodel Gisele Bündchen, NBA superstars Stephen Curry and Shaquille O’Neal, tennis player Naomi Osaka. and Larry David from Hollywood.
FTX CEO Sam Bankman-Fried was the institutional face of the cryptocurrency industry. He amassed a net worth of more than $21 billion, but lost most of it in just a few days starting on November 8.
The company was a mechanism that people used to buy and sell cryptocurrencies like bitcoin and ether. But trust in FTX was destroyed when its clients rushed to withdraw their money by selling the cryptocurrencies they had previously purchased using the platform.
And the rest is history. Bankman-Fried now faces criminal and civil charges on fraud allegations.
The celebrities who backed his cryptocurrency empire are now facing some embarrassing consequences.
Tom Brady lost a staggering number of shares
One of FTX’s highest profile promoters was NFL star Tom Brady. Needless to say, his remarkable investment went horribly wrong.
A strangely prescient video was captured in a Twitter post, where Brady asks Bankman-Fried, “Sam, where you going bro?” The post was shared by @MilkRoadDaily.
The Tampa Bay Buccaneers quarterback is reported to own more than a million shares, and the value of that now looks like it could be zero.
Why did the run on the bank happen on FTX?
the nov. 2, Coindesk published a story that raised concerns about the financial health of FTX and Alameda Research. The article claimed that Bankman-Fried’s Alameda Research assets consisted of FTT (~FTTUSD) the cryptocurrency issued by FTX.
The revelation that FTX was using FTT, the once-beloved cryptocurrency, as collateral on its balance sheet caused great concern due to the concentration risk and volatility of FTT. Clients and investors were skeptical about the capital reserves of trading firm Alameda and Bankman-Fried’s FTX.
On Nov. 6, Binance announced that it would sell around $530 million worth of FTT, triggering the bank run.
By November 8, Binance officially said it was acquiring FTX as the values of cryptocurrencies such as bitcoin fell. Stocks of crypto companies, including Robinhood (HOOD) – Get a free report and Coinbase (CURRENCY) – Get a free reportthey were plummeting in value.
The next day, Binance said it was withdrawing its takeover offer. The situation was worse than initially believed.
On November 11, FTX filed for bankruptcy and Bankman-Fried stepped down as CEO.
It was soon announced that FTX was under federal investigation by New York prosecutors for giving client funds to Alameda Research.
And the civil action followed.
“Bankman-Fried was orchestrating massive fraud for years, siphoning billions of dollars of trading platform client funds for his own personal gain and to help grow his crypto empire,” the Securities and Exchange Commission alleged. in his civil suit.
