It’s official. FTX, FTX US, Alameda and many affiliated entities filed for bankruptcy this morning. My thoughts are with the hundreds of thousands of clients who have entrusted FTX with their savings. Many institutions also have significant amounts of assets on FTX. Chances are they will only be getting a small percentage of their assets back after a prolonged period of bankruptcy proceedings. Psychopath SBF stepped down (but is not yet arrested). John Ray, the lawyer who oversaw Enron bankruptcy, is taking over.
Things are likely going to get worse from here. BlockFi halted client withdrawals because they are no longer being bailed out by FTX. There are counterparties and counterparties’ counterparties. If anyone on the daisy chain becomes insolvent due to FTX/Alameda’s default, there’s going to be a domino effect and many crypto entities will go down. Next few weeks are going to be brutal.
Many DeFi projects funded by FTX/Alameda will also be in trouble if they are funded with FTT tokens, which dropped 90% in value in the past week. Projects which get quarterly infusions from FTX/Alameda might have to shut down or scale back. The Solana ecosystem is especially impacted as FTX/Alameda supports many projects there. SOL token also dropped 50% in value in the past week. I personally believe a big percentage of Solana’s success/hype can be attributed to FTX/Alameda’s support. With FTX/Alameda going under, who is going to pump up the SOL token price? The Solana developer ecosystem is a lot less organic than the Ethereum ecosystem.
We still do not know the details of FTX’s assets and liabilities. But according to Zane Tackett, the former head of institutional sales at FTX, the gap between assets and liabilities is at least $2.66B. It’s unclear what Alameda’s balance sheet looks like. SBF wanted to raise $9B to fill the hole so chances are things are quite hairy. I would like to know all the details about this FTX mess and how we allowed SBF and his friends to conduct such egregious frauds. Their criminal actions are definitely a big blow to blockchain development. My hope is that once all the greed and hubris is washed away, we can start with a clean state and many decentralized and transparent applications could be built for real-world utility.