Just a couple of days ago, when I informed readers that gold and silver popped higher, I also included a notice that Bitcoin had suddenly dropped about $2,000 overnight and I wasn't sure what the reason was. Within hours, the news started flowing that crypto exchange FTX.com, the second largest in the world was in the midst of collapsing.
I had found the reason. FTX appears to have been one giant Ponzi scheme. After having read through a few articles to get a clearer picture as to what happened and what continues to happen, it's clear that FTX is headed for bankruptcy with losses in the billions affecting pension funds, celebrity investors, family offices such as that of Paul Tudor Jones and big players like Blackrock, Sequoia Capitol and Japanese billionaire Masayoshi Son's Softbank. FTX's founder Sam Bankman-Fried has lost the bulk of his $18 billion fortune (94% loss)and the rest will probably go to cover debts and legal costs as he is likely heading to prison as he himself, a few months ago, described Defi as a Ponzi scheme.
Sequoia Capitol has informed its investors it has written off its entire $210 million investment in FTX. I can't get a clear picture on the extent of the Ontario Teacher's Pension Fund losses but they are completely writing it off, according to an article published on the site, Bitcoin Wisdom. We can assume it's in the hundreds of millions.
I can't help but ask, how many other pension funds are affected? Just last month, U.K. pension funds came within a hair of collapse and had to be bailed out, causing the Pound to crash to multi-decade lows. It's clear now that FTX was a unicorn, a.k.a. 'grossly overvalued /produces nothing', kind of like... Facebook which itself has taken a nosedive. According to the New York Post, Zuck has lost a record $100 billion in the last 13 months and Facebook is down 25%.
Are other pension funds going to panic and start selling, if they haven't started already? Could the panic spread to other exchanges?
As to what triggered FTX's collapse, it appears to have been none other than Binance CEO Changpeng “CZ” Zhao. Zhao too is / was an investor in FTX. A liquidity crisis caused by a surge in customer withdrawals was sparked by Zhao cashing out $530 million in FTX native tokens. What did he know that others didn't. According to the Wall Street Journal, the SEC has launched an investigation. I think Zhao will be questioned as to why he cashed out just before everything blew up.
As for Sam Bankman-Fried, who is being called Bankrupt-Fried and Bankfraud-Fried, things are not going to get better for him as it is now suspected he illegally funnelled investor money into another venture, Alameda Research which, according to an article published by Reuters this morning, is set to wind down operations while FTX is no longer allowing withdrawals.
I'm sure more news is to follow in coming days as to who lost how much. I suspect the pain will continue for investors and average people alike as they learn a big chunk of their savings / pensions just disappeared. I suppose now would be a good time to open up a store that sells only one product, pitchforks! You might end up richer that Bankrupt-Fried.
Fried and bankrupt, what could be worse than that.
As for Bitcoin, which has been hugely affected by the FTX fiasco, dropped some $5,000 in a matter of days, down to a low of $15,564 but has recovered some 11% to $17,573, where it sits at time of writing.
This just goes to show that we must exercise due diligence when investing in cryptos. At the end of January this year, there were some 9,900 cryptocurrencies circulating. As of late June, there are now more than 12,000 cryptocurrencies out there. Of these 12,000, I only trust ta few and Bitcoin is at the top of the list.
Update: Friday, November 11, 2022 - It's official. Zero Hedge reports this morning that FTX has filed for bankruptcy and Bankman-Fried has resigned as CEO. Click here to view the article.
I earn free Satoshis using CryptoTab Browser. I also use the BAT browser to earn free BAT tokens. No expensive investments were made to earn these tokens and the risk is minimal at best. Silver though, is my ultimate back up plan as the S&%t hits the fan. Consider investing in silver and / or gold. Click here for more info and purchase any precious metal at OwnX.
Subscribe to my blog and hit the 'like' button if you enjoyed this post. Tips are always appreciated.
Check out some of my previous posts.
Central banks considering revaluing gold.
The looming diesel fuel shortage.
Gold's performance in previous USD bull runs.
Another week. Another flurry of rate hikes.
Earning crypto without spending a single penny!
My silver XPerience with OwnX.
A fan of history? Check out my other blog, 'A Brief History Of'.
A brief history of the feud between Captain Kirk and Mr. Sulu.
