This week we saw the wealth of crypto executive Sam Bankman-Fried drop by 95% from a previous high of nearly $25 billion to less than $1 billion, while it appeared that his trading firm, FTX, turned out to be a Ponzi scheme and customer funds had been raided to fill a huge hole at his trading firm Alameda Research.
It appears that he may have fled the Bahamas for Argentina during the night, after remaining customer funds at the bankrupt exchange had their wallets drained to zero. That seems like an odd final destination, since Argentina has extradition.
Most tracked flight right now – https://t.co/g65UMuTWD8According to tweets the founder and former CEO of @FTX_Official is en route to Argentina after the FTX collapse earlier this week. pic.twitter.com/e42sI7Huto
— Flightradar24 (@flightradar24) November 12, 2022
The situation began to accelerate a week ago when the CEO of the largest exchange, Binance, tweeted that they were going to liquidate their holdings of FTX’s proprietary coin FTT.
- The main asset held by Bankman-Fried’s trading firm turned out to be their own coin
- And they’d pledged that coin as collateral for loans from Bankman-Fried’s exchange
- It had a small float, they owned most of the coins themselves, so they were able to prop up the price. By selling a small number of coins at a high price, it made the rest look valuable
- Once there was suspicion of a solvency problem, customers made a run on the exchange and caused a liquidity problem – quickly revealing what looks like chicanery.
Last night things got even worse. The companies filed for bankruptcy. Customers, for the most part, were unable to access their assets. Then came reports that NFTs and cutouts in the Bahamas were being used to withdraw funds. People were gaining control of user accounts, using the funds to buy NFTs in FTX’s marketplace, and locals in the Bahamas (who could still make withdrawals in person) would access the funds from these sales.
Apparently this is a Bahamas account withdrawing other people's funds for them.
They are likely bypassing the internal balance transfers block by selling NFTs on FTX's NFT marketplace — eg. Bahamas account creates an NFT, the stuck user buys the NFT with their full balance. https://t.co/VphzwQprdQ
— Cobie (@cobie) November 11, 2022
Then things went even more sideways and the money in customer accounts was gone – at scale.
Official: FTX has been hacked.Source: admin of FTX Community Chat pic.twitter.com/IukG4ekWhO
— 0xTre (@0xTre) November 12, 2022
And everyone was gone from the FTX offices, according to the exchange’s charitable foundation:
They’ve been asked to evacuate.
— Future Fund (@FUTURE_FUND_) November 12, 2022
Perhaps the best summary so far:
— naiive (@naiivememe) November 11, 2022
As an aside, Sam Bankman-Fried had sought to invest in the acquisition of Twitter and put the social media company on the blockchain, which sounded dumb to Elon Musk. Musk points out that the meltdown of FTX effectively happened on Twitter, when the Binance CEO first called out the exchange and customers reacted, and when users tracked the hack and pilfering of funds in real time. That couldn’t happen anyway else (Mastodon!) and is why, market value and recent stumbles aside, Twitter remains one of the most important places in the world.