FTX, once the world’s second-largest crypto exchange, collapsed in November 2022 amid accusations that client money was being channelled to prop up its investment arm Alameda
The failure of crypto currency platform FTX, whose disgraced former boss goes on trial this week, triggered shock waves across the world, with regulators still seeking to get to grips with the sector.
Sam Bankman-Fried, once the wunderkind of crypto, will appear in a federal court in New York on Tuesday facing seven counts of fraud that could see him spend decades in prison, capping a spectacular decline from grace.
FTX, once the world’s second-largest crypto exchange, collapsed in November 2022 amid accusations that client money was being channelled to prop up its investment arm Alameda.
Investors pulled their money as the news snowballed, sinking FTX into bankruptcy and making SBF a financial pariah.
The crisis also ensued in a mass movement of capital from the highly speculative industry amid a series of other business failures.
FTX fuelled concern over a sector dubbed by critics the “Wild West”, with its promises of high returns in a volatile marketplace and a lack of supervision – two facets that can appeal to criminals seeking to launder money.
Crypto companies with big exposure to FTX fell by the wayside, including the trading company Genesis and the BlockFi platform, as well as a number of lenders.
I am seeing the crypto failures from last year like dominos following FTX, said Erica Stanford, a fintech specialist at law firm CMS.
A number of other crypto currency projects unrelated to FTX also bit the dust.
Many were clear Ponzi schemes, Stanford told AFP, referring to pyramid investment scams designed to con consumers with the lure of a quick buck.
Stanford said the FTX failure had also impacted a lot of “people from the industry”.
SBF had carefully styled himself as the poster-boy of the crypto world – so his decline tarnished everyone.
US prosecutors accuse SBF of diverting funds from FTX clients, but also wire fraud, securities and commodities fraud, and money laundering.
The tumult finally triggered the collapse of a virtual trading business that at one point had been valued at $32 billion.
