97-482: Alameda Research was a cryptocurrency trading firm , co-founded in September 2017 by Sam Bankman-Fried and Tara MacAulay. In November 2022, FTX , Alameda's sister cryptocurrency exchange, experienced a solvency crisis, and both FTX and Alameda filed for Chapter 11 bankruptcy . That same month, anonymous sources told The Wall Street Journal that FTX had lent more than half of its customers' funds to Alameda, which
194-528: A Bahamas -based cryptocurrency exchange , began in November 2022. The collapse of FTX, caused by a spike in customer withdrawals that exposed an $ 8 billion hole in FTX's accounts, served as the impetus for its bankruptcy. Prior to its collapse, FTX was the third-largest cryptocurrency exchange by volume and had over one million users. On 2 November 2022, CoinDesk published an article stating that Alameda Research ,
291-410: A cryptocurrency exchange , which also operated a crypto hedge fund , and had been valued at $ 18 billion, filed for bankruptcy . The financial impact of the collapse extended beyond the immediate FTX customer base, as reported, while, at a Reuters conference, financial industry executives said that "regulators must step in to protect crypto investors." Technology analyst Avivah Litan commented on
388-422: A hash pointer as a link to a previous block, a timestamp , and transaction data. By design, blockchains are inherently resistant to modification of the data. It is "an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way". For use as a distributed ledger, a blockchain is typically managed by a peer-to-peer network collectively adhering to
485-434: A trading firm affiliated with FTX and owned by FTX chief executive Sam Bankman-Fried , held a significant amount of FTX's exchange token, FTT. The article triggered a spike in withdrawals from FTX, but eventually, customers became unable to retrieve the money they had deposited in the exchange. On 11 November, FTX, Alameda Research, and over 100 affiliated entities filed for bankruptcy. Bankman-Fried resigned as FTX CEO and
582-550: A "secret exemption" from FTX's auto-liquidation protocol. Alameda Research suffered a series of losses in May and June 2022, which anonymous sources told the Wall Street Journal resulted in FTX lending the trading firm more than half of its customer funds, a decision that the sources said FTX CEO Sam Bankman-Fried described as a "poor judgment call". This was explicitly forbidden by FTX's terms of service. On 12 November 2022,
679-639: A bank account". In January 2018, Bankman-Fried organized an arbitrage trade to take advantage of the higher price of bitcoin in Japan versus in America. The company earned between $ 10 million and $ 30 million before the price gap closed in early 2018. In early 2019, the firm moved its headquarters from California to Hong Kong . As of August 2021, Bankman-Fried owned approximately 90 percent of Alameda Research. Sam Bankman-Fried started his own crypto exchange in April 2019 under
776-830: A bank and designate specific encrypted keys before they could be sent to a recipient. This allowed the digital currency to be untraceable by a third party. In 1996, the National Security Agency published a paper entitled How to Make a Mint: The Cryptography of Anonymous Electronic Cash , describing a cryptocurrency system. The paper was first published in an MIT mailing list (October 1996) and later (April 1997) in The American Law Review . In 1998, Wei Dai described "b-money," an anonymous, distributed electronic cash system. Shortly thereafter, Nick Szabo described bit gold . Like bitcoin and other cryptocurrencies that would follow it, bit gold (not to be confused with
873-547: A blockchain, mining is the validation of transactions. For this effort, successful miners obtain new cryptocurrency as a reward. The reward decreases transaction fees by creating a complementary incentive to contribute to the processing power of the network. The rate of generating hashes, which validate any transaction, has been increased by the use of specialized hardware such as FPGAs and ASICs running complex hashing algorithms like SHA-256 and scrypt . This arms race for cheaper-yet-efficient machines has existed since bitcoin
970-428: A blockchain. A node is a computer that connects to a cryptocurrency network. The node supports the cryptocurrency's network through either relaying transactions, validation, or hosting a copy of the blockchain. In terms of relaying transactions, each network computer (node) has a copy of the blockchain of the cryptocurrency it supports. When a transaction is made, the node creating the transaction broadcasts details of
1067-511: A collapse similar to FTX. Institutional investors that stand to lose money due to their stakes in FTX include Tiger Global Management , the Ontario Teachers' Pension Plan , SoftBank Group , BlackRock , Lightspeed Venture Partners , Temasek , and Sequoia Capital . Sequoia Capital wrote down its equity in FTX to $ 0 on 9 November, losing some $ 214 million. Sequoia released a notice to investors, also published on Twitter, assuring them
SECTION 10
#17330863036531164-428: A community of mutually distrustful parties referred to as miners . Miners use their computers to help validate and timestamp transactions, adding them to the ledger in accordance with a particular timestamping scheme. In a proof-of-stake blockchain, transactions are validated by holders of the associated cryptocurrency, sometimes grouped together in stake pools. Most cryptocurrencies are designed to gradually decrease
1261-406: A counterparty of Alameda. In August 2022, Alameda co-CEO Sam Trabucco resigned, and Caroline Ellison became the firm's sole CEO. On 8 November 2022, following a liquidity crisis at FTX , a large cryptocurrency exchange , Binance and FTX signed a letter of intent for FTX to be acquired by Binance. The value of Alameda was affected, and was estimated to have dropped over 90 percent following
1358-665: A crackdown on cryptocurrency that had previously banned the operation of intermediaries and miners within China. On 15 September 2022, the world's second largest cryptocurrency at that time, Ethereum , transitioned its consensus mechanism from proof-of-work (PoW) to proof-of-stake (PoS) in an upgrade process known as "the Merge". According to the Ethereum Founder, the upgrade would cut both Ethereum's energy use and carbon-dioxide emissions by 99.9%. On 11 November 2022, FTX Trading Ltd. ,
1455-509: A digital wallet (which is a computer with software hosting your wallet information), to hosting your wallet using an exchange where cryptocurrency is traded, or by storing your wallet information on a digital medium such as plaintext. Bitcoin is pseudonymous , rather than anonymous ; the cryptocurrency in a wallet is not tied to a person but rather to one or more specific keys (or "addresses"). Thereby, bitcoin owners are not immediately identifiable, but all transactions are publicly available in
1552-530: A liberal political action committee (PAC) in support of President Joe Biden . In 2022, Alameda reportedly donated $ 5 million to Guarding Against Pandemics, a PAC run by Sam Bankman-Fried 's brother, Gabe. The company provided financial support to the Worldwide Online Olympiad Training program by the Art of Problem Solving. Cryptocurrency A cryptocurrency , crypto-currency , or crypto
1649-469: A loss of funding for the effective altruism movement, which Bankman-Fried had funded using profits from FTX. However, several leaders of the EA movement, including William MacAskill and Robert Wiblin , condemned FTX's actions. Prior to the collapse, Bankman-Fried and other senior leaders of FTX and Alameda were altogether worth approximately $ 16.5 billion, making them the second-largest group of benefactors to
1746-422: A manner similar to the way FTX used FTT. Bloomberg reported that the collapse of FTX exacerbated institutional skepticism of cryptocurrencies as an asset class. BlockFi, a cryptocurrency lender, filed for Chapter 11 bankruptcy protection on 28 November; the firm had earlier begun preventing withdrawals. The company disclosed "significant exposure" to FTX on 14 November. Another cryptocurrency lender, Genesis ,
1843-417: A method used by cryptocurrency thieves to thwart attempts to retrieve stolen funds. A person speaking on behalf of FTX in a Telegram chat referred to the "unauthorized transactions" as a "hack" and encouraged users to delete FTX mobile apps as they were compromised. Kraken has since announced its assistance in identifying the perpetrator. On 14 November, Kraken's chief security officer said on Twitter that
1940-412: A nonbinding agreement to purchase FTX to ensure that customers could recover their assets in a timely manner. The deal did not include the sale of FTX.US. Zhao announced on Twitter that the company would complete due diligence soon, adding that all crypto exchanges should avoid using tokens as collateral. He also wrote that he expected FTT to be "highly volatile in the coming days as things develop". On
2037-503: A number of stablecoins have crashed or lost their peg . For example, on 11 May 2022, Terra 's stablecoin UST fell from $ 1 to 26 cents. The subsequent failure of Terraform Labs resulted in the loss of nearly $ 40B invested in the Terra and Luna coins. In September 2022, South Korean prosecutors requested the issuance of an Interpol Red Notice against the company's founder, Do Kwon . In Hong Kong,
SECTION 20
#17330863036532134-436: A potential rescue deal. Bankman-Fried made several statements on 10 November, taking responsibility for FTX's failure and indicating that FTX was attempting to raise $ 10 billion in emergency financing to remain solvent. Bankman-Fried also announced that Alameda Research would cease trading and end operations. FTX's in-house legal and compliance teams had, for the most part, resigned by 10 November. Anonymous sources cited by
2231-399: A protocol for validating new blocks. Once recorded, the data in any given block cannot be altered retroactively without the alteration of all subsequent blocks, which requires collusion of the network majority. Blockchains are secure by design and are an example of a distributed computing system with high Byzantine fault tolerance . Decentralized consensus has therefore been achieved with
2328-669: A quantitative trading firm, after he left his job at Jane Street Capital . The firm was based in Berkeley, California , where Bankman-Fried moved that same year. He had recruited about 20 young effective altruists , most of whom had no experience trading in financial markets nor were aware of cryptocurrencies. Per a 2021 interview, the term 'research' was included in the name to avoid scrutiny, with Bankman-Fried saying, "if you named your company like We Do Cryptocurrency Bitcoin Arbitrage Multinational Stuff, no one's going to give you
2425-532: A specialised bank called a "custodian". These physical representations of cryptocurrency do not hold any value by themselves; these are only utilized for collectable purposes. Cryptocurrency is produced by an entire cryptocurrency system collectively, at a rate that is defined when the system is created and that is publicly stated. In centralized banking and economic systems such as the US Federal Reserve System , corporate boards or governments control
2522-592: A subsidiary of Digital Currency Group , halted withdrawals on 16 November. This halt caused Gemini to cease allowing redemptions for clients using a service provided through a partnership with Genesis. BlockFi confirmed speculation by filing for Chapter 11 bankruptcy protection in the United States on 28 November. Cryptocurrency investment firms with assets still held on FTX after its bankruptcy include Galois Capital and Galaxy Digital. Several public figures also invested in FTX or received compensation for promoting
2619-512: A subsidiary of Digital Currency Group , halted withdrawals on 16 November. This halt caused Gemini , an exchange owned by the Winklevoss twins , to cease allowing redemptions for clients using a service provided through a partnership with Genesis. Another Digital Currency Group subsidiary, Grayscale, saw the value of its flagship offering, the publicly traded Grayscale Bitcoin Trust, decline by 20% over
2716-450: A valid partial proof-of-work. As of February 2018 , the Chinese government has halted trading of virtual currency, banned initial coin offerings, and shut down mining. Many Chinese miners have since relocated to Canada and Texas. One company is operating data centers for mining operations at Canadian oil and gas field sites due to low gas prices. In June 2018, Hydro Quebec proposed to
2813-439: Is a digital currency designed to work through a computer network that is not reliant on any central authority, such as a government or bank , to uphold or maintain it. Individual coin ownership records are stored in a digital ledger , which is a computerized database using strong cryptography to secure transaction records, control the creation of additional coins, and verify the transfer of coin ownership. Despite
2910-454: Is a method of securing a cryptocurrency network and achieving distributed consensus through requesting users to show ownership of a certain amount of currency. It is different from proof-of-work systems that run difficult hashing algorithms to validate electronic transactions. The scheme is largely dependent on the coin, and there is currently no standard form of it. Some cryptocurrencies use a combined proof-of-work and proof-of-stake scheme. On
3007-483: Is the combination of two words "alt" and "coin" and includes all alternatives to bitcoin." Altcoins often have underlying differences when compared to bitcoin. For example, Litecoin aims to process a block every 2.5 minutes, rather than bitcoin's 10 minutes which allows Litecoin to confirm transactions faster than bitcoin. Another example is Ethereum , which has smart contract functionality that allows decentralized applications to be run on its blockchain. Ethereum
Alameda Research - Misplaced Pages Continue
3104-849: Is the largest), but the IRS and the SEC also have "somewhat hazy claims", which take priority. Following the collapse of FTX, the Royal Bahamas Police Force launched a criminal investigation into the company. Anonymous sources cited by Bloomberg said that the office of the United States Attorney for the Southern District of New York had begun an investigation into FTX's collapse as of 14 November. The United States House Committee on Financial Services plans to conduct hearings in December on
3201-490: The Bloomberg Billionaires Index following the crises and preliminary acquisition agreement on 8 November 2022. Late in the day on 9 November, The Wall Street Journal reported that Binance was walking away from the FTX acquisition, blaming FTX's mishandling of customer funds and pending investigations of FTX. On 9 November 2022, Alameda's website was taken down. The next day Bankman-Fried said Alameda Research
3298-496: The New York Times said that the exchange owes as much as $ 8 billion. The crypto lender BlockFi , which was affiliated with FTX, announced on 10 November that it was suspending operations as a result of FTX's collapse. Bankman-Fried resigned as CEO and was replaced by John J. Ray III , a corporate restructuring specialist who previously oversaw the liquidation of Enron . As of 12 November, Bankman-Fried told Reuters that he
3395-402: The Wall Street Journal reported that Binance would not move forward with the deal to acquire FTX. Binance cited FTX's reported mishandling of customer funds and pending investigations of FTX as the reasons for not pursuing the deal. Bankman-Fried said in a Slack message that FTX had learned through the press about Binance's concerns and decision. On 9 November, FTX's website said that it
3492-462: The Ethereum blockchain, with a value of about $ 60 million. The Wall Street Journal , citing anonymous sources, reported that Alameda Research suffered a series of losses in May and June 2022 which were covered by FTX lending the trading firm more than half of its customer's funds; FTX CEO Sam Bankman-Fried reportedly described this as a poor judgment call. Pantheri Asset Management made $ 10.7 million as
3589-472: The Legislative Assembly had voted 62–22 to pass a bill submitted by President Nayib Bukele classifying the cryptocurrency as such. In August 2021, Cuba followed with Resolution 215 to recognize and regulate cryptocurrencies such as bitcoin. In September 2021, the government of China , the single largest market for cryptocurrency, declared all cryptocurrency transactions illegal. This completed
3686-589: The New York State Department of Financial Services after being designated a systemic risk following a run . After Silicon Valley Bank 's collapse, Signature Bank's collapse was the third largest in United States history. In 2023, Solana recovered, making it possible to pay people back. CEO John J. Ray III estimated that "customers and digital asset loan creditors will recover between 118% and 142% of their Petition Date claim values." Any left over money would normally go to stakeholders (of which SBF
3783-756: The New York Times on 14 November said the same. Anonymous sources cited by the Wall Street Journal said the funds were used in part to pay back loans Alameda had taken to make investments. On 10 November, the Securities Commission of the Bahamas froze the assets of one of FTX's subsidiaries, FTX Digital Markets Ltd, "and related parties", and provisionally appointed an attorney as liquidator. Japan's Financial Services Agency ordered FTX Japan to suspend some operations. The company's Australian subsidiary
3880-483: The Wall Street Journal on 10 November said that Alameda Research owed FTX some $ 10 billion, as FTX had lent funds placed on the exchange for trading to Alameda so that Alameda could make investments with the money. Though Bankman-Fried said that FTX.US customers did not have reason to worry on Twitter on 10 November, employees began attempting to sell assets belonging to the firm on the same day. These assets include stock-clearing company Embed Financial Technologies and
3977-501: The Wall Street Journal reported that anonymous sources had said that Alameda CEO Caroline Ellison said that she, Bankman-Fried, Gary Wang, and Nishad Singh were aware of that decision. The same was reported in the New York Times on 14 November 2022. FTX used software to conceal the misuse of customer funds. Following months of arguments and disagreements between Changpeng Zhao , the CEO of Binance , and Bankman-Fried, tensions between
Alameda Research - Misplaced Pages Continue
4074-648: The "character and direction" of the city. In 2021, Kazakhstan became the second-biggest crypto-currency mining country, producing 18.1% of the global exahash rate. The country built a compound containing 50,000 computers near Ekibastuz . An increase in cryptocurrency mining increased the demand for graphics cards (GPU) in 2017. The computing power of GPUs makes them well-suited to generating hashes. Popular favorites of cryptocurrency miners, such as Nvidia's GTX 1060 and GTX 1070 graphics cards, as well as AMD's RX 570 and RX 580 GPUs, doubled or tripled in price – or were out of stock. A GTX 1070 Ti, which
4171-560: The 2010s as alternative cryptocurrencies, or, "altcoins". Sometimes the term "alt coins" was used, or disparagingly, "shitcoins". Paul Vigna of The Wall Street Journal described altcoins in 2020 as "alternative versions of Bitcoin" given its role as the model protocol for cryptocurrency designers. A Polytechnic University of Catalonia thesis in 2021 used a broader description, including not only alternative versions of bitcoin but every cryptocurrency other than bitcoin. "As of early 2020, there were more than 5,000 cryptocurrencies. Altcoin
4268-464: The FTX Token and Serum, a separate cryptocurrency accounted for in the balance sheet. Cryptocurrencies experienced swings and declines in value as news of FTX's collapse first emerged in early November: Tether dropped below its peg price of $ 1.00 to $ 0.97 and Bitcoin sank to its lowest price in two years. Share prices for publicly traded cryptocurrency companies declined. The price of Solana , which
4365-455: The FTX chapter 11 case, analyzing issues such as creditor privacy, relief from the automatic stay, proposed differential treatment of customers from other creditors, and others. In July 2023, it was announced that T.J. Miller would star as “a character inspired by Bankman-Fried” in Fortun3 , “an interactive series … inspired by the collapse of FTX.” The FTX collapse resulted in scrutiny of and
4462-487: The German region, said: "Gamers come first for Nvidia." Numerous companies developed dedicated crypto-mining accelerator chips, capable of price-performance far higher than that of CPU or GPU mining . At one point, Intel marketed its own brand of crypto accelerator chip, named Blockscale . A cryptocurrency wallet is a means of storing the public and private "keys" (address) or seed, which can be used to receive or spend
4559-523: The UK announced its Treasury had commissioned a study of cryptocurrencies and what role, if any, they could play in the UK economy. The study was also to report on whether regulation should be considered. Its final report was published in 2018, and it issued a consultation on cryptoassets and stablecoins in January 2021. In June 2021, El Salvador became the first country to accept bitcoin as legal tender , after
4656-496: The anonymity techniques are not sufficient safeguards. In order to improve privacy, researchers suggested several different ideas, including new cryptographic schemes and mechanisms for hiding the IP address of the source. Cryptocurrencies are used primarily outside banking and governmental institutions and are exchanged over the Internet. Bankruptcy of FTX The bankruptcy of FTX ,
4753-399: The bankruptcy, and claimed without evidence that a potential backer had emerged soon after the filing. On 12 November, anonymous sources cited by the Wall Street Journal said Alameda CEO Caroline Ellison disclosed to other Alameda employees that she, Sam Bankman-Fried, Gary Wang, and Nishad Singh knew that client deposits were transferred from FTX to Alameda. An anonymous source cited by
4850-420: The blockchain. Still, cryptocurrency exchanges are often required by law to collect the personal information of their users. Some cryptocurrencies, such as Monero , Zerocoin , Zerocash , and CryptoNote , implement additional measures to increase privacy, such as by using zero-knowledge proofs . A recent 2020 study presented different attacks on privacy in cryptocurrencies. The attacks demonstrated how
4947-498: The business owned by FTX. Jim Chanos predicted the collapse of FTX would lead to increased scrutiny and regulation of cryptocurrencies. Chanos further criticized the cryptocurrency sector as "designed to extract fees from really unsuspecting investors". Richard Handler , CEO of American financial firm Jefferies Group , tweeted on 10 November that he had attempted to meet with Bankman-Fried in July and again in September as he perceived he
SECTION 50
#17330863036535044-861: The collapse of FTX, and committee leaders said they would seek testimony from Bankman-Fried. On 15 November 2022, a class-action lawsuit was filed in Miami against Bankman-Fried and several celebrities, including American football quarterback Tom Brady and comedian Larry David , alleging the company engaged in deceptive practices; they are seeking damages. The lawsuit also named Gisele Bündchen , Steph Curry , Shaquille O'Neal , Udonis Haslem , David Ortiz , Trevor Lawrence , Shohei Ohtani , Naomi Osaka , and Kevin O'Leary . On 21 December 2022, both Caroline Ellison (former CEO of Alameda) and Gary Wang (former Chief Technology Officer of FTX) pled guilty to fraud and other charges and were cooperating with federal investigators in criminal case against Sam Bankman-Fried. In
5141-629: The collapse, was reported as having been wiped out, and several institutional investors of FTX wrote off their investment stakes in the company. Some $ 473 million in funds were later taken from FTX in an "unauthorized transaction". The collapse of FTX has resulted in a ripple effect across cryptocurrency markets, with the price of Bitcoin falling to its lowest level in two years. In late 2022 and early 2023, key executives from FTX and Alameda, such as Caroline Ellison , Gary Wang , and Nishad Singh, pleaded guilty to defrauding FTX customers and related charges. In October 2023, all three testified that it
5238-588: The company was FTX. Between $ 1 billion and $ 2 billion in customer funds reportedly could not be accounted for as of 12 November. The Financial Times reported that FTX's balance sheet shortly before the bankruptcy showed $ 9 billion in liabilities against $ 900 million in liquid assets , $ 5 billion in "less liquid" assets, and $ 3.2 billion in illiquid private equity investments. American columnist Matt Levine described that among its less liquid assets that "[FTX] relied on to be able to pay out customer balances" were two tokens that "it had just made up", referring to
5335-400: The company. These include former couple Tom Brady and Gisele Bündchen , as well as Shaquille O'Neal , Stephen Curry , and Kevin O'Leary . According to anonymous sources cited by The Information , some venture capital firms are considering lawsuits against Bankman-Fried. Anthony Scaramucci , founder of SkyBridge Capital , announced the firm was attempting to buy back a 30% stake in
5432-627: The comparisons to Lehman and further compared the collapse to the Enron scandal , caused by fraud perpetrated by Enron executives. Rostin Behnam , the Chairman of the Commodity Futures Trading Commission , called for Congress to grant the organization more power to regulate cryptocurrencies. Risk management firm Titan Grey published a primer on the commencement and early motions practice of
5529-592: The cryptocurrency ecosystem that "everything...needs to improve dramatically in terms of user experience, controls, safety, customer service." According to Jan Lansky, a cryptocurrency is a system that meets six conditions: In March 2018, the word cryptocurrency was added to the Merriam-Webster Dictionary . After the early innovation of bitcoin in 2008 and the early network effect gained by bitcoin, tokens, cryptocurrencies, and other digital assets that were not bitcoin became collectively known during
5626-585: The cryptocurrency. The first cryptocurrency was bitcoin , which was first released as open-source software in 2009. As of June 2023, there were more than 25,000 other cryptocurrencies in the marketplace, of which more than 40 had a market capitalization exceeding $ 1 billion. In 1983, American cryptographer David Chaum conceived of a type of cryptographic electronic money called ecash . Later, in 1995, he implemented it through Digicash , an early form of cryptographic electronic payments. Digicash required user software in order to withdraw notes from
5723-476: The cryptocurrency. With the private key, it is possible to write in the public ledger, effectively spending the associated cryptocurrency. With the public key, it is possible for others to send currency to the wallet. There exist multiple methods of storing keys or seed in a wallet. These methods range from using paper wallets (which are public, private, or seed keys written on paper), to using hardware wallets (which are hardware to store your wallet information), to
5820-515: The day of that announcement, FTT lost 80 percent of its value. On 9 November, Bloomberg called the acquisition of FTX by Binance "unlikely" due to the poor state of FTX's finances. Bloomberg also reported that the United States Securities and Exchange Commission and Commodity Futures Trading Commission were investigating the nature of FTX's connections to Bankman-Fried's other holdings and its handling of client funds. Later that day,
5917-504: The expected regulatory framework for stablecoins in 2023/24 is being shaped and includes a few considerations. Memecoins are a category of cryptocurrencies that originated from Internet memes or jokes. The most notable example is Dogecoin , a memecoin featuring the Shiba Inu dog from the Doge meme. Memecoins are known for extreme volatility; for example, the record-high value for a Dogecoin
SECTION 60
#17330863036536014-569: The firm knew "the identity" of a user who paid transaction fees associated with moving the stolen money through their Kraken account. In an interview with Kelsey Piper published 16 November by Vox , Bankman-Fried blamed an "ex-employee" or malware on a device owned by an ex-employee for the theft. In January 2024, the U.S. Department of Justice indicted three individuals for running a SIM swap scam operation that allegedly stole “over $ 400 million in virtual currency” from an unspecified company between November 11-12, 2022. Sources told Bloomberg that
6111-503: The firm's stake in FTX represented a small amount of its overall portfolio, and replaced a profile of Bankman-Fried published on the firm's website with a link to the same notice. The Ontario Teachers' Pension Plan released a similar statement. BlockFi , a cryptocurrency lender, was reportedly taking steps to file for bankruptcy as of 15 November, having earlier halted withdrawals. The company disclosed "significant exposure" to FTX on 14 November. Another cryptocurrency lender, Genesis,
6208-479: The industry. The cryptocurrency exchange company Gemini , owned by Cameron and Tyler Winklevoss , announced that it would be pausing withdrawals on its Earn program, which uses Genesis as a lending partner. The exchange token of Crypto.com , Cronos, lost approximately $ 1 billion in value in November. On 14 November, Crypto.com's CEO assured users that the exchange was functioning as normal. Commenters and customers remained fearful that Crypto.com could experience
6305-406: The later gold-based exchange BitGold) was described as an electronic currency system that required users to complete a proof of work function with solutions being cryptographically put together and published. In January 2009, bitcoin was created by pseudonymous developer Satoshi Nakamoto . It used SHA-256 , a cryptographic hash function, in its proof-of-work scheme. In April 2011, Namecoin
6402-457: The low trading volume of FTT and the enmity between Zhao and Bankman-Fried, resulted in the price of the token plummeting. Binance had received FTT from FTX in 2021 during a transaction in which FTX bought back Binance's equity stake in FTX. Zhao cited "recent revelations that came to light" as the motivation for selling FTT. Bloomberg and TechCrunch reported that any sale by Binance would likely have an outsized impact on FTT's price, given
6499-431: The name FTX. Alameda Research played a significant role in the growth of FTX, as it acted as FTX's main market maker , available to buy and sell with other customers, sometimes taking trading losses to attract customers to the exchange. According to public data reviewed by The Wall Street Journal , between early 2021 and March 2022, Alameda Research amassed crypto tokens ahead of FTX listing them for trading, especially on
6596-654: The naming rights to FTX Arena . Disagreements emerged between remaining executives, with Bankman-Fried and FTX COO Constance Wang resisting urges from Ryne Miller, a member of FTX US's legal team, to end trading on the exchanges. Bankman-Fried continued to seek funding even as Miller informed other executives that he believed there was a "0%" chance of securing further investment. Miller and other executives asked Bankman-Fried to cede control of FTX US to them, which he resisted. On 11 November, Bankman-Fried announced that he had filed FTX US for bankruptcy along with FTX and Alameda. Bankman-Fried continued to seek capital for FTX after
6693-517: The production of that currency, placing a cap on the total amount of that currency that will ever be in circulation. Compared with ordinary currencies held by financial institutions or kept as cash on hand, cryptocurrencies can be more difficult for seizure by law enforcement. The validity of each cryptocurrency's coins is provided by a blockchain . A blockchain is a continuously growing list of records , called blocks , which are linked and secured using cryptography. Each block typically contains
6790-401: The provincial government to allocate 500 megawatts of power to crypto companies for mining. According to a February 2018 report from Fortune , Iceland has become a haven for cryptocurrency miners in part because of its cheap electricity. In March 2018, the city of Plattsburgh, New York put an 18-month moratorium on all cryptocurrency mining in an effort to preserve natural resources and
6887-477: The public disclosure of problems and the FTX acquisition deal. Alameda held a large quantity of FTT , the native token of the FTX exchange, as assets on its books. TechCrunch reported that "the exchange was unusually intertwined with its sister entity, Alameda Research." Principal shareholder Bankman-Fried had an estimated net worth of $ 10.5 billion in October 2022 and it dropped to approximately $ 1 billion according to
6984-426: The rest of the cryptocurrency industry. Alameda was once the largest trader on FTX, bringing liquidity to the exchange. Between 1 June 2022 and 22 July 2022, Alameda's known wallets were the largest stablecoin depositors and sources of liquidity to all of FTX's known wallet addresses, accounting for 10% of Tether transfers and 30% of USD Coin transfers on the exchange. According to John J. Ray III , Alameda had
7081-402: The reward for finding a hash has diminished and often does not justify the investment in equipment and cooling facilities (to mitigate the heat the equipment produces) and the electricity required to run them. Popular regions for mining include those with inexpensive electricity, a cold climate, and jurisdictions with clear and conducive regulations. By July 2019, bitcoin's electricity consumption
7178-473: The signed agreements Ellison and Wang agreed to "cooperate fully" and "truthfully and completely disclose all information concerning all matters". On 3 January 2023, Bankman-Fried pled not guilty to fraud and other charges. His trial began in October 2023. On 2 November 2023, Bankman-Fried was found guilty of all charges. On 16 November 2022, the cryptocurrency brokerage service Genesis suspended withdrawals following FTX declaring bankruptcy, further affecting
7275-449: The supply of currency. In the case of cryptocurrency, companies or governments cannot produce new units and have not so far provided backing for other firms, banks, or corporate entities that hold asset value measured in it. The underlying technical system upon which cryptocurrencies are based was created by Satoshi Nakamoto . Within a proof-of-work system such as bitcoin, the safety, integrity, and balance of ledgers are maintained by
7372-463: The term that has come to describe many of the fungible blockchain tokens that have been created, cryptocurrencies are not considered to be currencies in the traditional sense, and varying legal treatments have been applied to them in various jurisdicitons, including classification as commodities , securities , and currencies. Cryptocurrencies are generally viewed as a distinct asset class in practice. Some crypto schemes use validators to maintain
7469-410: The token's low trading volume. The announcement by Zhao of the pending sale and disputes between Zhao and Bankman-Fried on Twitter led to a decline in the price of FTT and other cryptocurrencies, resulting in $ 6 billion of customer withdrawals from FTX. FTX became unable to meet the demand for further withdrawals, and on 8 November, Bankman-Fried and Zhao jointly announced Binance had entered into
7566-448: The transaction using encryption to other nodes throughout the node network so that the transaction (and every other transaction) is known. Node owners are either volunteers, those hosted by the organization or body responsible for developing the cryptocurrency blockchain network technology, or those who are enticed to host a node to receive rewards from hosting the node network. Cryptocurrencies use various timestamping schemes to "prove"
7663-562: The two had intensified days before the crisis. Zhao's firm Binance had obtained $ 2.1 billion in Binance USD and FTT coins in 2021, following a deal in which FTX bought back an equity stake held by Binance in FTX, and in early November 2022, it had 23 million FTT tokens, worth about $ 529 million at the time. On 7 November 2022, Zhao announced that Binance had intended to sell its holdings in FTT. The sale of Binance's holdings in FTT, compounded with
7760-519: The two weeks preceding 17 November. Grayscale Bitcoin Trust was trading at a discounted price, 42% below the value of its Bitcoin, as of 14 November. Silvergate Bank covered colossal losses on the bankruptcy of FTX. On 9 March 2023 Silvergate Bank announced it would wind down its operations and undergo liquidation, in turn creating a domino effect of chain insolvencies. On 12 March 2023, Signature Bank , which catered to operators such as Binance and Celsius Network , collapsed after being closed by
7857-441: The validity of transactions added to the blockchain ledger without the need for a trusted third party. The first timestamping scheme invented was the proof-of-work scheme. The most widely used proof-of-work schemes are based on SHA-256 and scrypt . Some other hashing algorithms that are used for proof-of-work include CryptoNote , Blake , SHA-3 , and X11 . Another method is called the proof-of-stake scheme. Proof-of-stake
7954-463: Was "in over his head". Handler stated that Bankman-Fried did not respond to the emails sent from Jefferies staff sent on Handler's behalf. The sudden collapse of FTX has been compared to the bankruptcy of Lehman Brothers by writers in publications including The New York Times and the Financial Times , with some deeming FTX's collapse as "crypto's Lehman moment". Lawrence Summers acknowledged
8051-513: Was 73 cents, but that had plunged to 13 cents by mid-2024. Scams are prolific among memecoins. Physical cryptocurrency coins have been made as promotional items and some have become collectibles. Some of these have a private key embedded in them to access crypto worth a few dollars. There have also been attempts to issue bitcoin “bank notes”. The term “physical bitcoin” is used in the finance industry when investment funds that hold crypto purchased from crypto exchanges put their crypto holdings in
8148-425: Was Bankman-Fried who directed them to commit fraud. On 2 November 2023, Sam Bankman-Fried was convicted of defrauding customers of FTX and lenders of Alameda Research. Sam Bankman-Fried cofounded Alameda Research , a cryptocurrency trading firm, in 2017. In 2019, Bankman-Fried had the idea of starting a cryptocurrency exchange to help bring in revenue to fund Alameda's activities and founded FTX. Bankman-Fried
8245-417: Was affiliated with Bankman-Fried, declined as well. The crisis at FTX has inspired an increase in withdrawals from other exchanges. A decline in the value of Cronos, the token of exchange Crypto.com , triggered fears of the potential for a collapse similar to that of FTX and spurred withdrawals from the platform. CEO Kris Marszalek provided assurances that the firm was liquid and that it did not use Cronos in
8342-501: Was created as an attempt at forming a decentralized DNS . In October 2011, Litecoin was released, which used scrypt as its hash function instead of SHA-256. Peercoin , created in August 2012, used a hybrid of proof-of-work and proof-of-stake . Cryptocurrency has undergone several periods of growth and retraction, including several bubbles and market crashes, such as in 2011, 2013–2014/15, 2017–2018, and 2021–2023. On 6 August 2014,
8439-406: Was estimated to be approximately 7 gigawatts, around 0.2% of the global total, or equivalent to the energy consumed nationally by Switzerland. Some miners pool resources , sharing their processing power over a network to split the reward equally, according to the amount of work they contributed to the probability of finding a block . A "share" is awarded to members of the mining pool who present
8536-528: Was explicitly forbidden by FTX's terms-of-service. At Bankman-Fried's trial, Alameda CEO Caroline Ellison testified that she was one of Bankman-Fried's main accomplices in channeling FTX customer funds into Alameda's coffers. In December 2022, Ellison pleaded guilty to two counts of wire fraud and five conspiracy counts involving wire, securities and commodities fraud and money laundering, in relation to her activities at Alameda Research and FTX. In November 2017, Sam Bankman-Fried co-founded Alameda Research as
8633-556: Was introduced in 2009. Mining is measured by hash rate , typically in TH/s. A 2023 IMF working paper found that crypto mining could generate 450 million tons of CO 2 emissions by 2027, accounting for 0.7 percent of global emissions, or 1.2 percent of the world total With more people entering the world of virtual currency, generating hashes for validation has become more complex over time, forcing miners to invest increasingly large sums of money to improve computing performance. Consequently,
8730-422: Was not processing withdrawals at that time. Bankman-Fried said that although the firm's assets were worth more than its clients' deposits, it would need funds from outside to meet demand for withdrawals due to a lack of liquidity . Bankman-Fried stated on 9 November that FTX.US, as a separate company, was "not currently impacted" by the crisis. On 10 November, Axios reported that FTX approached Kraken for
8827-539: Was placed under administration . On the same day, a team running the FTX Future Fund, a charitable group bankrolled by Bankman-Fried, announced their collective resignations. Future Fund had committed $ 160 million in charitable grants and investments by 1 September of that year. On 11 November, FTX, FTX US, Alameda Research, and more than 100 affiliates filed for bankruptcy in Delaware. Anonymous sources cited by
8924-521: Was released at a price of $ 450, sold for as much as $ 1,100. Another popular card, the GTX 1060 (6 GB model), was released at an MSRP of $ 250 and sold for almost $ 500. RX 570 and RX 580 cards from AMD were out of stock for almost a year. Miners regularly buy up the entire stock of new GPUs as soon as they are available. Nvidia has asked retailers to do what they can when it comes to selling GPUs to gamers instead of miners. Boris Böhles, PR manager for Nvidia in
9021-568: Was replaced by John J. Ray III . The collapse of FTX has had a wide impact on cryptocurrency markets, with comparisons made to the Enron scandal and Madoff investment scandal , and was described by federal prosecutors as "one of the biggest financial frauds in American history". Following the bankruptcy, the Securities Commission of the Bahamas froze the assets of one of FTX's subsidiaries. Bankman-Fried's net worth , estimated at $ 16 billion prior to
9118-833: Was still in the Bahamas, though other high-ranking FTX employees had begun leaving for Hong Kong, the location of the company's former headquarters, or other locations. Authorities in the Bahamas, including the Royal Bahamas Police Force , questioned Bankman-Fried on 12 November. Despite FTX's bankruptcy, Bankman-Fried continued to attempt to raise money for the firm during the weekend of 12 and 13 November. Late on 11 November, some $ 473 million in funds were removed from FTX through what Ryne Miller, FTX US's general counsel, characterized as "unauthorized transactions". Miller further announced that FTX and FTX US intended to move remaining funds denominated in cryptocurrency to offline "cold storage". The funds taken from FTX were mostly stablecoins such as Tether , and were quickly exchanged for Ether ,
9215-414: Was the CEO of both companies until he formally stepped down from his position at Alameda in October 2021, promoting traders Caroline Ellison and Sam Trabucco to co-CEOs. Ellison was reported to have a romantic involvement with Bankman-Fried. As of August 2021, Bankman-Fried still owned 90% of Alameda. The close relationship and potential conflicts of interest between Alameda and FTX drew scrutiny from
9312-411: Was the most used blockchain in 2020, according to Bloomberg News. In 2016, it had the largest "following" of any altcoin, according to the New York Times . Significant market price rallies across multiple altcoin markets are often referred to as an "altseason". Stablecoins are cryptocurrencies designed to maintain a stable level of purchasing power . Notably, these designs are not foolproof, as
9409-450: Was winding down trading and would close. Alameda Research, along with FTX and more than 130 affiliated entities, filed for Chapter 11 bankruptcy protection in November 2022. As a quantitative trading firm specializing in cryptocurrencies , Alameda's strategies included arbitrage , market making , yield farming, and trading volatility . During the 2020 United States presidential election , Alameda gave $ 5 million to Future Forward USA,
#652347