The liquidity crunch is tied to CEO Sam Bankman-Fried’s intent to establish his other trading firm, Alameda.
According to the report, a portion of the transferred funds entailed customer deposits, a transaction where Bankman-Fried allegedly failed to inform other FTX executives. However, the value of the customer deposit could be determined.
Sources close to the matter indicated that Bankman-Fried’s failed to communicate with executives over fears the information could leak to the public.
Genesis of FTX troubles
Notably, insiders alleged that FTX’s troubles are mainly the doing of Bankman-Fried as he moved to attempt and save other collapsing cryptocurrency firms. Interestingly, the CEO’s push to rescue collapsing firms was accelerated despite the prevailing macroeconomic conditions characterized by high inflation and rising interest rates.
According to the executive, the crisis emerged after FTX experienced a “giant withdrawal surge” as users rushed to move about $6 billion worth of cryptocurrencies from the exchange within 72 hours. In most cases, FTX’s daily withdrawals totaled tens of millions of dollars.
Following the crisis, giant cryptocurrency exchange Binance announced a possible bail-out of FTX. However, Binance withdrew the deal stating that the issue was beyond its control.
“In the beginning, our hope was to be able to support FTX’s customers to provide liquidity. But the issues are beyond our control or ability to help,” Binance said.
Regulators step in
The withdrawal comes after United States regulators officially began looking into the FTX saga. As reported by Finbold, the Commodity Futures Trading Commission’s (CFTC) Commissioner, Kristin Johnson, reiterated the need to establish a regulatory framework to protect consumers.
Like previous high-profile cryptocurrency crises, the FTX incident has resulted in market-wide turmoil, with most assets undergoing significant selling pressure. For instance, the cryptocurrency market cap has plunged by over $150 billion, with assets like Bitcoin (BTC) staring at a possible retest of the $10,000 level.