DUBAI, UAE — The factors that led to the FTX Corporation’s collapse are still relevant and have potential to create new failures, a Dubai-based expert told TRENDS while referring to its co-founder Caroline Ellison, who recently pleaded guilty to federal charges in the Southern District of New York. Ellison.
“Cryptocurrency prices are still under pressure while the crash of Terra and others has eroded investors’ confidence,” said Elizabeth Rayment, Director of Your Mind Media Agency for FinTech, Financial Services, and Blockchain Investing.
Ellison, also known as “Carina Wang,” had pleaded guilty to conspiracy to commit four counts of fraud. They include two counts of email fraud, two counts of conspiracy to commit wire fraud, conspiracy to commit commodity fraud, conspiracy to commit securities fraud, and conspiracy to commit money laundering.
Ellison is a well-known figure in the cryptocurrency industry, having co-founded FTX Corporation, a cryptocurrency derivatives exchange, and served as CEO of Almeda Research, a quantitative trading firm focused on digital assets. Her guilty plea is a stark reminder of the risks of fraudulent activity in the cryptocurrency industry, and serves as a warning to others who may be engaging in similar behavior.
In a statement following Ellison’s guilty plea, FTX Corporation emphasized that Ellison had not been involved with the company since 2019, and that the company is committed to “the highest standards of integrity and compliance.” Almeda Research has not yet issued a public statement on Ellison’s guilty plea.
Cryptocurrency platform FTX and its founder, Sam Bankman-Frad, have seen a mysterious loss of approximately US$ 662 million in cryptocurrency, marking the latest development in one of the darkest periods for cryptocurrency.
FTX has begun moving digital assets to offline wallets to mitigate damages from unauthorized transactions for analysis.
In addition, the platform announced that it had filed for bankruptcy under Chapter 11 of the US Bankruptcy Law. Its founder, Sam Bankman Fried, stepped down from the company’s presidency after losing about 94 percent of his wealth in one day due to this crisis.
Pointing to the latest FTX-related developments, Rayment said, “The slowing global economy could continue exacerbating current market conditions. However, remaining market participants avoid such collapses by adopting best practices from the financial industry, securing their reserves, and abiding by regulations, which could help mitigate risks. In this regard, we could see a revival of the sector as more substantial, and better-managed firms would be able to weather the storm, providing an improved ecosystem to investors.”
How it all started?
It all reportedly started with a tweet from the of Binance Founder and CEO Changpeng Zhao, commonly known as “CZ”.
After Binance, the world’s number one cryptocurrency trading platform in terms of the trading volume, announced the sale of FTT, a wave of panic spread among FTX users, including holders of the platform’s cryptocurrency. Many also liquidated their cryptocurrencies, anticipating an inevitable price crash. The value of FTT is also beginning to evaporate. Meanwhile, many investors have withdrawn assets stored on the platform as a precautionary measure.
Binance recently announced its intention to acquire FTX, and has indicated that it has signed a non-binding letter of intent with the aim of a complete takeover. This type of agreement does not bind Binance to anything. Instead, the deal allows the company to examine the company’s financial situation in detail before proceeding with a potential acquisition—the operation aimed to overcome the liquidity crisis in FTX.
The first Binance analysis was published on November 10, and the report revealed that the company holds US$ 71 billion in reserves. In addition, the group published a list of its addresses on the blockchain to substantiate its claims.
According to Rayment: “FTX has effectively filed for bankruptcy and is sorting out its debts and obligations. However, the company’s future is highly uncertain regarding the level of damage it has created in the market. At the same time, the company’s collapse has played a role in highlighting the need for proper regulation for such big entities”.
Sam Bankman-Fried has pleaded guilty to criminal charges related to the collapse of the cryptocurrency platform; a federal prosecutor announced as Fred was on his way back to the US from the Bahamas, where he was arrested.
The founder and former CEO of FTX, worth tens of billions of dollars on paper, is being held today in Fox Hill Prison in the Bahamas, which human rights activists have pointed out as suffering from poor sanitation and infested with rats and vermin.
At one point, Fred’s net worth was estimated at US$ 32 bn; he was a prominent figure in Washington, donating millions of dollars to mostly left-leaning political causes and Democratic political campaigns.
Yet, the only way FTX could re-emerge after its bankruptcy proceeding is if it finds new investors or is bought out, Rayment clarified.
The new management could help build further confidence in the company’s activity as it implements proper structures and strong controls over the firm’s operations and it oversees a switch toward more reliability and security, Rayment added.