A few months earlier, FTX CEO SBF said several “third-tier” crypto exchanges were insolvent but yet to be exposed. This was when several crypto lending platforms suffered massive financial contagion following Three Arrows Capital’s (3AC) fallout as a result of Terra’s spectacular collapse.
His comments, obviously, did not age well now that his empire appears to be crumbling.
Crypto Projects Fail, FTX Not an Exception
Sam Bankman-Fried’s story of building his crypto empire from his Berkeley apartment may not be the classic tale of success that can be written on the walls of history. The crypto billionaire, however, did manage to skyrocket to cult status at just 29 years old, thanks to the raging bull run in 2021.
No one in history got so much ahead that young. As he debuted on Forbes’ cover last year, the business magazine said that only “Zuck (Facebook’s Mark Zuckerberg) has been as rich ($23 billion) this young (29!).”
And as financial troubles intensified, SBF jumped to rescue battered firms such as Voyager Digital and BlockFi. He even admitted to his willingness “to do a somewhat bad deal here, if that’s what it takes to sort of stabilize things and protect customers.”
During the same period, the exec also highlighted the existence of certain companies that have “basically too far gone, and it’s not practical to backstop them for reasons like a substantial hole in the balance sheet, regulatory issues.” He then added that “there is not much of a business left to be saved.” These words have now come to haunt him.
As it turns out, FTX, too, is not fine. A leaked balance sheet was enough to unravel the troubles in the exchange and its sister trading firm, Alameda. A Twitter spat between SBF and CZ did leave many in the community worried that the former’s trading platform could be the next crypto implosion. But it wasn’t until Binance’s official announcement of agreeing to buy its crypto competitor that all hell broke loose.
FTT nosedived 80% and wiped out more than $2 billion in value.
Covering Up Bad Blood With CZ?
SBF positioning himself as the industry’s lender of last resort after revealing his plans to stop a few insolvent crypto lenders from cascading into a failed string of dominoes painted somewhat of a savior picture.
This soon turned out to be perceived as “unfriendly” by many, including CZ himself, who had earlier taken a jibe at the FTX chief by saying, “Don’t perpetuate bad companies. Let them fail.” In retrospect, CZ did contradict himself with the latest buyout offer for the firm that now has one foot in the grave.
But the bad blood between the two titans has always been there, even as Binance was an early investor in FTX. Several community members have pointed out that SBF may have deleted several tweets which depicted the same. One now-deleted tweet of note is Bankman-Fried reply to co-CEO of FTX Digital Markets Ryan Salame last month, wherein the latter said,
“been an absolute pleasure watching @cz_binance have the extremely difficult but transformative debates on twitter this past week to ensure the crypto industry moves forward in the best possible way.”
SBF’s cheeky reply to the same was,
“excited to see him repping the industry in DC going forward! Uh, he is allowed to go to DC, right?”
This passive-aggressive barb was from October. While the bombshell report on the composition of Alameda’s balance sheet may have been the last straw, a few community members speculated the exchange could be one of the reasons behind Zhao’s move to slash Binance’s exposure to FTT token, which resulted in the liquidity crunch in FTX.
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