Sam Bankman-Fried Steps Down as CEO of FTX as the Company Files for Bankruptcy in the US
Today, global cryptocurrency exchange FTX announced that it and approximately 130 additional affiliated companies had commenced voluntary proceedings under Chapter 11 Bankruptcy in the US.
For clarity, FTX was a giant cryptocurrency exchange that allowed you to buy and sell crypto like Bitcoin, Ethereum, collectibles like NFTs, and various other digital assets.
When you purchase Bitcoin or any other digital asset on a “centralized exchange,” they are the sole custodian of the asset. You holding your assets on the exchange mean that if something were to happen to the company, they are the ones who make the final decision.
When you purchase or hold digital assets, we recommend storing them in a “non-custodial wallet.” Metamask, Trust Wallet, and hardware wallets like Ledger are all examples of non-custodial or “self-custody” wallets.
Using a centralized exchange like Coinbase or Binance to onboard is fine as long as you migrate the funds to a non-custodial wallet afterward. This ensures that you are the only person or entity that can access the assets. In this space, we like to say, “Not your keys, not your crypto.”
FTX allegedly took its customers’ investments and used them to make risky bets, which led to this fallout. The implications of using customer funds as leverage are unprecedented and will lead to widespread fraud investigations.
Many retail traders like yourselves who were buying crypto and holding it in FTX lost their money, and 100+ of the best and brightest (definitely the largest) VCs and investors in the space went down along with them.
Amid the fallout, CEO Sam Bankman Fried stepped down, making way for John J. Ray III, former CEO of the infamous Enron energy company, which went down due to Enron executives using fraudulent accounting practices to inflate the company’s revenues. Sound familiar?
This has been a whirlwind of a week, and the widespread contagion won’t be felt in the market for weeks, maybe even months. Estimates of the liabilities range from $10 to 50 billion dollars. Do you have any funds locked up in FTX? Let us know your thoughts below. 👇🏽