FTX was one of the most credible entities in the entire crypto space. It exploded in 48 hours. Here's why.
because of his financial wizardry in the crypto space. He also earned countless glowing profiles and admiration from the public for his alleged commitment to giving away his fortune and effective altruism, a hotly debated moral philosophy that calls on people to think rigorously about maximizing human welfare through. Those narratives have now crumbled and been instantly replaced with that of a reckless gambler willing to take other people’s money to get his fix.
We discussed what exactly went wrong with FTX, why people fell for Bankman-Fried’s shady practices, and how this collapse is going to rattle the already-beleaguered crypto world.Zeeshan Aleem: What was FTX and how did it make money?: FTX was a cryptocurrency exchange. It’s a website where you can create an account, show up with your credit card or your bank account, and use it to buy crypto assets. Crypto assets are effectively digital financial assets which people buy and they speculate on.
Now, beneath the marketing and the veneer of credibility, what was actually going on is that FTX was set up in the Bahamas, which is a jurisdiction with extremely loose financial regulation. And they would have people from the United States log in to this platform, and give them their money.But the laws of the United States and the laws of the Bahamas are two different worlds. And unfortunately, the Bahamas is not subject to the same level of regulatory oversight that the United States is.
But some of the people who ran FTX — including Bankman-Fried — also ran this other entity called Alameda Research, which was a hedge fund. Alameda Research existed to make profit for the owners of the hedge fund. That’s a conflict of interest. One exists to provide a service for customers, the other exists to make a profit. So what happened, allegedly, is that some of the executives between the two entities were commingling the funds.
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