He was hailed as the savior of Crypto.Now he needs billions for relief

Last week, California billionaire Sam Bankman-Fried was touted as a key figure and even a savior of cryptocurrency. Today, in a series of apologetic tweets, he said “I failed” after his crypto exchange bled billions.

His FTX exchange is currently scrambling to raise US$9.4 billion from both investors and rivals, and customers are scrambling to withdraw their funds.

Many people trust FTX as the place to buy tokens and cryptocurrencies like Bitcoin.

Now, industry watchers say the dramatic drop may trigger governments, including Canada, to crack down on cryptocurrencies.

Problems arose when rival owners of the world’s largest exchange, Binance, took to Twitter to question the stability of FTX. This led to his three-day panic that cost FTX an estimated $6 billion.

Binance head Changpeng Zhao on Wednesday withdrew a takeover bid for its second-largest rival, citing regulatory concerns, according to The New York Times.

That sent FTX into a tailspin.

Bankman-Fried said it was in talks with others about another bailout deal, but made no promises.

“I’m sorry. That’s the best. I failed. I should have done better.” he wrote on twitter.

It remains unclear what exactly the mistake was.

But cryptocurrency experts say investors’ money, which should be “liquid,” is not.

FTX faced legal and regulatory threats before the withdrawals were frozen, according to Samson Mow, CEO of Pixelmatic and new Bitcoin technology company JAN3.

Mow said that while digital assets such as Bitcoin and Ethereum weren’t an issue, he was familiar with the explosive growth of FTX.

He says the exchange has created a token called FTT that will be used to hold value. FTT was the backbone of his FTX, so when its value dropped, users rushed away.

Mow said the U.S. Securities and Exchange Commission is investigating and said customer funds may have been improperly used to dig FTX affiliate Alameda Research out of the $10 billion hole. I’m here.

People who have purchased bitcoin or other currencies through exchanges are currently unable to withdraw them.

Mow said Bitcoin is trustworthy, but exchanges that rely on tokens like FTT as collateral are built on the house of financial cards.

He said users are “lazy” and aware of the risks of leaving assets unclaimed on currency exchanges.

“You gambled at a bankrupt casino – and now you’ve lost your money,” Mow said.

FTX uses FTT as collateral, and those tokens are now worthless, so people who haven’t withdrawn their digital assets and stored them in their own wallets can’t access them right now, he said.

“There’s an old saying: It’s not the key, it’s not the coin. This is not a new lesson. People just haven’t learned. They’re gambling and they got what they deserved.”

The implosion of FTX, which was valued at $32 billion not long ago, is the latest bad news for digital asset investors. Bitcoin’s price is less than a third of his 2021 high before the crash last fall.

However, Ashley Stanhope of Ether Capital, an Ethereum-focused public company and founding member of Ethereum, said that Bankman-Fried is an influential player and “closely works with regulators. “Working together,” he said, he was seen as someone who tried to regulate the space. The Canadian Web3 Council, a group working with governments to build better investor protection.

He has also spent millions of dollars helping other companies, claiming to be a proponent of effective altruism, a movement that supports charitable giving to protect the future of humanity. rice field.

Her interpretation of his apology is that he “made a real mistake. It doesn’t look like he was trying to cheat investors or do anything wrong,” she said.

Stanhope fears the situation will erode the industry’s credibility and lead to regulators “painting all cryptocurrencies with the same brush.”

Among FTX’s investors is the Ontario Teachers’ Pension Plan (OTPP), which put more than $126 million into exchange between October 2021 and January 2022.

The OTPP said in a statement on Thursday that the FTX “uncertainty” would have a “limited impact” on the pension system.

Regarding the loss of FTX and its impact on the industry, Stanhope acknowledges that it is a challenge, and Bankman-Fried’s downfall is likely to change the cryptocurrency landscape.

“FTX’s implosion is likely to change the approach of investors,” she said.

Until exchanges become more secure and transparent, “more users may take their assets from centralized exchanges and rely on self-hosted wallets,” she said.