Chapter 4 - Closing Case - FIN Massive Cryptocurrency Web Dissolves Flashcards
What is FTX? When was it launched? What happened?
A large cryptocurrency exchanged. April 2019. Went from an estimated value of 16 billion to zero, requiring bankruptcy protection by November 11, 2022.
Who are the founders and co-founders of this company?
Sam Bankman Fried
Gary Wang
Nishad Singh.
How many companies were apart of the FTX? What were the four types?
100 companies in the FTX.
1. Venture capital companies -Invests in other companies
2. Trading companies - Invested in other cryptocurrency organizations (hedge funds)
3. Cryptocurrency exchange for US customers.
4. International cryptocurrency exchange.
What is a digital token/ token/ digital coin?
Representation of value or rights. Provide access or the right to participation in digital systems such as distributed ledgers, cryptocurrency exchanges, or other block chain systems.
What is Alameda?
Accepted wire transfers on behalf of the FTX group for FTT tokens.
How was the FTT similar to a share? How were trading discounts supposed to protect the firm?
Voting rights and group profit were added to the value of the token. It was supposed to be protected from valuation decreases through trading discounts to large holders, encouraging them to use the FTX platform for cryptocurrency rather than other platforms.
Could the FTT tokens be used within the group?
No, it could only be used for the FTX as a whole.
What was the collateral pool? On July 13, 2022 how many different types of tokens were there and what was its estimated value?
Other assets like investments that protected the value of the tokens, and the FTT was used for the settlement of other tokens, trading with other cryptocurrency exchanges without having to cash in the FTT token. 30 different types and 3.2 billion.
Why did the company collapse?
Alameda made poor investment decisions (losing 8 billion in money). There were no profits to increase the value of the FTT. This cash was meant to be used for the payment of tokens at other exchanges, but instead they invested it. The losses were hidden through fraudulent activity.
What did the assets section of the statement of financial look like for FTX on June 30, 2022?
Total Assets = 14.6 Billion
Unlocked FTT = 3.66 Billion
FTT Collateral = 2.16 billion
(Unlocked and FTT were created by FTX and had a total value of 5.82)
Purchase of other digital currencies, rather than investments that would protect the FTT.
What had the company failed to establish? What did the customers want to do as a result of this?
Corporate governance controls to establish investments at the appropriate risk levels. Withdraw billions of dollars worth of coins.
A cryptocurrency exchange Finance was going to purchase the international FTX assets which would have relived the liquidity problem, why did it not work? What happened the day after they filed for bankruptcy, how much was the damage that it caused?
It sold the FTT tokens then walked away from the deal, which increased the liquidity crisis. Without cash, without the cash they were forced into bankruptcy, and Bankman stepped down. Then the following day there was a hack of 477 million in FTT tokens, locking the rest of the tokens away showing that there were no security controls.
Where was this company primarily located? What was their ranking in terms of size of cryptocurrency exchange?
In the Bahamas. They were the third largest.
What did the Securities Commission of the Bahamas do after the company went bankrupt? (2 parts)
1. Seizing of assets
2. Bankman Fried
- Seized the assets of the local FTX subsidiary, and put those cryptocurrency assets to the SCB wallet for credit protection.
- Arrested on December 12, and extradited to the States where he was placed on house arrest, in which $250 million of bail was to be paid.
What was Friedman charged for, what day did he plead, and what month was the trial? What did the US prosecutor charge him with?
Embezzlement, and he pleased not guilty on January 3, 2023 with a trial date in October 2023. Inadequately and deliberately altering the records kept by the transactions of Fried in the payments for political campaigns. Stealing money from customers to pay loans to another company.
