For those unfamiliar with digital assets, FTX, the world’s second largest digital asset exchange/custodian filed Chapter 11 bankruptcy after seeing its value plummet from $32B just two weeks ago to $0 in a matter of 48 hours. Sam Bankman-Fried, commonly referred to as SBF, is now currently in custody in the Bahamas, where he resides and where FTX International is currently headquartered.
The downfall of FTX has had much scrutiny and even more allegations – charges ranging from gross negligence to outright fraud. However, while Three Arrows Capital in May 2022 was like Bear Stearns falling in 2008, FTX’s rapid decline is much akin to the Lehman Brothers collapse. As a result, we have already begun to see the contagion of FTX’s demise across the digital asset ecosystem – Blockfi is now preparing to file Chapter 11, Voyager Digital, which was supposedly supposed to be acquired by FTX, is now back on the market, and multiple other custodians, lending firms, and trading shops having to pause or shut down operations because of this collapse. This story is still developing, with even more details still to come, but this is certainly a black eye on the digital asset space.