Big Lessons Learned from Recent FTX “liquidity crunch.”
How can a multibillion-dollar global international company collapse in 8 days and what lessons can be learned from this collapse?
My father always told me as a child that history repeats itself and lessons must be learned from such a phenomenon. When I consider what happened recently to FTX, I felt there were some lessons we should learn about. I’ve never used FTX, didn’t comprehend their enormous worth, and wasn’t too familiar with their business. However, it makes sense to do things like start an aggressive VC arm and facilitate buyouts because they were highly valued.
FTX is the second-largest exchange, therefore it’s unclear how it could fall so quickly considering its size. It appears that FTX currently owes billions to its clients and doesn’t have the money to pay up. How that unfolded is still unclear. However, according to Reuters, the plan was to create a “backdoor” to shift billions without alerting other employees or auditors of the transaction. Perhaps some of these recent events wouldn’t have happened if there had been some regulation. The plan was achieved by following the below recipe:
- FTX prints FTT out of thin air
- FTX lends FTT to Alameda Research
- Alameda Research borrows USD stablecoins against FTT
