The sudden scandal of FTX – the world’s third-largest cryptocurrency exchange by volume – has unleashed a scandal in the crypto world that to many is reminiscent of the financial crisis that began in 2008 in terms of related dynamics: here it is explained.
Some have even gone so far as to compare FTX to Lehman Brothers in terms of the significance and potential implications of its collapse for the financial system. What brought a platform valued at $32 billion to the brink of bankruptcy?
The scandal of FTX explained
On 2 November CoinDesk reported that FTX was effectively insolvent. The report stemmed from the apparently murky relationship between FTX and the trading firm Alameda Research, both led by Sam Bankman-Fried. In particular, Alameda Research appeared to be heavily exposed to the FTT token, a cryptocurrency issued by FTX and usable on the platform’s ecosystem. Following the recent crypto market compression, the value of FTT declined, leading to heavy losses for Alamed
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