Sam Bankman-Fried and Gary Wang own both Alameda and FTX.
Alameda traded, and FTX was their exchange platform. Moreover, Alameda conducted its trades on FTX.
Things went sour in 2019, when Wang gave a special permission to Alameda’s FTX accounts — a fancy function called “allow negative”.
This allowed Alameda to withdraw more money than was in their balance.
Sam justified this move by saying they could just use FTX’s earnings to cover any excess withdrawals.
And yet, things didn’t go as planned.
As Alameda continued to withdraw to cover losses, they quickly exhausted FTX’s revenue.
To temporarily solve this, Sam decided to count the value of the FTT token (a cryptocurrency he created) as part of FTX’s revenue.
Despite this addition, Alameda kept drawing more, eventually forced to tap into customer deposits.
Gary provided Alameda a credit line of a staggering $65 billion, a huge sum compared to standard market practices.
They used $8 billion of it.
After some market downturns, with LUNA crashing and other financial mishaps, the total available funds in FTX decreased.
When FTX’s financial details became public and other investors began to withdraw, it sparked a mass panic.
FTX couldn’t meet all the withdrawal demands.
FTX was cremated on the spot.
SBF tweeted “1) What”
That’s it in a nutshell.
Author: Chris Campbell
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