When cryptocurrency alternate FTX raised $400 million from traders reminiscent of Softbank, Temasek, Tiger Global, and others in January, its web price took off.
The funding lifted its worth to $32 billion.
By November, it was bankrupt.
While FTX pumped up its repute with big-name traders, it was additionally allying itself with high-profile celebrities, together with NFL nice Tom Brady, supermodel Gisele Bündchen, NBA superstars Stephen Curry and Shaquille O’Neal, tennis participant Naomi Osaka, and Hollywood’s Larry David.
And, earlier than its collapse, FTX reportedly was additionally hoping to kind a partnership with pop and nation music star Taylor Swift.
FTX CEO Bankman-Fried was the institutional face of the cryptocurrency trade. He amassed a web price of greater than $21 billion however misplaced most of it in a brief few days starting on Nov. 8.
The firm was a mechanism folks used to purchase and promote cryptocurrencies reminiscent of bitcoin and ether. But confidence in FTX was destroyed as its prospects hurried to withdraw their cash by promoting the cryptocurrencies that they had beforehand bought utilizing the platform.
Tom Williams/CQ-Roll Call, Inc by way of Getty
Why the run on the Bank Occurred
On Nov. 2, Coindesk revealed a narrative that raised considerations in regards to the monetary well being of FTX and Alameda Research. The article claimed that the property of Bankman-Fried’s Alameda Research consisted of FTT (~FTTUSD) , the cryptocurrency issued by FTX.
The revelation that FTX was utilizing FTT as collateral on its stability sheet brought on nice concern because of the focus danger and volatility of FTT. Customers and traders grew to become skeptical in regards to the capital reserves of Alameda and FTX.
Reacting to the Coindesk story, Binance introduced on Nov. 6 that it could promote about $530 million of FTT, triggering the run on the financial institution.
By Nov. 8, Binance introduced it was buying FTX as cryptocurrency values reminiscent of bitcoin’s had been falling. Stocks of crypto corporations, together with Robinhood (HOOD) – Get Free Report and Coinbase (COIN) – Get Free Report, had been plummeting in worth.
The very subsequent day, Binance stated it was withdrawing its acquisition supply. The scenario was worse than first believed.
On Nov. 11, FTX filed for chapter and Bankman-Fried resigned as CEO.
Soon it was introduced that FTX was below federal investigation by prosecutors in New York for giving buyer funds to Alameda Research.
Bankman-Fried Had Pursued Taylor Swift
On Dec. 7 it was revealed that FTX had been negotiating a $100 million sponsorship deal in spring 2022 with pop and nation music celebrity Taylor Swift.
The deal was in its late levels, reported the Financial Times (FT), citing “folks with data of the talks.”
Several members of FTX’s advertising group had been against the deal, the publication wrote, believing it was too excessive of a value to pay. They additionally questioned the worth of movie star endorsements and whether or not Swift was an acceptable accomplice for its buyer’s demographics, the story stated.
One former FTX worker stated the corporate sought a “gentle diploma of endorsement” from Swift on social media. But one other particular person stated Swift by no means stated she would endorse the corporate.
“Taylor wouldn’t, and didn’t, conform to an endorsement deal. The dialogue was round a possible tour sponsorship that didn’t occur,” the particular person informed FT.
Since the negotiations didn’t end in a deal, Taylor is free from any robust public relations discussions about ties to the corporate, which has been denounced for its celebrity- and notoriety-driven method to selling its foreign money.
“Consumers have been inundated with crypto promoting — anybody that watched the Super Bowl is aware of what I imply — aimed toward stirring emotions of urgency and stoking fears of lacking out,” stated Sen. Amy Klobuchar, D-Minn., at a current Senate listening to.