The Collapse of the FTX Empire

We'll talk about elections next week.

AccessTimeIconNov 9, 2022 at 4:12 a.m. UTC
Updated Nov 9, 2022 at 9:44 p.m. UTC

Hello folks. It is Election Day in the U.S., and that was going to be my main focus today, up until about 11:05 a.m. ET anyway. That’s the point when Sam Bankman-Fried announced that his company FTX would enter a “transaction” with Binance, which Binance CEO Changpeng Zhao later clarified was a letter of intent for Binance to acquire FTX.

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The fall of an empire

The narrative

WELL, today has been a day. I had a whole election thing planned, but we’re not going to know what’s happening for a while anyway – so instead, I’m going to refer you to the links below to catch up on today’s news. CoinDesk will have a live-blog kicking off at about 8:00 p.m. ET to monitor for major moves and results.

Why it matters

FTX was a huge player. According to CoinGecko, as of this morning FTX was the fourth-largest exchange by volume. Sam Bankman-Fried was a huge donor during the midterm elections and was a leading voice on some legislation. He might still be, but his company going from being “fine” to signing a letter of intent with Binance over the course of two days might have some long-term ramifications. We’ll have more on this in the coming days, but for now catch up on the last … week? the last week of this chaos here.

Breaking it down

This whole thing started last week when my colleague Ian Allison reported that Alameda Research, a trading firm founded by Bankman-Fried and tied to FTX, held a remarkable number of FTT tokens on its balance sheet. FTT is the token issued by FTX.

Here’s what happened next:

We’re going to need some time to figure out the implications. Bankman-Fried personally was a major donor this past election cycle (and sprung to prominence on the back of major donations in the 2020 election). A political action committee backed by Bankman-Fried is even rumored to be the next main super PAC to receive President Joe Biden’s blessing in the next election cycle.

There's also regulatory implications. FTX US Derivatives (formerly LedgerX) has a number of CFTC licenses, and FTX famously applied to try and settle derivatives directly, which the CFTC has yet to rule on.

Biden’s rule

Changing of the guard

Key: (nom.) = nominee, (rum.) = rumored, (act.) = acting, (inc.) = incumbent (no replacement anticipated)
Key: (nom.) = nominee, (rum.) = rumored, (act.) = acting, (inc.) = incumbent (no replacement anticipated)

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Outside CoinDesk:

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If you’ve got thoughts or questions on what I should discuss next week or any other feedback you’d like to share, feel free to email me at nik@coindesk.com or find me on Twitter @nikhileshde.

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See ya’ll next week!

Disclosure

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CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.

Nikhilesh De

Nikhilesh De is CoinDesk's managing editor for global policy and regulation. He owns marginal amounts of bitcoin and ether.