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Date Posted: 9:11:54 1/27/23 Fri
Author: Jasper
Subject: A timeline of the fall of crypto

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Though not regulated as such, these crypto lenders were operating as banks, offering lavish returns to depositors putting up their own cryptocurrency as collateral. Without even FDIC insurance on their settlement accounts, depositors rushed to get funds out before the firms collapsed. Without sufficient cash on hand, Voyager and Celsius paused withdrawals before filing for bankruptcy in July.

In November, FTX, a major cryptocurrency exchange branding itself as the responsible, good-faith actor in an otherwise dodgy industry, was the next domino to fall. Leaked balance sheets from FTX’s sister company, Alameda Research, revealed that the trading firm was holding most of its assets in FTX’s house “token,” FTT. This raised questions about the unusually close relationship between the two firms (it was later revealed that FTX was secretly and illicitly funneling depositors’ funds to Alameda to fund risky crypto investments), as well as their solvency. FTT, like similar assets held by recently failed crypto firms, was highly illiquid.

In response to the leak, the CEO of Binance, the largest cryptocurrency exchange by trading volume, announced that it would liquidate its entire substantial holdings in FTT, which caused the token to crash in value. Following a now-familiar arc, depositors rushed to withdraw funds from FTX, forcing the exchange to pause withdrawals for lack of liquidity. Within five days, FTX, Alameda Research, and various subsidiaries—having been recently valued at well over $US40 billion, collectively—began the bankruptcy process as well.

https://quillette.com/2023/01/24/the-crypto-token-industry-is-second-order-fraud/

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