The entire saga happened after CoinDesk claimed that the balance sheet of Alameda, a crypto hedge fund owned by FTX’s founder, SBF, held billions of dollars worth of FTX’s own cryptocurrency, FTT, and had been using it as collateral in further loans.
Binance’s CEO, CZ, tweeted that his company was selling its FTT holdings, worth about $500m, because of “recent revelations that have come to light”. Things snowballed from there. The value of FTT collapsed, and FTX customers started withdrawing funds in a bank-run-style exodus as users tried to withdraw $6 billion over just a three day period.
After this mess,
FTX filed for bankruptcy just a few days ago. It was then revealed by Bloomberg on Thursday that SBF had said the firm needed $4bn to stay solvent, with a funding gap of $8bn. FTXwas facing not just a liquidity crunch but solvency problems – meaning it owed more money than it actually had.
The entire saga attracted everybody’s attention, and even a lot of conspiracy theories. Some people say SBF and Dan Friedberg (FTX’s Chief Regulatory Officer) are the masterminds behind all the problems. Some people even went further and tried to blame the problem on SEC Chair, Gary Gensler, who used to work for Alameda CEO’s father.
Whatever actually happened, we really hope all the responsible parties will be punished.
In this opportunity, we would also like to talk about the importance of self-custody. It’s very important to always HODL your own crypto assets in your own crypto wallet, meaning outside centralized exchanges (CEX-es). Download metamask, use hardware wallets like Trezor or Ledger, or other popular solutions, and never share your private keys with anybody.
Even if you want to use CEX-es, just use it for a quick trade, and withdraw as soon as possible after you complete your trade. Don’t overexpose yourself to CEX-es, it doesn't matter how friendly their CEOs may seem, because there are always risks of them trading with customer funds. This is not a shot at CEX-es, this is just us caring about our community’s security.
At the end of the day, crypto is supposed to solve centralization and not promote it. Crypto is supposed to be about decentralization and removing central authority. We hope people will eventually understand the importance of self-custody.
Here at DeSpace we always encourage people to trade with their own non-custodial wallets. You can try our DeSwap to trade one crypto token to another. We don’t hold your keys nor your coins.
