The November 2022 Alameda gap exposed vulnerabilities in the crypto market, shedding light on FTX and Alameda Research’s fraud.
In November 2022, the cryptocurrency world was rocked by the collapse of FTX, one of the largest cryptocurrency exchanges. The collapse was triggered by a liquidity crisis at FTX, which was caused by a combination of factors, including mismanagement of customer funds and risky trading practices by FTX’s sister company, Alameda Research.FTX has filed for bankruptcy, revealing a debt of over $3 billion to its creditors. Additionally, the exchange is unable to locate approximately $8.
The close relationship between FTX and Alameda Research allowed Bankman-Fried to engage in a variety of fraudulent activities, including: Offering fraudulent financial products: FTX, under Bankman-Fried’s leadership, offered unregulated financial products like margin and derivatives trading. This lack of oversight allowed him to defraud customers by selling these products without disclosing the associated risks.The scam began to unravel in November 2022 when it was revealed that Alameda Research held a large position in FTT, the native token of FTX.), which caused the token’s price to plummet.
While the FTX episode may have been the last domino to fall in a series of bankruptcies that were filed during 2022, it was easily the biggest event of the year, and it put the industry under a legal and regulatory microscope.SBF was arrested in the Bahamas on Dec. 12, 2022, after United States prosecutors filed criminal charges against him. He was extradited to the U.S. in January 2023 and went on trial in October 2023.
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