Sam Bankman-Fried’s cryptocurrency exchange FTX is now bankrupt, and in the process of the company’s collapse, it started with a digital currency it created with minimal trading volume. played an important role.
This digital currency is FTT created by FTX. It is not uncommon for cryptocurrency exchanges to issue their own currency, both to allow founders and early investors to profit when the value of the currency rises, and to incentivize traders to patronize the exchange.
But FTT is different because FTX is closely tied to Bankman-Fried’s trading firm, Alameda Research; Alameda also collapsed last week. Alameda played the unusual dual role of holding most of the FTT issued while also acting as the primary trading partner around the currency, according to people familiar with the deal.
Alameda then used FTT as collateral to secure hundreds of millions of loans, people familiar with the matter said. The Wall Street Journal (The…