When cryptocurrency exchange FTX raised $400 million from investors such as Softbank, Temasek, Tiger Global, and others in January of 2022, its net worth took off.
The funding, in amazing fashion, soon lifted its value to $32 billion. By November, it was bankrupt.
While FTX pumped up its reputation with big-name investors, it was also allying itself with high-profile celebrities, including NFL great Tom Brady, his then wife supermodel Gisele Bündchen, NBA superstars Stephen Curry and Shaquille O’Neal, tennis player Naomi Osaka, and Hollywood’s Larry David.
FTX CEO Sam Bankman-Fried was the institutional face of the cryptocurrency industry. He amassed a net worth of more than $21 billion but lost most of it in a short few days beginning on Nov. 8.
The company was a mechanism people used to buy and sell cryptocurrencies such as bitcoin and ether. But confidence in FTX was destroyed as its customers hurried to withdraw their money by selling the cryptocurrencies they had previously purchased using the platform.
And the rest is history. Bankman-Fried is now dealing with criminal and civil charges on accusations of fraud.
The celebrities who endorsed his cryptocurrency empire are now facing some blindingly embarrassing consequences.
Tom Brady Lost a Staggering Number of Shares
One of FTX’s most high-profile promoters was NFL star Tom Brady. Needless to say, his remarkable investment went horribly wrong.
A strangely prophetic video was captured in a Twitter post, where Brady asks Bankman-Fried, “Sam, where you going, bro?” The post was shared by @MilkRoadDaily.
The Tampa Bay Buccaneers quarterback is reported to own more than a million shares, and the value of that now looks like it could be zero.
Why Did the Bank Run on FTX Happen?
On Nov. 2, Coindesk published a story that raised concerns about the financial health of FTX and Alameda Research. The article claimed that the assets of Bankman-Fried’s Alameda Research consisted of FTT (~FTTUSD) , the cryptocurrency issued by FTX.
The revelation that FTX was using FTT, the once beloved cryptocurrency, as collateral on its balance sheet caused great concern due to the concentration risk and volatility of FTT. Customers and investors became skeptical about the capital reserves of Bankman-Fried’s trading firm Alameda and FTX.
On Nov. 6, Binance announced that it would sell about $530 million of FTT, triggering the run on the bank.
By Nov. 8, Binance officially said it was acquiring FTX as cryptocurrency values such as bitcoin’s were falling. Stocks of crypto companies, including Robinhood (HOOD) – Get Free Report and Coinbase (COIN) – Get Free Report, were plummeting in value.
The very next day, Binance said it was withdrawing its acquisition offer. The situation was worse than first believed.
On Nov. 11, FTX filed for bankruptcy and Bankman-Fried resigned as CEO.
Soon it was announced that FTX was under federal investigation by prosecutors in New York for giving customer funds to Alameda Research.
And civil action followed.
“Bankman-Fried was orchestrating a massive, years-long fraud, diverting billions of dollars of the trading platform’s customer funds for his own personal benefit and to help grow his crypto empire,” the Securities and Exchange Commission alleged in its civil complaint.
Source: https://www.thestreet.com/investing/cryptocurrency/tom-brady-wins-at-football-but-loses-big-at-crypto?puc=yahoo&cm_ven=YAHOO&yptr=yahoo