'You won' says CEO of sinking billion-dollar crypto exchange as rescue attempts crumble

A close-up of a fire.
(Image credit: Nitat Termmee via Getty images.)

Crypto is a speculative and volatile industry at the best of times, but this year has arguably been its annus horribilis. The list of incidents could be its own article, but a brief highlights reel would include the $40 billion collapse of Terra, high-profile and high-profit hacks on crypto exchanges, and the ongoing decline of the entire market's value.

Today's addition is another general fall in value of cryptocurrencies, with bitcoin currently having a slight rally but having lost approximately 70% of its value from the same time last year. A metric tonne of other smaller cryptocurrencies (sometimes referred to as "shitcoins") have also plummeted in value.

The reason why is a crypto exchange called FTX which, following rumours it was not in the best financial health, was hit by a run: reportedly $6 billion worth of withdrawal requests over three days.  To give an idea of FTX's scale, Reuters estimates that it has handled $626.69 billion in trades this year.

Following the run came the news that FTX's larger rival, Binance, would bail the company out "pending due diligence".

Well, Binance did the due diligence: and decided it couldn't touch this with a bargepole. In a statement Binance said:

"As a result of corporate due diligence, as well as the latest news reports regarding mishandled customer funds and alleged US agency investigations, we have decided that we will not pursue the potential acquisition of FTX.com [...] the issues are beyond our control or ability to help".

As regards the US agency investigations, Reuters reports that the US Securities and Exchange Commission (SEC) is looking at FTX's activities. Doubtless even more closely than they were a week ago.

To be crystal clear, FTX has not yet gone bust. But that seems inevitable.

FTX's founder Sam Bankman-Fried was once idolised in crypto circles, as both an entrepreneur and highly successful trader. Bankman-Fried has just posted a lengthy twitter thread in which he says "I fucked up" before going on to blame lots of other factors, and imply some mysterious stranger is behind the collapse. He says "we're spending the week doing everything we can to raise liquidity", but don't hold your breath.

The FTX website now has a red banner at the top saying "FTX is currently unable to process withdrawals. We strongly advise against depositing."

In a sign of just how wild this space is, venture capital firm Sequoia Capital has just written off a $210 million investment in FTX. "Based on our current understanding, we are marking our investment down to $0." $210 million just, poof, gone.

Let's end on the FTX CEO's not-mea culpa. "At some point I might have more to say about a particular sparring partner, so to speak," writes Sam Bankman-Fried. "But you know, glass houses. So for now, all I'll say is: well played; you won."

This is almost certainly a reference to Binance CEO Changpeng "CZ" Zhao, who as well as being behind the mooted rescue package was also arguably the one that caused it. A Coindesk report in early November pointed out a potential misuse of FTT, FTX's own crypto token, in order to inflate the balance sheet of another company, Alameda. To cut a long story short Zhao announced his intention to sell all Binance's holdings of FTT due to "recent revelations that came to light".

Then he had a bit of a public spat with Bankman-Fried, and the price of FTT began to tank, resulting in the $6 billion of withdrawals that put FTX on its knees. This is when Zhao announced Binance had entered a non-binding agreement to buy FTX, before today's U-turn.

It nevertheless seems incredible that the CEO of FTX, which is collapsing because it was found out, would blame this on a marketplace rival selling FTX's own crypto token: but this is crypto.

Funny thing is, immediately after the "you won" Bankman-Fried clearly had second thoughts about calling Zhao out, writing (caps his): "I WAS NOT VERY CAREFUL WITH MY WORDS HERE, AND DO NOT MEAN ANY OF THEM IN A TECHNICAL OR LEGAL SENSE."The real joke of course is on those who trusted FTX, investors large and small, and the wider crypto market which, after a year like this, is looking shaky indeed. Whatever its advocates may say about more utopian ideas of decentralisation, it's clear that speculation and greed are the true heart of cryptocurrency. There will never be a shortage of imaginary assets nor, sadly, those who can be persuaded to buy them.

Rich Stanton

Rich is a games journalist with 15 years' experience, beginning his career on Edge magazine before working for a wide range of outlets, including Ars Technica, Eurogamer, GamesRadar+, Gamespot, the Guardian, IGN, the New Statesman, Polygon, and Vice. He was the editor of Kotaku UK, the UK arm of Kotaku, for three years before joining PC Gamer. He is the author of a Brief History of Video Games, a full history of the medium, which the Midwest Book Review described as "[a] must-read for serious minded game historians and curious video game connoisseurs alike."