Did a Single Tweet from CZ Cause FTX’s Collapse?
Former Alameda Research CEO Caroline Ellison testified in Sam “SBF” Bankman-Fried’s criminal trial, stating that a tweet from Binance CEO Changpeng “CZ” Zhao contributed to the failure of cryptocurrency exchange FTX. The tweet in question, posted on November 6, 2022, announced that Binance would liquidate its holdings of FTX Token (FTT) due to recent revelations. The liquidation of tokens reportedly caused retail investors to follow suit and withdraw funds from FTX, leading to the platform halting withdrawals and filing for bankruptcy.
The Main Reason for FTX’s Collapse
While Ellison acknowledged that CZ’s tweet played a role in FTX’s collapse, she attributed the main reason to Alameda borrowing $10 billion from the exchange that it couldn’t repay. She testified that Bankman-Fried directed her to take billions of dollars from FTX without users’ consent. CZ responded to claims that his tweet destroyed FTX, stating that no healthy business can be destroyed by a tweet. He pointed out that Ellison’s own social media activity offering to buy Binance’s FTT holdings was the real cause for people to dump the tokens.
Additional Revelations at Trial
Ellison also provided information about Bankman-Fried’s ambition to become the US president, creating alternative spreadsheets of Alameda’s financials, and seeking support from Saudi Crown Prince Mohammed bin Salman. During cross-examination, she mentioned that SBF may not have been aware of her concerns about risking FTX customers’ funds. Ellison pleaded guilty as part of an agreement with US authorities for her testimony. Bankman-Fried has pleaded not guilty and is facing multiple criminal charges.
Hot Take: CZ’s Tweet and FTX’s Collapse
A tweet from Binance CEO CZ Zhao announcing the liquidation of FTX Token (FTT) holdings contributed to the collapse of cryptocurrency exchange FTX. Retail investors followed suit, leading to a run on the platform and its subsequent bankruptcy filing. However, the main reason for FTX’s collapse was Alameda Research borrowing $10 billion from the exchange without repayment. While CZ denied that a tweet could destroy a healthy business, he pointed out that Ellison’s own social media activity played a role in people dumping FTT tokens. The trial has revealed additional details about Bankman-Fried’s ambitions and actions.
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