FTX Employees’ Crypto Profits Locked Up for Seven Years
In 2021, FTX CEO Sam Bankman-Fried (SBF) made changes to the rules for FTX employees after their crypto profits threatened to allow them to retire early. According to Michael Lewis’ book “Going Infinite,” SBF used his power to extend the lockup period for employees’ Serum (SRM) holdings by seven years. This prevented them from cashing out their paper profits.
SRM is a token tied to the decentralized exchange ecosystem Serum on Solana. Token launches often include lockup periods for founders and employees to prevent immediate dumping of coins on the market. However, SRM experienced a significant price increase in September 2021, making early recipients of the token extremely wealthy.
The Illiquid State of Serum at FTX
When FTX faced financial troubles in November 2022, it was revealed that the firm held around $2.2 billion worth of SRM, making it the largest digital asset in its portfolio. However, this value far exceeded the actual circulating supply of SRM, rendering most tokens illiquid without drastically affecting its price.
Binance delisted many SRM trading pairs by the end of November, leaving limited liquidity for the crypto on mid-size exchanges. Following FTX’s collapse, the Serum project initiated a hardfork to distance itself from the control of the defunct exchange.
Controversial Claims and SBF’s Trial
In his book, Lewis also claimed that SBF intended to pay former president Donald Trump $5 billion to not run for re-election in 2024. However, Lewis received criticism from crypto and financial industry figures for allegedly downplaying SBF’s alleged fraud.
Currently, SBF is facing trial on charges of conspiracy and fraud related to FTX.
Hot Take: FTX’s Lockup Controversy and Future Implications
The controversy surrounding the extended lockup period for FTX employees’ Serum holdings raises questions about the power dynamics within crypto companies and the potential risks faced by early recipients of tokens. This incident also highlights the importance of liquidity in the crypto market, as illiquid assets can significantly impact token prices. As the trial against SBF unfolds, it remains to be seen how it will affect the perception and regulation of the crypto industry.
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