FTX founder trial has recently taken center stage as the U.S. Department of Justice accuses Sam Bankman-Fried of building a “house of cards” on a lie. The defense for Bankman-Fried argues that he acted in good faith while his businesses grew too quickly. They place the blame on former employee and paramour Caroline Ellison for failing to install safeguards. Ellison has already pleaded guilty and is expected to testify during the trial.
In the midst of this controversy, blockchain intelligence firm Messari discovered that Q3 fundraising for crypto firms fell to its lowest level in three years. The total amount raised was just under $2.1 billion across 297 deals. The sudden collapse of FTX in November contributed significantly to the downturn in the industry.
Wall Street Journal report uncovers backdoor
A report by the Wall Street Journal revealed that some of FTX’s U.S. employees were aware of a backdoor in the exchange that allowed Alameda Research to withdraw billions in customer funds. These employees brought their discovery to the attention of FTX’s director of engineering, but the issue remained unresolved. LedgerX’s chief risk officer also raised concerns with her boss, who then discussed the matter with one of Bankman-Fried’s closest deputies.
FTX founder trial: The defense’s argument
Bankman-Fried’s defense team claims that he acted in good faith as his businesses expanded rapidly. They argue that the responsibility for installing safeguards falls on former employee Caroline Ellison, who failed to do so. Ellison’s guilty plea and her upcoming testimony during the trial may play a crucial role in determining the outcome of the case.
Impact on the crypto industry
The FTX founder trial and the company’s collapse in November have had a significant impact on the crypto industry. Fundraising for crypto firms in Q3 reached its lowest level in three years, with only $2.1 billion raised across 297 deals. This downturn in the industry can be partially attributed to the issues surrounding FTX and its founder.
Concerns raised by employees
The Wall Street Journal report highlighted the fact that some FTX employees in the U.S. were aware of the backdoor in the exchange. They flagged their discovery to the director of engineering, but the problem was never addressed. This raises questions about the company’s internal communication and whether appropriate action was taken to protect customer funds.
Role of Alameda Research
The backdoor in FTX’s exchange allowed Alameda Research, a company closely associated with Bankman-Fried, to withdraw billions in customer funds. The connection between the two companies and the fact that the backdoor was not fixed raises concerns about the level of oversight and transparency in the crypto industry.
Conclusion
The FTX founder trial serves as a stark reminder of the risks and challenges that the crypto industry faces. As the case unfolds, it remains to be seen what impact it will have on the future of the industry and the regulatory environment. With billions of dollars at stake, the trial’s outcome could have far-reaching consequences for both FTX and the broader crypto market.
