The vanishing billions: FTX crypto collapse shockwaves spread

An under-fire entrepreneur has sparked a scandal with repercussions for football legend Tom Brady and the Miami Heat NBA team. Photo / AP, Getty, Herald montage

Billions of dollars might have gone missing from the implosion of crypto currency exchange FTX.

The scandal has already led to the Miami Heat basketball team terminating its relationship with Sam Bankman-Fried, who quit on Friday as chief executive of the Bahamas-based firm.

Reports from the United States alleged Bankman-Fried secretly funnelled US$10 billion (NZ$16.39b) of customer funds into his trading company, Alameda Research.

The New York Post said Bankman-Fried’s girlfriend Caroline Ellison was running Alameda Research.

Two senior FTX officials claimed they saw the evidence amoney was missing in copies of financial records Bankman-Fried shared with company executives last week, according to Reuters.

FTX founder, Sam Bankman-Fried. Photo / Getty Images

“There are initial indications that $473 million in cryptoassets were stolen from FTX late last night,” crypto research firm Elliptic said in a blog post.

Cointracker said FTX websites and apps may have been hacked, and Coinbase advised people to stay away from these sites and apps.

“Prior to this week’s turbulent events, FTX Global was a top three global crypto exchange by trading volume,” Cointracker added.

“On November 8 it halted the ability of users to withdraw funds, sending shockwaves throughout the crypto world, and many token prices began to crash.”

The saga has scandalised social media and left some crypto users scrambling for answers.

The Miami Heat NBA team has ditched FTX as the naming rights partner for its stadium. Photo / AP

“All crypto users are affected by the market conditions even if they didn’t directly use FTX,” Cointracker added. “The reason for fear in the crypto markets is that many other companies had their assets on FTX.”

The NY Post said Miami-Dade County and the NBA’s Miami Heat were re-naming the FTX Arena and ending their relationship with the “ruined company and disgraced founder”.

The county and the basketball team were now looking for a new naming rights sponsor.

Cornell University researchers described FTX as a cryptocurrency exchange where customers swapped dollars for various crypto currencies such as Bitcoin.

“Suppose several individuals began withdrawing their crypto holdings from FTX at once,” a Cornell blog added.

“There can be a host of reasons why they have chosen to withdraw their holdings, but people in the network that have not withdrawn their money now are worried that there might not be enough funds to cover their own accounts.”

The upshot was an “information cascade” where the next people in the network imitated individuals they’re connected to, who had decided to withdraw.

NFL superstar Tom Brady, a seven-time Super Bowl champion, was among the investors in FTX and was last year made a brand ambassador for FTX.

Bankman-Fried appeared to reject some of the allegations.

“I’m piecing together all of the details, but I was shocked to see things unravel the way they did earlier this week,” he tweeted this weekend.

He told Reuters he “disagreed with the characterisation” of the US$10b transfer.

“We didn’t secretly transfer,” he said. “We had confusing internal labelling and misread it,” he added, without elaborating.

When Reuters asked him about the missing cash he responded: “???”