📚 Inside the Frantic Texts Exchanged by Crypto Executives as FTX Collapsed

The day before FTX filed for bankruptcy, founder Sam Bankman-Fried received an "alarmed" text message from Binance CEO Changpeng Zhao, reports the New York Times: Mr. Zhao was concerned that Mr. Bankman-Fried was orchestrating crypto trades that could send the industry into a meltdown. "Stop now, don't cause more damage," Mr. Zhao wrote in a group chat with Mr. Bankman-Fried and other crypto executives on Nov. 10. "The more damage you do now, the more jail time." FTX and its sister hedge fund, Alameda Research, had just collapsed after a run on deposits exposed an $8 billion hole in the exchange's accounts. The implosion unleashed a crypto crisis, as firms with ties to FTX teetered on the brink of bankruptcy, calling the future of the entire industry into question. The series of about a dozen group texts between Mr. Zhao and Mr. Bankman-Fried on Nov. 10, which were obtained by The New York Times, show that key crypto leaders feared that the situation could get even worse. And their frantic communications offer a rare glimpse into the unusual way business is conducted behind the scenes in the industry, with at least three top officials from rival companies exchanging messages in a group chat on the encrypted messaging app Signal. The texts also show that industry leaders were acutely aware that the actions of a single firm or fluctuations in the value of one virtual currency could destabilize the whole industry. The exchanges became increasingly tense as Mr. Bankman-Fried and Mr. Zhao traded barbs. Earlier that week, Mr. Zhao had agreed to buy FTX and save the exchange, before backing out of the deal. In the Nov. 10 texts, he appeared certain that FTX would not survive, and concerned that it could bring the rest of the industry down with it.... In the Nov. 10 texts, Mr. Zhao specifically accused Mr. Bankman-Fried of using his hedge fund to drive down the price of Tether, a so-called stablecoin whose price is designed to remain at $1. According to messages seen by The Times and people familiar with the matter, the group chat included several other prominent crypto executives, including Jesse Powell, a founder of the crypto exchange Kraken, and Paolo Ardoino, the chief technology officer of Tether, the company that issues the stablecoin of the same name. Tether is a linchpin of crypto trading worldwide, commonly used by digital asset enthusiasts to conduct transactions. Industry insiders have long feared that if Tether's price fell, it would cause a domino effect that might bring the industry to its knees. (Tether ultimately did not end up losing its $1 peg.) 30-year-old Bankman-Fried told the Times that Mr. Zhao's claims were "absurd.... Trades of that size would not make a material impact on Tether's pricing, and to my knowledge neither myself nor Alameda has ever attempted to intentionally depeg Tether or any other stablecoins... I have made a number of mistakes over the past year but this is not one of them." A spokeswoman for Tether told the Times they'd "demonstrated its resilience to attacks," adding that FTX's actions "don't reflect the ethos and commitment of an entire industry."

Read more of this story at Slashdot.