Financial records obtained by Bloomberg News show that the bankrupt crypto exchange FTX used a token it created to pay for the acquisition of the trading platform Blockfolio.
Bloomberg reported that one of the biggest crypto purchases at the time, FTX spent over $84 million to acquire the bulk of Blockfolio in 2020. Of that amount, 94% was paid in FTX’s FTT tokens.
Although it was widely reported at the time that the exchange made the payment with a combination of cash, cryptocurrency, and equity, the financial specifics of FTX’s acquisition of Blockfolio were previously unknown.
However, unreported information provides insight into the former FTX CEO Sam Bankman- Fried’s “appetite for whimsical financial engineering” and an early desire to acquire clients through significant acquisitions.
According to the financial filings, the transaction valued Blockfolio at roughly $160 million and provided the exchange a 52% stock share with the option to purchase the remaining 48% within two years.
FTT Plays Starring Role In FTX’s Demise
According to Bloomberg’s report, the FTT token was a major factor in the exchange’s downfall. After CoinDesk revealed that the exchange’s native token made up a sizeable chunk of Alameda’s balance sheet and competitor Binance CEO C.Z announced intentions to sell substantial amounts of it, the weeks-long controversy began.
However, Bloomberg’s news came under the spotlight after the U.S. SEC declared the exchange’s token, FTT, to be a security and that FTX used the funds raised from the FTT token sale to support its commercial activities.
The SEC stated in a lawsuit against Caroline Ellison, the former CEO of sibling trading company Alameda, and Gary Wang, a co-founder of FTX, that the huge token distribution to FTX encouraged the management team of the exchange to take actions to enhance user traffic to the trading platform, which in turn increased demand for and raised the trading price of the FTT token.
The lawsuit stated that In order to manipulate the price of FTT, Ellison followed SBF’s orders and directed Alameda to buy a significant amount of the commodity on the open market.
Ellison and Alameda were able to borrow more money because of this manipulative conduct, which also concealed Alameda’s genuine risk exposure. This manipulation served the Defendants’ strategy.
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