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CEO of FTX Sam Bankman-Fried testifies during a hearing before the House Financial Services Committee on Dec. 8, 2021. Alex Wong/Getty Images

Not long ago—like, just a few days ago—prominent cryptocurrency exchange FTX was considered maybe the key power broker in the digital-money space. It had high-profile celebrity endorsements; its name graced both a chess tournament and the Miami Heat’s stadium; it regularly swooped in to try to bail out troubled crypto firms; and its CEO, Sam Bankman-Fried, has become one of Washington’s most important donors and lobbyists. Well, at least until he suddenly halted his political donations last month (and retracted an offer to back Elon Musk’s Twitter takeover).

Perhaps that should have been a bigger warning sign—because we’re now at Election Day, and FTX and its chief suddenly don’t look so deep-pocketed after all. Tuesday morning—following reports that 1) FTX’s in-house token was crashing in value; 2) users were withdrawing their investments from the company en masse; and 3) all of this was dragging down the value of major cryptocurrencies like ETH—the world’s largest crypto exchange, Binance, announced it was planning to “fully acquire” FTX.com. Binance’s CEO, Changpeng “CZ” Zhao, tweeted that FTX had “asked for our help” due to a “significant liquidity crunch”; Bankman-Fried appeared to confirm this in a separate thread. Now, the entire crypto market is going haywire, and maxis are running wild with speculation on what’s going on. It’s definitely all pretty weird, considering that Bankman-Fried dismissed concerns about FTX’s balance sheets as “false rumors” in a since-deleted tweet only a day ago—and now may lose about 94 percent of his multibillion-dollar fortune.

So: WTF is going on with FTX, crypto CEOs SBF and CZ, and the entire crypto space? Who just poured cold water on this alphabet soup? Will crypto face an existential crisis for the fourth time this year? It’s time for yet another crypto-crisis explainer from yours truly!

Tell me how we got here.

So, FTX and Binance are among the world’s largest crypto exchanges. Millions of traders around the world use these platforms to trade their holdings of digital assets like Bitcoin or NFTs. Users can also trade these exchanges’ in-house tokens—FTT and BNB, respectively—which can grant them special trading benefits and, in essence, represent their faith in the exchanges. Both companies are also headed by crypto celebrities: Bankman-Fried gained fame in the late 2010s as a proponent of the philosophies of “effective altruism” and “longtermism,” both highly popular within Silicon Valley, while Zhao started off as an early blockchain developer who became one of the world’s richest billionaires thanks in part to his Bitcoin dedication.

For a while, the two exchanges were considered rivals in the fight to dominate crypto. Though they’re far from the space’s only major players, both Binance and FTX had unique strengths in the market: The former boasts massive global trading volume, far surpassing other exchanges, while the latter has enjoyed record-breaking investment rounds and become one of the United States’ most culturally and politically omnipresent crypto brands. Both FTX and Binance also appeared to weather this year’s crypto travails relatively well. It may seem ironic, then, that when FTX launched in late 2019, Binance was one of its first major investors, taking an equity stake plus a long position on FTT. Bankman-Fried told Bloomberg at the time that Binance’s total investment amounted to “tens of millions”; Changpeng Zhao considered it a strategic investment to “support multiple initiatives to grow the [crypto] industry.”

But troubles began back in March 2020, when Binance stopped allowing FTT trades on its platforms because its “users did not understand the products” and were not making appropriate use of the token, the crypto site Cointelegraph reported. The following year, Bankman-Fried bought out all of Binance’s shares in FTX, citing the regulatory crackdowns that were hitting Binance in countries like the United Kingdom, Italy, and its home base of Japan. But, SBF reassured observers, the companies’ split was “cordial.”

Yet this month, things went sideways yet again. On Sunday, Zhao revealed that in selling off Binance’s equity share in FTX, his company earned back about $2.1 billion as denominated in Binance and FTT tokens—and that he was planning to “liquidate” Binance’s remaining FTT holdings.

Uhhhhh-huh. But … why?

In his first Twitter thread, Zhao didn’t get into specifics, vaguely citing “recent revelations that have came to light.” He clarified that this was not “a move against a competitor,” but he did mention in a different tweet that “we won’t support people who lobby against other industry players behind their backs.”

Observers reasoned that the cited “revelations” referred to findings from a Nov. 2 article by crypto publication CoinDesk, which got ahold of a leaked balance sheet from one of Sam Bankman-Fried’s separate ventures, the crypto-trading firm Alameda Research. CoinDesk had revealed that a large share of Alameda’s reported assets (which totaled about $14.6 billion) were made up of FTT tokens. That is, Alameda didn’t hold much of its assets in fiat currency or in a widely traded digital currency like Bitcoin—but in an illiquid token that’s controlled by the other company run by Bankman-Fried. What’s more, the FTT holdings amounted to the equivalent of about $6.1 billion in Alameda assets, which is odd considering that FTX’s own website stated that there were only about $5.1 billion worth of FTT in total circulation.

This, combined with Zhao’s announcement, fueled rumors that FTX was actually financially “insolvent.” Bankman-Fried personally addressed the rumors, calling them “unfounded,” while another Alameda employee tweeted that the balance sheet presented an incomplete snapshot of the company’s finances. On Monday, as crypto-world chatter intensified, Zhao took to Twitter to debunk speculation that this was an elaborate conspiracy from Binance to undermine FTX, and Bankman-Fried insisted that “FTX is fine. Assets are fine.”

I’m assuming the assets were not fine.

Indeed, and that’s why we’re here today. Tuesday morning saw the threads from both Zhao and Bankman-Fried, all but cementing that FTX’s value was actually a wash and FTT was propping up way more than it was supposed to. So, as crypto traders confirmed their worst assumptions about Bankman-Fried’s businesses, the value of FTT crashed; Solana, another currency backed by FTX and shown to make up for a significant portion of Alameda’s balance sheet, also lost about a quarter of its value.

FTX users then began withdrawing their trades from the exchange at a rapid pace—and as they removed their holdings of coins like Bitcoin and ETH, the respective value of those currencies also plunged. As a result, the values of a single Bitcoin and ETH coin respectively fell by about 11 percent and 18 percent. Bitcoin, the world’s most popular cryptocurrency, had already been trading at historically low levels following May’s crypto crash, so this was yet another gut-punch it didn’t really want. Other major crypto-trading companies, like Coinbase and Robinhood, also plunged in market capitalization. (Bankman-Fired notably has a 7.6 percent stake in Robinhood.) Crypto journalists compared the brouhaha to June’s crypto tribulations, which also came about due to irregularities concerning a single crypto exchange’s in-house token (and which also had links to Bankman-Fried’s crypto businesses).

So was FTX lying about its actual worth?

We don’t know for sure, but, to boil down a very complex event to a simple theory: The values of many cryptocurrencies come from investor confidence and collective speculation from traders, whether they all congregate on a single blockchain or invest their digital holdings in certain exchanges. It’s in Bankman-Fried’s monetary interest to keep FTX users happy, to assure them that their virtual money is safe and retains value, and to make sure they trust FTX to give them a solid return on investment; functionally, crypto exchanges tend to operate a lot like your standard banks. I suspect that once the world’s largest crypto exchange essentially gave FTX a no-confidence vote, and once other major cryptocurrencies started to collapse, Bankman-Fried would have realized the only thing left to do was give his customers the money they wanted from FTX’s coffers—which he had promised them through FTX’s advertised yields. And that meant securing a bailout, at a price tag much lower than the company may have liked.

What happens now?

It’s worth noting, as Bankman-Fried wrote in his Tuesday thread, that the U.S. branches of both Binance and FTX are “currently” unaffected by the broader company issues, which mainly affect international traders. Both exchanges have separate American branches that are based stateside and adhere to unique American crypto regulations and financial laws. But American FTX traders may be wary of Bankman-Fried’s imprimatur now. Maybe it’s not quite time to invest in Gamestop again, guys.

Future Tense is a partnership of Slate, New America, and Arizona State University that examines emerging technologies, public policy, and society.