E-Financial

The Collapse of FTX

Published

4 years ago

November 15, 2022

Chike Onwuegbuchi

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By Oluseyi Akindeinde

FTX recently valued at $32 billion dollars, has filed for Chapter 11 bankruptcy protection in the US. The filing in Delaware federal court on Friday 11th November, 2022 included the main FTX international exchange, FTX US a US crypto marketplace, Sam Bankman-Fried’s proprietary trading group Alameda Research and about 130 affiliated companies.

In this piece I try to dissect what went wrong at FTX, and discuss possible ramifications for the crypto industry.

The Players

Sam Bankman-Fried aka SBF (The self proclaimed Crypto White Knight and member of the inner caucus. Darling of Washington DC).

Caroline Ellison aka CE (His Girlfriend).
Changpeng Zhao aka CZ (The Outcast Dark Crypto Lord).

The Entities

Alameda Research (AR). The Trading company founded and OWNED by SBF but managed by CE. Revenue earned through market making (ie providing liquidity to crypto exchanges) as well as trading/speculating on cryptocurrency futures using a high degree of leverage.

– FTX (FTX.com). Cryptocurrency

Futures Exchange (brokerage and derivatives platform) OWNED and CONTROLLED by SBF. Revenue earned through customer transaction fees who trade and speculate on cryptocurrency futures and derivatives(day traders). The trading platform was called FTXPro.

– Binance. A rival crypto Exchange OWNED & CONTROLLED by CZ. The Biggest cryptocurrency spot exchange in the world by volume.

Quick Summary

AR and FTX were meant to be separate entities even though they were founded by the same person SBF.

– FTX had a market-cap (networth) of $32 billion having raised funding from well known

VCs in Silicon Valley including Sequoia Capital.

AR allegedly owed FTX $8 billion after taking loans apparently funded by deposits of FTX customers.
AR used these borrowed funds to trade cryptocurrencies with leverage and also to bail out struggling crypto companies (Voyager and BlockFI) who had liquidity issues.

– FTX declared bankruptcy with loads of customer funds gone with it.

How Money Disappeared – Summary

– SBF founded AR and FTX.

– FTX also issued FTT tokens which they gave to early investors that included AR.

– As an exchange, customers deposited their funds on FTX to trade with.

– SBF basically gave these customer deposits to AR as loans to be used for their trading activities and in return accepted FTT tokens (originally issued by FTX) as collateral for the loan.

– A report then came out that pointed out that AR’s balance sheet was basically made up largely of FTT tokens issued by FTX.

– CZ (who once bought a stake in FTX but later divested because he had a bone to pick with SBF) upon getting wind of this development announced he would de-risk his entire $500M of FTT position.

On the back of this, other customers also started to dump their FTT tokens and immediately started withdrawing their funds on FTX. It led to a bank run.
AR then started selling assets presumably on other exchanges to send back to FTX to shore up capital in order to meet the customer shortfall.
When SBF realized the liquidity squeeze, he then reached out to CZ for a bail out of FTX wherein CZ accepted the offer of bail out subject to corporate due diligence.

CZ later pulled out of the deal because his due diligence on FTX had come up short.
FTT price tanked as FTX had no liquidity in reserve to meet customer withdrawal obligations and subsequently paused withdrawals.

– From being illiquid, FTX became insolvent since the value of the collateral held (FTT) had fallen below the value of their liabilities.

SBF basically thought he could print money (FTT) out of thin-air using FTX as the mechanism and use it as collateral against real assets.
FTX, AR and SBF filed for bankruptcy protection post- haste.

How Money Disappeared – Details

Background

SBF, an MIT physics graduate and a former Wall Street futures trader made a lot of money trading crypto arbitrage. He founded AR but gave CE the reins of power when he founded FTX a crypto futures and derivates trading company.

FTX as part of its operations issued a token called FTT. It is like airline miles or reward points as you don’t get any ownership stake in FTX itself.

FTT token allowed the holder to obtain discounts on trading fees when they trade on FTXPro. It could also be pledged as collateral for futures trading on FTXPro.
FTX used a portion of profits (trading fees) generated to buy back and burn a portion of FTT in circulation.
So indirectly FTT token was tied to the profitability of FTX – that is the more profitable FTX was, the more FTT tokens FTX would buy back leading to an increase in the price of the FTT tokens (the reverse was also the case if FTX wasn’t profitable).

– Burning FTT would also lead to reducing its supply which further increases its price. This also made FTT behave somewhat like a company stock. But it wasn’t legally a stock.

– There were over 400,000 holders of FTT at the last count.

– Word got out about AR’s balance sheet which had $14.6 billion but it’s biggest asset was

$3.7bn worth of “unlocked FTT” and its other biggest asset was

$2.2bn worth of FTT that were pledged as collateral. Basically nearly half of AR’s balance sheet was made up of FTT tokens – an asset created by FTX.

AR’s balance sheet liability also carried $7.4bn worth of liabilities (loans).
From purely a risk management point of view, this was rather bad because AR was using it’s own equity as collateral for borrowed money. If the company became unprofitable, this would be bad in itself but if the collateral (FTT tokens) backing those loans were to fall in value, this would become a disaster for AR.

Relationship Between FTX and AR

SBF founded both companies. FTX being the exchange. AR was the trading company using FTX to conduct its trading activities.
FTX and AR claimed they were completely separate entities. Speculation however started to spread on social media that the two companies were one and the same and customer funds on FTX were finding their way to AR behind the scenes.

– It was later gathered that FTT token’s price was being propped up by AR. Not only that, AR was further using FTT it got issued by FTX as collateral to the same FTX to fund its own operations.

– It was bad enough that AR carried a lot of illiquid assets on their books (FTT), it became even worse when FTX started giving a huge portion of their customer funds to AR as loans which were collateralised and secured by the very same FTT tokens issued by FTX.

– Remember that FTX issued FTT tokens in the first place. So, they were getting back what they issued as collateral. Like plugging an extension plug into itself. Simply means if the price of FTT went down, FTX would be seriously impacted.

Crisis Brewing

FTX’s primarily business was being a broker dealer. They were listing and selling

perpetual crypto futures and allowing AR and other traders/ speculators to trade crypto derivatives often with huge leverage.

As a result, they needed a reserve of money to lend to AR and speculators.
And because FTX and AR were one and the same, customer funds deposited on FTX were diverted to AR for leveraged trading operations.
Once suspicion started to filter

through that FTX didn’t have enough crypto on hand to honour all customer withdrawals, customers started demanding for their funds and FTX started having liquidity issues as there wasn’t enough reserve on hand to meet up with customer’s withdrawals.

AR in turn started withdrawing funds (stable coins and crypto)

they had on other exchanges to send to FTX. This served to further confirm that FTX was really facing a liquidity crisis.

Denials

SBF denied the liquidity crisis and basically said everything was fine and customer funds were intact. He even claimed it was all the work of competitors trying to spook them.
At the same time CE (who ran AR) took to twitter to say that AR had $10bn in liquidity not reported on the balance sheet.

Enter CZ

CZ who was a former investor in FTX had over $500M worth of FTT. It was paid in part as

settlement when CZ divested from FTX in 2021.

Actually SBF bought back CZ’s stake in FTX and paid him $2.1bn in BUSD and FTT tokens.
When CZ got wind of the report of AR’s balance sheet and its asset makeup, he made a public declaration to offload his entire $500M worth of FTT in what he called a “de-risking” process.
This piece of public declaration naturally spooked the markets as speculators who held FTT tokens started de-risking (selling) as well.

The Death Spiral

With speculators selling, FTT price began to plummet.
It was made worse when CE incredibly made a public offer to CZ that AR were willing to buy Binance’s entire FTT stake at $22 each over-the-counter.
This further fuelled the fire that AR and FTX were using FTT as collateral for crypto loans and feared getting liquidated.

This caused hundreds of millions of dollars in FTT liquidations on FTX and because

of low liquidity it further crashed the price. AR and FTX also started selling off the other crypto assets they held to prevent FTX from collapsing.

This caused other cryptocurrency prices to tank. A ripple effect.

Traders also started rushing to pull their funds off FTX exchange for fear that the exchange would collapse. This essentially led to a bank run.

The Aborted Rescue Mission

People just couldn’t believe that FTX, a company that had raised a combined $1.8bn in VC money could be facing insolvency.
The unthinkable then happened – SBF publicly reached out to CZ and asked to be bailed out.
CZ accepted by signing a non- binding letter of intent (LoI) to buy FTX pending due diligence.

This served to further confirm that FTX was indeed neck deep in trouble.

The following day, however, CZ through Binance made it known that they wouldn’t be taking up the offer of buying FTX as the issues were simply too many.

FTX had failed their process of corporate due diligence.

Binance also cited risks related to pending regulatory investigations on FTX and reports of internal FTX funds mismanagement.

FTX then paused withdrawals of customer funds. There was already an $8bn shortfall.
SBF attempted a last ditch effort at raising funds but no offer of a bail-out was forthcoming.

Bankruptcy Filing

FTX and AR are now insolvent and SBF has filed for Chapter 11 bankruptcy protection.
They imploded in a wave of scuttlebutt and were brought down in truly exceptional circumstances.
The fallout of this is still unravelling and will most likely take a few months to sort out. Until then there will still be blood on the crypto streets so tread with caution. Brace yourselves for more bloodbath.
A lot of people lost loads of money on FTX. Here’s a Never leave your funds on an Exchange. Get a non-custodial wallet and move your funds there. Exchanges are centralized entities.

Wrap up

Naturally people will be more skeptical of crypto but this, in fact isn’t crypto problem.

This was caused by a few self- absorbed, irresponsible and incompetent individuals like SBF and CE running centralised entities engaging in blackbox-like business practices, mis-using customer funds to run opaque financial institutions under a cloak of invincibility with no oversight regulation.

These guys basically ran a huge fraudulent operation which could have gone undetected for a long time.

The system needs sanitization. Some regulation needs to be enforced to bring a semblance of order to the industry.

A lot of Nigerians lost money in this debacle and I truly sympathize with you if you did. These are truly extraordinary times.

At the end of the day nothing is wrong with crypto. It’s just a medium and a tool in the hands of nefarious individuals. Going forward though, always remember: Not your keys. Not your coins.

I round off with these words from CZ

Oluseyi Akindeinde is the Chief Technology Officer, Digital Encode.

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E-Financial

Cyberthreat: New Malware, Turns Phones into Tools for Card Fraud- Report

Published

1 day ago

August 15, 2026

Ebere Melum-Nwogbo

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Cybercriminals have developed a new Android malware that can turn victims smartphones into a bridge for stealing bank card information and carrying out contactless payment fraud, cybersecurity researchers have warned.

Cyberthreat: New Malware, Turns Phones into Tools for Card Fraud- Report

The malware, identified as WindRelay, operates in conjunction with a known remote-access trojan, SpyNote, to capture live information exchanged between a physical bank card and an Android phone via Near Field Communication (NFC).

NFC is the short-range technology that enables contactless payments when a bank card or smartphone is tapped against a payment terminal.

According to cybersecurity firm Group-IB, WindRelay was detected in the wild in August 2025 and has been used in a social-engineering scheme targeting victims in Czechia, Slovakia and Slovenia.

Meanwhile, the fraud begins with a phone call, text message or other communication in which criminals pretend to be bank officials.

The victim is persuaded to install an application, often personalised with the victim’s name, and once installed, SpyNote gives the criminal remote access to the phone and can silently install WindRelay, with the victim then tricked into placing a physical bank card against the infected smartphone, supposedly for identity verification, PIN change, or account resolution.

WindRelay reads the card’s NFC signals and sends the information in real time to another device controlled by the criminal, with such a device then imitating the victim’s card at a payment terminal or ATM, as the victim’s smartphone becomes a wireless bridge between the victim’s bank card and the criminal’s device.

Group-IB said it identified 23 WindRelay samples uploaded to VirusTotal between November 2025 and July 2026, with the malware samples impersonating financial institutions in Czechia, Slovakia and Slovenia.

Meanwhile, the development adds to existing concerns over the use of mobile devices in cybercrime and financial fraud in Nigeria.

In June, the Nigeria Computer Emergency Response Team (ngCERT) issued an advisory on IPIDEA malware and malicious residential proxy networks, warning that the malware could hijack consumers internet connections and use compromised devices as part of criminal proxy networks.

While the ngCERT advisory concerns a different malware and attack method, both incidents highlight a growing risk: ordinary smartphones and connected devices can be secretly turned into tools for cybercriminals.

This is particularly relevant as Nigerians increasingly rely on smartphones for mobile banking, digital payments and other financial services.

Consequently, cybersecurity experts have advised users not to install applications sent through unsolicited calls, text messages or links, especially when the sender claims to represent a bank, as users should also be suspicious of requests to place payment cards against smartphones for supposed account verification.

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E-Financial

SEC Clears Blockchain for Accelerated Regulatory Incubation Programme

Published

1 day ago

August 15, 2026

Chike Onwuegbuchi

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The Securities and Exchange Commission (SEC) has cleared additional Virtual Asset Service Providers (VASPs) for admission into its Accelerated Regulatory Incubation Programme (ARIP).

Among the newly cleared is BC Access Nigeria Limited (Blockchain), marking an important step in the company’s long-term commitment to Nigeria and its broader expansion across Africa.

Nigeria is one of Africa’s most important digital asset markets, where crypto increasingly plays a practical role in how people access, hold and move.

Value Admission into ARIP means Blockchain has satisfied the SEC’s initial requirements to participate in the programme and is authorised to operate within its defined sandbox scope, subject to the Commission’s ongoing compliance obligations, testing parameters, and regulatory conditions.

Through ARIP, Blockchain can work directly with the SEC as the Commission evaluates digital asset business models, tests. appropriate safeguards and develops its long-term regulatory framework for the market.

Speaking, General Manager for Africa, Blockchain, Owen Odia, said: “Nigeria is one of Africa’s most important digital asset markets and participating in the SEC’s ARIP is an important step forward in our long-term commitment to the country.

“The programme gives us the opportunity to work directly with the SEC in a controlled environment, bring our global experience to the Nigerian market and help support a framework that protects consumers while enabling responsible innovation. We appreciate the SEC’s proactive approach and look forward to contributing to a safe, transparent and well-regulated digital asset ecosystem.”

Blockchain’s participation in ARIP forms part of a broader global strategy to engage constructively with regulators and build within established regulatory frameworks.

Over the past year, Blockchain has secured several formal licenses and registrations globally, including the UK Financial Conduct Authority (FCA), EU Markets in Crypto-Assets (MiCA), and Cayman Islands Monetary Authority (CIMA) Virtual Asset Service Provider (VASP) License. Participating in Nigeria’s ARIP sandbox builds on that experience, bringing global standards in compliance, security and consumer protection to its local operations.

For Blockchain, ARIP provides a structured environment to test services for the Nigerian market, strengthen consumer protections and work directly with regulators and local stakeholders.

The company sees Nigeria as an important market in its African strategy, with strong existing demand for digital assets and an increasingly clear regulatory pathway for responsible operators. The company’s strategy materials specifically identify Nigeria as an important market for its African expansion.

ARIP was established by Nigeria’s SEC as a controlled regulatory sandbox for VASPs and fintech innovators. The programme allows the SEC to observe live applications of digital asset technologies, study operational risks, and establish tailored investor protection and anti-money laundering (AML) standards before final regulatory rules are codified.

Blockchain is pleased to participate in ARIP as we work alongside regulators to support responsible innovation, consumer protection and market integrity.

Founded in 2011, Blockchain is one of the world’s longest-standing digital asset companies with more than 95 million wallets, more than 44 million confirmed accounts and over $1.2 trillion processed.

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E-Financial

Leadway Unveils Multi-generational Insurance Plan for Nigerian Families

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1 day ago

August 15, 2026

Chike Onwuegbuchi

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Leadway Assurance has unveiled the Leadway Lifetime Plan, a one-of-a-kind whole-of-life insurance solution designed to extend financial protection beyond the immediate household to the wider family circle.

The newly introduced plan unveiled at a press briefing in Lagos reinforces Leadway’s commitment to building lasting financial security, preserving wealth, and delivering meaningful, long-term protection for the people who matter most.

The Leadway Lifetime Plan responds to the increasingly complex financial responsibilities faced by many working adults, particularly members of the Sandwich Generation individuals who simultaneously provide financial support for ageing parents while raising children and planning for their future.

With family responsibilities now extending beyond the traditional nuclear household, the Leadway Lifetime Plan is designed to offer broader, long-term protection that reflects the realities of modern Nigerian families.

Speaking on the new insurance plan, Olufunmilayo Amanwa, executive director, Technical & Operations, Leadway Assurance, said the product reflects the insurer’s recognition that family structures and financial responsibilities are evolving, and that insurance solutions must evolve with them.

“Financial responsibility no longer stops at the nuclear family. Today, one individual may be supporting children, a spouse, ageing parents, and in some cases, parents-in-law or siblings, all at once. That reality demands a different approach to protection.

The Leadway Lifetime Plan was built around this reality. It gives customers a way to extend continuous protection to the extended family, ensuring the people who depend on them are covered, while also delivering meaningful benefits to policyholders within their own lifetime. This is the Leadway way, designing solutions that respond to how people actually live, not recycling old products with new names”

Beyond traditional life protection, the Leadway Lifetime Plan incorporates a range of living benefits designed to provide financial support during critical stages of life.

Following five years of complete premium payment and subject to the policy terms, the policyholder and spouse may access up to 50 per cent of their current sum assured upon diagnosis of a covered critical illness. This benefit can provide valuable financial support at a time when a serious health event may place pressure on income, savings and overall household stability.

The plan also provides greater long-term financial flexibility. Eligible policyholders may access up to 50 per cent of the policy value for significant life goals after the premium payment term plus five years, subject to applicable policy conditions.

While Leadway’s existing Family Benefit Plan provides family-focused whole-life protection, the Lifetime Plan has been developed as a more expansive, multi-generational solution that combines lifelong protection with financial value that can be accessed during the policyholder’s lifetime.

Explaining the thinking behind the product, Rosetta Aryeetey, head, Life Underwriting and Life Business, Leadway Assurance said the solution was developed around the changing needs of customers. “The starting point for the Leadway Lifetime Plan was the customer.

We looked closely at how families are structured Today, how financial responsibilities are shared and the challenges customers face when they are responsible for several generations at the same time. What emerged was a need for a solution that does more than pay a benefit after death. Customers need protection for the people who depend on them, but they also need support when critical life events occur and flexibility as their financial priorities evolve.”

She added that the combination of multi-life protection, living benefits, long-term value and flexibility makes the Lifetime Plan relevant across different stages of a customer’s financial journey.

The plan also offers flexibility to enhance financial protection over time through an Escalation of Sum Assured feature. This allows customers to increase their benefits by a fixed percentage, giving them the flexibility to align their level of protection with their evolving financial needs and circumstances.

With the launch, Leadway Assurance is reinforcing its commitment to developing insurance solutions that respond to real-life needs while helping families build resilience, preserve financial stability and create lasting legacies.

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