In other words, those 'VIPs' handed over real money to buy a purely digital token from FTX, and all that was the basis for making risky and speculative investments. On its website, Bankman-Fried's company referred to FTT as 'the backbone of the FTX ecosystem.' The company regarded token holders as VIPs.
They could also use the tokens as collateral. 'Like loyalty points for using the exchange.'Ĭustomers who bought FTT were able to execute trades on the company's exchange at a discount. 'I think of it like airline miles,' says Ariel Zetlin-Jones, who teaches economics at Carnegie Mellon University. The FTX Token was part of an elaborate, rewards-based marketing scheme to attract buyers. Like airline miles, the tokens rewarded customers but did little outside the company That spooked investors, and as word spread, the token's value cratered. Planet Money Sam Bankman-Fried and the spectacular fall of his crypto empire, FTXĪlthough it was a major moneymaker for FTX and helped keep Bankman-Fried's hedge fund afloat, in the end the FTX Token proved to be the company's undoing.Īfter an article in CoinDesk earlier this month raised questions about FTX's financials, Changpeng Zhao, the CEO of Binance, decided to offload his company's sizable FTT holdings.
