FTX cryptocurrency exchange: The bankruptcy and its aftermath
According to its bankruptcy filing, FTX had valued its assets between $10 billion to $50 billion and listed more than 130 affiliated companies around the world
The collapse of cryptocurrency trading firm FTX, now short billions of dollars after a spectacular unravelling within a matter of a week, has shocked the crypto community.
FTX, which was one of the world’s largest crypto exchanges, filed for bankruptcy protection last week, and its CEO and founder Sam Bankman-Fried has resigned. FTX and dozens of affiliated companies — including Bankman-Fried’s hedge fund, Alameda Research — filed the bankruptcy petition in Delaware on Friday.
Also read: Sam Bankman-Fried: This crypto-billionaire mints money, then gives it away
The trading firm also said funds had disappeared and that there was “unauthorised access”. Experts fear that millions of dollars may have vanished.
Why bankruptcy?
Traders withdrew $6 billion from the platform in just 72 hours over fears that FTX had insufficient capital. Then rival exchange Binance abandoned a proposed rescue deal even as its due diligence on balance sheet was still pending.
According to its bankruptcy filing, FTX had valued its assets between $10 billion to $50 billion and listed more than 130 affiliated companies around the world.
The week’s developments marked a shocking turn of events for Bankman-Fried, who was recently estimated to be worth $23 billion and a major political donor to the Democrats.
His net worth has all but evaporated, according to Forbes and Bloomberg, which closely track the net worth of the world’s richest people.
Hacking or stealing?
After filing Chapter 11 bankruptcy protection, FTX said that there had been unauthorised access to its accounts. This sparked a debate on social media whether the firm was hacked or some insider stole the funds.
Exactly how much money is involved is unclear, but analytics firm Elliptic estimated on Saturday that $477 million was missing from the exchange, AP reported. FTX’s new CEO John Ray III said it was switching off the ability to trade or withdraw funds and taking steps to secure customers’ assets.
The Royal Bahamas Police Force said on Sunday that it was working with Bahamas securities regulators to “investigate if any criminal misconduct occurred” involving FTX, which had moved its headquarters to the Caribbean country last year.
Companies back off
Companies that backed FTX are writing down investments and politicians and regulators are calling for stricter oversight of the crypto industry.
The prices of bitcoin and other digital currencies have fallen — the total market value of all digital currencies dropped by about $150 billion in the last week, according to CoinMarketCap.com.
Also read: Crypto crimes on a record high this year: Over $3b stolen so far, $718m in Oct alone
FTX said on Saturday that it was moving as many digital assets as can be identified to a new “cold wallet custodian”, which is essentially a way of storing assets offline without allowing remote control.
FTX had entered into a number of sports-related deals, some of which are crumbling. The NBA’s Miami Heat and Miami-Dade County decided Friday to terminate their relationship with FTX, and will rename the team’s arena.
Earlier on Friday, Mercedes said it would immediately remove FTX logos from its Formula One cars.