A cryptocurrency exchange has filed for bankruptcy.
FTX was until recently one of the world’s largest cryptocurrency exchanges. It was already short of billions of dollars when it sought Chapter 11 bankruptcy protection on Friday and its former CEO and founder, Sam Bankman-Fried, resigned.
The company had valued its assets at between 10 billion (£8.45m) to 50 billion dollars (£42.3m), and listed more than 130 affiliated companies around the world, according to its bankruptcy filing. The unravelling of the once-giant exchange is sending shockwaves through the industry, with companies that backed FTX writing down investments and the prices of bitcoin and other digital currencies falling.
Politicians and regulators are calling for stricter oversight of the unwieldy industry. Frances Coppola, an independent financial and economic commentator, said: “Cyrpto isn’t in the very early stages any more,” she said. “We’ve got ordinary people putting their life savings into it.”
FTX filed for chapter 11 bankruptcy protection on Friday (11 November). Here is all you need to know:
What is FTX?
FTX is an abbreviation of “Futures Exchange”. It is a cryptocurrency exchange, which is basically the digitalequivilant of the stock exchange - think the FTSE or Dow Jones.
Customers were able to trade cryptocurrencies or digital currencies for other assests. FTX had over one million users as of February 2022.
FTX also operated as FTX.US, a separate exchange available to US residents. It was backed by celebrities such as NFL legend Tom Brady, Golden State Warrior’s star Steph Curry and more.
Has FTX filed for bankruptcy?
Embattled cryptocurrency exchange FTX, short billions of dollars, is seeking bankruptcy protection following its collapse this week. FTX Trading said in a press release on Friday (11 November) that CEO and founder Sam Bankman-Fried has resigned.
FTX also said Mr Bankman-Fried’s Alameda Research hedge fund is among the entities filing for Chapter 11 in Delaware. On Thursday (10 November), a person familiar with the matter said the Department of Justice and the Securities and Exchange Commission were looking into FTX to determine whether any criminal activity or securities offenses were committed.
The person could not discuss details of the investigations publicly and spoke to The Associated Press on condition of anonymity. The investigation is centred on the possibility that FTX may have used customers’ deposits to fund bets at Alameda Research.
In traditional markets, brokers are expected to separate client funds from other company assets. Violations can be punished by regulators. FTX had agreed earlier this week to sell itself to bigger rival Binance after experiencing the cryptocurrency equivalent of a bank run.
Customers fled the exchange after becoming concerned about whether FTX had sufficient capital. The crypto world had hoped that Binance, the world’s largest crypto exchange, might be able to rescue FTX and its depositors.
However, after Binance had a chance to look at the books of FTX, it became clear that the smaller exchange’s problems were too big to solve and Binance backed out of the deal.
Can you withdraw money from FTX?
Collapsed cryptocurrency trading firm FTX has confirmed there was “unauthorised access” to its accounts hours after the US company filed for bankruptcy protection on Friday. The embattled company’s new CEO John Ray III said on Saturday that FTX is switching off the ability to trade or withdraw funds and taking steps to secure customers’ assets, according to a tweet by FTX’s general counsel Ryne Miller.
FTX is also coordinating with law enforcement and regulators, the company said. Exactly how much money is involved is unclear but analytics firm Elliptic estimated on Saturday that 477 million dollars (£403m) was missing from the exchange.
Another 186 million dollars (£157m) was moved out of FTX’s accounts but that may have been FTX moving assets to storage, said Elliptic’s co-founder and chief scientist Tom Robinson. A debate formed on social media about whether the exchange was hacked or a company insider had stolen funds, a possibility that cryptocurrency analysts could not rule out.
Who is the founder of FTX?
Born in March 1992, Sam Bankman-Fried is an American entrepreneur, investor and former billionaire. Following the collapse of FTX he has lost his status as a billionaire.
He founded FTX in 2019 with Gary Wang. He is also the founder of Alameda Research, a quantitative cryptocurrency trading firm.
In October 2022, he was estimated to have had a personal fortune of $10.5bn but as of 11 November Bloomberg Billionaires Index, following the bankruptcy filling, consider Bankman-Fried to have no material wealth.
He had emerged as a major donor for the Democrats in the United States. He had become the second-largest donor behind George Soros.