FTX, a cryptocurrency exchange company, has filed for bankruptcy in the United States and is seeking court protection as it looks for a way to refund users’ money.
The company stated in a press release on Friday, November 11, 2022 that Former boss, Sam Bankman-Fried, has resigned as chief executive. It further disclosed that the objective was to “begin an orderly process to review and monetize assets for the benefit of all global stakeholders”.
Earlier this week, customers rushed to withdraw their funds as rumours spread that FTX and other firms headed by Mr Bankman-Fried were becoming financially unstable.
Mr Bankman-Fried tried to organize a bailout, hoping to be bought by Binance, a rival, and one of the world’s biggest cryptocurrency exchanges but Binance walked away from the deal, leaving FTX struggling to raise billions of dollars.
The crypto world had expected that Binance, the world’s largest crypto exchange, might be able to rescue FTX and its depositors. However, after Binance had a chance to scrutinize 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.
“I’m sorry. I… should have done better,” Mr Bankman-Fried tweeted on Thursday, November 10, 2022. In little over a week, his FTX business has collapsed, plunging the wider cryptocurrency market into the dejection once more with the value of coins plummeting.
This week’s developments marked a shocking turn of events for FTX CEO and founder Sam Bankman-Fried, who was acclaimed as somewhat of a savior earlier this year when he helped shore up a number of cryptocurrency companies that ran into financial chaos.
Mr Bankman-Fried admitted that the downfall is on him but that will be little consolation to the potentially 1.2 million FTX customers who could now lose their crypto savings.
John J Ray III, a lawyer who formerly worked at a venture capital firm and has experience with bankruptcy, was named chief executive in Mr Bankman-Fried’s place. “The FTX Group has valuable assets that can only be effectively administered in an organised, joint process,” Mr Ray said in the statement.
US Authorities Investigate FTX
US Authorities investigate the firm for potential securities violations following its swift collapse.
The bankruptcy proceeding will involve FTX as well as Alameda Research, a trading firm founded by Mr Bankman-Fried, and roughly 130 affiliates, according to the statement FTX shared on Twitter.
On Thursday, November 10, 2022, a person who was acquainted with the matter divulged that the Department of Justice and the Securities and Exchange Commission were looking into FTX to ascertain if any criminal activity or securities offenses were committed. The person could not discuss details of the investigations openly and spoke on condition of anonymity.
The investigation is focused on the probability that FTX may have utilized customers’ deposits to fund bets at Alameda Research. In traditional markets, brokers are expected to separate client funds from other company assets and violations can be punished by regulators.
All eyes will turn now to the other major cryptocurrency exchanges. With FTX, the second largest going under, pressure will be mounted on the remaining companies to prove if they have the financial strength to survive.
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