Crypto exchange FTX filed for bankruptcy

Sam Bankman-Fried, the founder of the trading platform, who was investigated by the SEC, resigned as CEO

 

Cryptocurrency exchange FTX announced on its Twitter page (the network is blocked in Russia) about filing for bankruptcy. According to the report, FTX Trading Ltd., Alameda Research and 130 other affiliated companies have begun voluntary proceedings under Chapter 11 of the U.S. Bankruptcy Code. The procedure will allow the companies to get protection from creditors' claims during business reorganization and debt restructuring.

 

At the same time, it was announced that Sam Bankman-Fried is stepping down as CEO of the platform. John Ray III has been appointed as the new CEO.

 

Needs up to $8 billion to save business and customer funds

 

The precipitous collapse of one of the largest crypto exchanges began in early November after a CoinDesk investigation revealed that most of the assets of FTX-affiliated company Alameda ($14.6 billion) were FTT tokens. The venture capital giant appeared to be backed by coin issued by its own subsidiary instead of independent assets such as fiat currencies or other cryptocurrencies with good collateral.

 

Following this news, Binance CEO Changpeng Zhao announced that his company intends to sell its existing FTT tokens. Immediately thereafter, the coin's exchange rate dropped 23%, followed by a surge in FTX withdrawals. Bankman-Fried confirmed that about $6 billion in various cryptocurrencies were withdrawn from the platform in just 72 hours.

 

As a result of the resulting liquidity crisis, Bankman-Fried was forced to turn to Zhao for help. The Binance platform considered buying FTX, but after a due diligence review and amid news of misuse of client funds, the largest cryptocurrency exchange decided it would not buy FTX.

 

FTX CEO Bankman-Fried told investors that his company could need up to $8 billion to bail out its business and customer funds. After the rejection of Binance, he continued to search for a solution and sought help from the U.S. cryptocurrency exchange Kraken, as well as the founder of the blockchain Tron and one of the heads of the exchange Huobi Justin Sun, but did not achieve positive results.

 

At the same time, on November 10, it was revealed that Bankman-Fried secretly covered Alameda's losses with funds from FTX clients. He used for this purpose at least $4 billion from the funds of the exchange.

 

The Securities and Exchange Commission (SEC) launched an investigation into Sam Bankman-Fried and the Bahamas Securities Commission has frozen the funds of FTX Digital Markets, which is the operator of the FTX crypto exchange. Stablecoin issuer Tether also blocked 46 million USDT in its wallet.

 

"The cryptocurrency flight will continue."

All FTT token holders can't expect to receive funds - that's out of the question, the head of AMarkets' analytics department believes. He called what happened to FTX "the collapse of another pyramid", which was held only on the faith of investors in the growth of new digital assets.

 

"The bubble burst. Because of the problems of this platform, the capitalization of the entire crypto market decreased by 24%, and the panic of investors will further enhance this effect - the flight from cryptocurrencies will continue," warned the expert. "This has been warned about more than once. And the largest investors (both private and institutional) have long started to go into cash, treasuries and gold," Deyev concluded.

 

The ENCRY co-founder suggested that FTX may now issue some sort of debt token that could be offset over time. Such a token could act as a promissory note that the exchange will try to repay customers.

 

"For the crypto market, FTX's bankruptcy is a worsening of the investment climate, another blow to the credibility of the crypto industry and likely a trigger for further declines that were already expected due to macroeconomic factors such as high inflation and key rate hikes in the US and Europe. Well now we should not wait for a new bullish cycle until the summer of 2023," - predicted the expert.

 

The rate of bitcoin is unlikely to rise in the next six months, agreed a senior analyst at Bestchange. He added that the hardest hit companies, in one way or another related to the business of FTX. These are Binance, Coinbase, Robinhood and some other investors or companies servicing the crypto exchange business, like Tether and Circle.

 

"FTT holders will likely get a chance to lock in their losses at not so catastrophic prices, after a short technical correction that may occur in the coming days. However, the outlook is negative on the future of both FTT holders and exchange clients. The miracle is unlikely to happen, all potential "saviors", renounced their involvement in the business of FTX and do not plan to save the exchange on current conditions "

 

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