FTX crypto exchange files for bankruptcy
The American crypto exchange FTX filed for Chapter 11 bankruptcy today following several days of turmoil amid a failed buyout. Founder and CEO Sam Bankman-Fried announced his official resignation yesterday. The cryptocurrency world has been severely shaken by the second-largest exchange collapsing.
In 2020, FTX was valued at only a few hundred million US dollars but skyrocketed to a US$1 billion valuation in 2021 and a whopping US$32 billion this year before its current collapse. The company had been in relatively good standing, though questions about CEO Bankman-Fried’s trading company Alameda Research holding 40% of their assets in FTT tokens, a cryptocurrency owned by FTX. Some feared a conflict of interest.
But the death knell for the crypto exchange came when Binance, the only bigger exchange announced earlier this week it would buy FTX, but then backed out just one day later (not dissimilar to crypto fan Elon Musk’s Twitter saga) causing a selloff frenzy.
Billions of dollars were sold, bankrupting the company nearly overnight. Unlike banks, which usually come with legal safety nets to protect investor money in a collapse, crypto exchanges have little-to-no safety nets in place to protect crypto holders.
Chapter 11 in the US lets a company undergo a court-supervised restructuring of its debt without completely shuttering its operations. FTX and its CEO both issued statements, with Bankman-Fried promising to do everything they could to raise liquidity. Bangkok Post reports that the FTX crypto exchange announced they have already begun their restructuring.
“[FTX has begun an] orderly process to review and monetize assets for the benefit of all global stakeholders.”
But many crypto investors saw billions wiped out in the FTX collapse and have no recourse to recoup losses. Bitcoin and other cryptocurrencies went into a freefall over the news. Binance even faced accusations of a sham takeover bid to drive their competitor into the ground, but Binance CEO Changpeng Zhao tweeted that FTX’s failure is not a win for his company. The collapse has shaken confidence in the entire crypto sector.
