FTX crypto swap files for bankruptcy



It took less than a week for FTX to go from the third largest cryptocurrency exchange in the world to bankruptcy court.

The beleaguered cryptocurrency exchange, strapped for billions of dollars, is seeking to protect itself from bankruptcy after the exchange experienced the crypto equivalent of a bank run. FTX, its affiliate hedge fund Alameda Research and dozens of other companies filed for bankruptcy in Delaware on Friday morning.

CEO and founder Sam Bankman-Fried has stepped down, the company announced. Bankman-Fried was recently estimated at US$23 billion and has been a major political donor to Democrats. His net worth has all but evaporated, according to Forbes and Bloomberg, which closely track the net worth of the world’s wealthiest people.

Bankman-Fried also has other problems. On Thursday, a person familiar with the matter said the Justice Department and the Securities and Exchange Commission are reviewing FTX to determine whether criminal activity or securities offenses have occurred. The person could not publicly discuss details of the investigation and spoke to The Associated Press on condition of anonymity.

The investigation centers on the possibility that FTX used customer 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 earlier this week agreed to sell out to its biggest rival Binance after experiencing the cryptocurrency equivalent of a bank run. Customers fled the exchange after worrying about whether FTX had enough capital.

The crypto world had hoped that Binance, the world’s largest crypto exchange, might be able to save FTX and its depositors. However, after Binance had a chance to review FTX’s books, it became clear that the smaller exchange’s issues were too big to fix and Binance pulled out of the deal.

FTX is the latest in a series of cascading disasters that have rocked the crypto industry, now under intense pressure from collapsing prices and surrounded financial regulators. Its failure also sends tsunami-like waves throughout the crypto universe.

Cryptocurrency lender BlockFi announced Thursday night on Twitter that it was « unable to conduct business as usual » and suspended customer withdrawals following the FTX implosion.

In a letter posted to its Twitter profile on Thursday evening, BlockFi – which was bailed out by Bankman-Fried’s FTX early last summer – said it was “shocked and dismayed by the news regarding FTX and Alameda.”

The company concluded by saying that any future communication about its status « will be less frequent than what our customers and other stakeholders are used to. »

Bitcoin fell immediately after the letter’s release, losing almost 5% before rallying above $17,000 overnight. The original cryptocurrency, bitcoin, had been hovering around $20,000 for months before FTX’s issues became public knowledge this week, briefly sending it to around $15,500.


Journalists Matt Ott and Michael Balsamo in Washington contributed.


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