Crypto giant FTX collapses into bankruptcy

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Image Source: PBS

In the US, the troubled cryptocurrency exchange FTX has asked the court for protection while it looks for a way to give customers their money back.

The company said that Sam Bankman-Fried, who used to be the boss, has also quit as CEO.

The 30-year-old was in charge of the second-largest cryptocurrency exchange in the world, so this was a massive change in his luck.

In a little more than a week, his FTX empire fell apart, which shook people’s faith in the already troubled crypto market.

Before the crash, Mr. Bankman-Fried was one of the most well-known people in the cryptocurrency world. His net worth was thought to be over $15 billion (£12.8 billion) as recently as Monday. He was compared to Warren Buffett.

But earlier this week, there were rumors that Mr. Bankman-companies, Fried’s, including FTX, were not financially well. Because of this, people tried to get their money out of FTX. Whichhich is an exchange for buying and selling digital tokens.

Mr. Bankman-Fried tried to set up a bailout when he ran out of money, but it didn’t work. Because of this, FTX had to scramble to raise billions of dollars, and many customers needed help to get to their money.

Why file for bankruptcy?

If the company files for Chapter 11 bankruptcy, it can keep running while the court reorganizes its debts.

FTX said the goal was to “start a process to review and sell assets in a way that is fair to all global stakeholders.”

In the filing, FTX said that its assets and debts were worth between $10 billion and $50 billion. And that it owed more than 100,000 people money.

According to a statement that FTX posted on Twitter, the case involves both FTX and Alameda Research. Alameda is a trading company that Mr. Bankman-Fried started, and about 130 of their partners.

Mr. Bankman-Fried said Thursday that FTX’s operations in the US would not be affected.

Mr. Bankman-Fried said, “This doesn’t mean that the companies will no longer be able to give customers good value for their money.”

Pressure on other companies

Mr. Bankman-Fried was well-known in the crypto industry and elsewhere. He often defended the industry in front of government officials.

He gave a lot of money to the Democrats in the last US election. Also, he did a lot of advertising in the country and used famous people like Tom Brady and Gisele Bundchen to get people to invest in crypto.

Read Also: Bitcoin fell  to lowest value in two years 

But as he became more famous, people started to wonder how the different parts of his business empire fit together. And if FTX and Alameda might work toward different goals.

FTX has hurt the crypto market

His company’s problems have hurt the rest of the cryptocurrency market. This week, Bitcoin lost 20% of its value, and more pressure is being put on other companies to show they have enough money to stay in business.

This year, a sharp drop in the value of digital assets caused several companies in the sector to fail or come close to failing. For example, BlockFi, which has ties to FTX, stopped customers from taking money out of their accounts on Thursday because of the situation.

Even though there isn’t much regulation. Regulators have warned crypto investors for a long time about the risks and the possibility of a more significant financial crisis. This is because even though there isn’t much regulation, traditional financial companies invest more in the market.

Blackrock, Softbank, and the Ontario Teachers’ Pension Plan in Canada, a large investment firm, all backed FTX. Several financial authorities are looking into the company.

Mr. Bankman-Fried said the collapse was “on me.” But that won’t help the 1.2 million customers of FTX who could now lose their savings.

Mr. Culham said that what happened this week wouldn’t stop him from investing in more cryptocurrencies.