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Wednesday, March 22, 2023

What Is Happening On The Failed Crypto Exchange FTX?

Imploding cryptocurrency trading company FTX is now short of billions of dollars after experiencing the crypto equivalent of a bank run.

The exchange, previously one of the world’s largest, filed for bankruptcy protection last week and its CEO and founder resigned. Hours later, the trading firm said there had been “unauthorized access” and the funds had disappeared. Analysts say hundreds of millions of dollars may be missing.

The unraveling of the once-giant exchange is sending shock waves through the industry. Here’s a look at the company’s collapse so far:

Customers fled the exchange fearing that FTX had enough capital, and it agreed to sell to rival cryptocurrency exchange Binance. But the deal fell through pending due diligence from Binance on FTX’s balance sheet.

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FTX had valued its assets at between $10 billion and $50 billion and listed more than 130 affiliated companies around the world, according to its bankruptcy filing.

FTX and dozens of affiliated companies, including CEO Sam Bankman-Fried’s hedge fund Alameda Research, filed for bankruptcy protection in Delaware on Friday.

This week’s events marked a surprising turn for Bankman-Fried, who was hailed as a savior earlier this year when he helped prop up a number of cryptocurrency companies that ran into financial trouble. He was recently estimated to be worth $23 billion and has been a prominent political donor to the Democrats.

FTX confirmed on Saturday that there was unauthorized access to its accounts, hours after the company filed for Chapter 11 bankruptcy protection.

A debate erupted on social media about whether the exchange was hacked or if funds had been stolen by a member of the company, a possibility that cryptocurrency analysts could not rule out.

It’s unclear exactly how much money is involved, but analytics firm Elliptic estimated on Saturday that $477 million was missing from the trade. FTX’s new CEO, John Ray III, said he was disabling the ability to trade or withdraw funds and taking steps to secure client assets.


The Royal Bahamas Police said on Sunday that it is investigating FTX, adding to the company’s woes. The police force said in a statement Sunday that it was working with Bahamas securities regulators to “investigate whether any criminal conduct occurred” related to the exchange, which had moved its headquarters to the Caribbean country last year.


Even before the bankruptcy filing and lack of funds, the US Department of Justice and the Securities and Exchange Commission began examining FTX to determine if any criminal activity or securities-related crimes were committed, according to a person familiar with the matter who spoke to The Associated Press last week. on condition of anonymity because they could not publicly discuss the details of the investigations.


The companies that backed FTX are reducing investments and the prices of bitcoin and other digital currencies have been falling. Politicians and regulators are calling for tighter oversight of the unwieldy industry. FTX said on Saturday that it was moving as many digital assets as can be identified to a new “cold wallet custodian,” which is essentially a way to store assets offline without allowing remote control.

Copyright 2022 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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