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Date : July 16, 2024
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$32 billion crypto exchange FTX collapses; CEO resigns

$32 billion crypto exchange FTX collapses; CEO resigns

(NewsNation) — Short billions of dollars, embattled cryptocurrency exchange FTX has filed for bankruptcy, and its CEO has resigned.

FTX sought bankruptcy protection after experiencing the crypto equivalent of a bank run.

Hailed as the next Warren Buffett by Fortune, Sam Bankman-Fried, former CEO of FTX, was once the “golden boy” of crypto, and worth billions of dollars. As of last Monday, he was among the top 100 richest people in the world — but that’s been wiped out in just days.

Bankman-Fried wrote in a tweet that he was still “piecing together” what happened at FTX.
“I was shocked to see things unravel the way they did earlier this week,” he wrote. “I will soon write up a more complete post on the play-by-play.”

The troubles came to light last week when rival crypto firm Binance swooped in to rescue FTX. However, Binance then pulled out and liquidated all their holdings in the exchange.

“It’s just the biggest crash there’s ever been in crypto,” Frances Coppola, an independent financial and economic commentator said. “We don’t yet know exactly how widespread the damage will be in crypto, but it’s already causing significant sell-offs in major cryptocurrencies and there will be more bankruptcies and more failures to come because of it.”

The Securities and Exchange Commission and the Justice Department are investigating, according to the Wall Street Journal.

The focus of the investigation is reportedly centered on whether FTX used customers’ deposits to fund investments at Alameda Research, possibly mixing client funds with company assets, which is regulated against in most securities markets.

John Ray is now the restructuring officer and CEO of FTX. He’s the person who helped clean up the mess after the collapse of Enron, an energy corporation that filed for bankruptcy in 2001.

An earlier tweet he wrote says “unauthorized access to certain assets has occurred” — or in other words, they had been hacked — but added that the company is in the process of freezing all assets.

Exactly how much money is involved is unclear. The Associated Press reported that analytics firm Elliptic estimated Saturday that $477 million was missing from the exchange. Another $186 million was moved out of FTX’s accounts, although Elliptic’s co-founder and chief scientist Tom Robinson said this may have been FTX moving assets to storage, according to the Associated Press.

Social media users debated whether the exchange was really hacked, or if a company insider had stolen funds — which is one possibility that analysts couldn’t rule out.

The sudden disintegration of FTX, valued at $32 billion as of last week, suggests that no company or investor is completely safe in the largely unregulated world of cryptocurrency.

Some big-name celebrities were invested — NFL quarterback Tom Brady and ex-wife model Gisele Bundchen, the Golden State Warriors’ Steph Curry, former NBA star Shaquille O’Neal and Kevin O’Leary of “Shark Tank” fame.

O’Leary disclosed that he is even a paid spokesperson for FTX.

In the past, he said he was a big advocate for Bankman-Fried because his parents are compliance lawyers.

“If there’s ever a place I am not going to get in trouble, its gonna be at FTX,” O’Leary has said previously.

Investor documents also show that Blackrock, the largest money manager in the country, is invested, as is Sequoia Capital — one of the biggest funds in Silicon Valley. In a letter to its investors, Sequoia said it now considers its $213 million investment in FTX “worthless.”

“There’ll clearly be some impact on Wall Street, because we know that there are Wall Street investors involved,” Coppola said. “But for me, the bigger issue is the impact on ordinary people who have invested in this thing, of whom there are thousands,and a lot of them stand to lose a significant amount of money, and that will hurt them.”

The Associated Press contributed to this report.

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