FTX a leading crypto exchange platform has filed for bankruptcy
FTX Trading Limited, a leading crypto exchange platform, has filed for bankruptcy.
Sam Bankman-Fried, founder and chief executive officer of FTX Cryptocurrency Derivatives Exchange, has stepped down as the company’s CEO following the filing.
The new CEO, John J. Ray, III was the lawyer brought out to clean up Enron.
What we know for now is that there are about 130 companies in this structure that might to be liquidated.
The effects have been far reaching with some exchanges halting FTX withdrawals and deposits.
This is a breaking story and we will update as more information becomes available.
The crypto market has been hit hard by the news of FTX filing for bankruptcy.
FTX is a leading crypto exchange platform that offers a wide range of features and services to its users.
Sam Bankman-Fried, the 30 year old has been a larger than life figure in the industry. He founded and managed the company’s assets through Alameda Research, a quantitative cryptocurrency trading firm he founded in October 2017.
Sequoia Capital the Venture Capital firm which invested $214 million in crypto exchange FTX Trading Ltd has said it will write down its investment.
Bitcoin just a few hours ago dipped below $16,414 on the news and many altcoins have seen double digit percentage losses.
When news of FTX troubles first surfaced a few days ago, the company’s then CEO Sam Bankman-Fried assured the public that FTX was fine and that customer deposits where fine.
It is now evident that was not the case and FTX was in deep trouble.
The speculation is that they leveraged their FTX token and some how loaned it to Alameda Research, who then went and leveraged it to go and invest which probably left a big hole in the balance sheet of Alameda Research which then couldn’t then repay the loan to FTX.
Other are saying that they might have lent out customer deposits to Alameda Research who provided the FTT token back to FTX as collateral so its an issue of FTX using customer deposits and not letting customers know that they were doing that and then lying about it.
The full effects of this bankruptcy are yet to be seen but it is sure to have far reaching implications for the crypto industry.
The fall of FTX comes a few months after another crypto currency terra luna collapsed with critics calling for more regulation in the industry.
With the news of yet another crypto exchange filing for bankruptcy, it is sure to raise more questions about the lack of regulation in the industry.
Some in the crypto community are saying that the fact that these entities are centralized shows the need for more decentralized entities in the crypto industry which rely on code rather than humans.
What is certain is that the crypto industry is in for a long road to recovery and this is likely to be just the beginning.
The main difference between the crypto and the regular financial ecosystem is that unlike traditional finance the market handles this kind of stuff and there are no bailouts like the 2008 financial crisis.
This could actually end up creating a healthier ecosystem because the bad actors get weeded out unlike traditional finance where the bad actors get a bailout and get bigger.
It is important to note that Alameda Research had a huge amount of Solana tokens with some estimates putting it at about 10% of Solana Tokens. It will be interesting to see how this will affect the Solana eco-system from a validation point of view and even a security point of view.
FTX was also pivotal in the Solana ecosystem and were early investors in multiple early Solana projects and were also a launch pad for multiple early projects and most of all they provided an exchange for Solana projects to get early liquidity.
A lot will depend on whether they are forced to sell these tokens or not and if they to sell the effect of that sale on the price of the Solana token and other tokens in the Solana ecosystem.
Galois Capital, a hedge fund whose founder is credited with spotting the collapse of cryptocurrency luna this year, has been caught off guard after close to half its assets were left trapped on crypto exchange FTX.