Collapse of crypto exchange FTX
The cryptocurrency exchange FTX has filed for bankruptcy and its chief executive, Sam Bankman-Fried, resigned, a downfall that has stunned crypto insiders and sent shock waves through the industry.
FTX is one of the world’s largest cryptocurrency exchanges. It enables customers to trade digital currencies for other digital currencies or traditional money, and vice versa. It is based in the Bahamas and was run by Mr. Bankman-Fried. It has spent millions of dollars lobbying U.S. legislators to institute crypto-friendly regulation.
The company had built its business on risky trading options that are not legal in the United States. The crypto industry overall has increasingly been the target of regulatory scrutiny in USA and across the globe.
The bankruptcy filing by the new FTX Chief Executive described numerous corporate missteps, including the use of software to “conceal the misuse of customer funds". Further, accuracy of financial statement is also suspected. On Nov. 2, the crypto publication CoinDesk reported on a leaked document that appeared to show that Alameda Research, the hedge fund run by Mr. Bankman-Fried, held an unusually large amount of FTT tokens, a native cryptocurrency token for FTX. Binance announced on Nov. 6 that it would sell its FTT tokens “due to recent revelations.” In response, FTT’s price plummeted and traders rushed to pull out of FTX. FTX scrambled to process requests for withdrawals, which amounted to an estimated $6 billion over three days. It seemed to enter a liquidity crunch, meaning it lacked the money to fulfill requests.
