FTX collapses and files for bankruptcy
FTX collapses and files for bankruptcy
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NY: FTX went from the third largest cryptocurrency exchange in the world to bankruptcy court in less than a week.
After experiencing the virtual equivalent of a bank run, the troubled cryptocurrency exchange, worth billions of dollars, filed for bankruptcy.

On Friday morning, FTX, hedge fund Alameda Research and several other associated businesses filed bankruptcy petitions in Delaware. The company also filed for bankruptcy, even though FTX US was not originally anticipated to be part of any financial rescue.

The company's CEO and founder Sam Bankman-Fried has resigned, it was announced. Bankman-Fried, whose net worth was recently estimated at $23 billion, has long supported Democrats in politics.

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According to Forbes and Bloomberg, which closely track the net worth of the world's richest people, their net worth has virtually disappeared.

"I was shocked to see him play the way he did earlier in the week," Bankman-Fried said in a series of tweets.

The opening of FTX is having an effect. Businesses supporting FTX are already writing off their investments. There is a growing demand among politicians and regulators for tighter regulation of the cryptocurrency industry.

 And the price of bitcoin and other digital currencies has been under pressure as a result of this recent crisis. According to CoinMarketCap.com, the market capitalization of all digital currencies decreased by about $150 billion last week.

FTX's failure goes beyond money. Major League Baseball, Formula One racing, a sports arena in Miami, and other major sporting events were all sponsored by the company. Mercedes announced that starting this weekend, FTX will no longer be used in its race cars.

Former BuzzFeed editor-in-chief and New York Times columnist Ben Smith founded the high-profile news startup Semaphore. FTX, Bankman-Fried and his brothers were also early investors in the company.

Bankman-Fried has other issues, too. According to a source with knowledge of the situation, the Department of Justice and the Securities and Exchange Commission are investigating FTX to see if any criminal activity or securities offenses have occurred.

The person spoke to The Associated Press under the condition of anonymity because they were unable to publicly discuss details of the investigation.

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The focus of the investigation is FTX's possible use of customer deposits to fund bettors at Alameda Research. Brokers are required to keep client funds separate from other company assets in traditional markets. Regulators have the power to punish violations.

When MF Global commingled client assets with its own stakes about a decade ago, the financial institution effectively failed. FTX listed over 130 affiliated companies spread across the globe in its bankruptcy filing.

The company estimated the value of its liabilities to be between $10 billion and $50 billion. John Ray III, a veteran bankruptcy litigator known for cleaning up the mess left after the collapse, was hired as the company's new CEO.

The bankruptcy of FTX will undoubtedly be one of the most challenging in recent memory. It will take months to determine who is owed what because the company lists more than 100,000 creditors in its filing and all of its customers are actually creditors because they deposited their money with FTX.

This is because the company has listed over 100,000 creditors. Since there is no legal protection for cryptocurrencies, politicians from both parties have come out against any Lehman Brothers-style bailouts for crypto investors.

According to Daniel Besikoff, partner at Loeb & Loeb LLP, who specializes in bankruptcy law, "These clients are completely exposed, unlike a case where (securities insured in failure of the brokerage) or where the FDIC steps in with the bank." Failure."

After experiencing the crypto equivalent of running a bank, FTX decided to sell itself to larger rival Binance earlier this week. Customers left the exchange when they wondered whether FTX had enough capital.

The crypto community was hoping that Binance, the world's largest cryptocurrency exchange, might be able to rescue FTX and its depositors. After reviewing FTX's financial records, Binance concluded that the problems facing the smaller exchange were insurmountable, and it withdrew from the agreement.

With prices plunging and financial regulators scrambling, FTX is just the latest in a string of catastrophes that have rocked the cryptocurrency industry. The entire cryptosphere is already feeling the effects of its failure.

Venture capital firm Sequoia Capital announced Thursday that it is writing down its total investment in FTX totaling approximately $215 million.
Cryptocurrency lender BlockFi tweeted late Thursday that the FTX collapse has prevented it from conducting business as usual and forced it to freeze customer withdrawals.

BlockFi, which was saved by Bankman-FTX Fried's early last summer, said it was "shocked and dismayed" by the news involving FTX and Alameda in a letter that was posted to its Twitter account late on Thursday.

In its final statement, the company promised that any upcoming updates "will be less frequent than what our clients and other stakeholders are used to."

After the letter was published, bitcoin fell and is now trading under $17,000. Before this week's disclosure of FTX's issues, when the original cryptocurrency had been circling around $20,000 for months, bitcoin briefly fell to around $15,500.

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Shares of the online trading platform Robinhood and the publicly traded cryptocurrency exchange Coinbase both increased by almost 12%.

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