FTX cryptocurrency exchange files for bankruptcy: what is FTX and what happened?


Fighting cryptocurrency exchange FTX has filed for Chapter 11 bankruptcy and its CEO has resigned after a collapse in the value of its associated cryptocurrency left a $7 billion is missing in corporate finance.

CEO and founder Sam Bankman-Fried has lost his entire $16 billion fortune overnight according to Bloomberg analysis, one of the greatest destructions of wealth of all time. While all of this was wealth speculation given that it was all done in ostensibly his own cryptocurrency, it marks a dramatic fall from grace for a young crypto investor who just this summer rubbed shoulders with Bill Clinton and Tony Blair, former US president and former British prime minister. respectively.

A Chapter 11 bankruptcy filing, filed in Delaware, is basically a restructuring led by the court, The court is then tasked with finding a way to pay creditors. Since the company is believed to be worthless could lead to the liquidation of FTX while the filing also prevents lawsuits from creditors against Bankman-Fried.

On the news the value of Bitcoin fell sharply to less than $14,300, the lowest value since December 2020.

How did we get here?

FTX suffered a severe liquidity crisis following the collapse in the value of its associated crypto coin, called FTT. It was reported that Bankman-Fried used the coin as collateral to raise loans for FTX as well as its sister hedge fund Alameda. Therefore The value of both these companies were both inextricably linked to the value of FTT.

Last Sunday, FTX competitor Binance announced the sale of all its FTT holdings worth $500 millionThis killed the value of FTT as investors rushed to sell their investments, further hurting the value of both FTX and Alameda.

struck by panic Bankman-Fried reached out to Binance CEO Changpeng Zhao in hopes of selling the company to him. A proposed deal on Tuesday between the two was supposed to resolve the crisis, but Binance abandoned the deal a day later.

Binance said in a statement published on Twitter that the problems with FTX were “beyond our control or ability to assist”.

Rumors are swirling about misuse of investor funds from FTX. That The Wall Street Journal writes that FTX had loaned $10 billion in customer funds to Alameda to invest, leaving both companies at risk of grave danger if the investments went bad or their value collapsed, which it did.


Source link

Leave a Comment