FTX, a crypto exchange, has filed for bankruptcy in the U.S., a move that has led to the loss of nearly $10 billion of customer funds. According to FTX's founder, the company needs at least $8 billion to protect the crypto assets of its users. He says that the market will face a similar crisis to the one that happened in 2008.
FTX filed for bankruptcy in the U.S. after rival Binance backed out of a merger
FTX, the third-largest crypto exchange, filed for bankruptcy after rival Binance walked away from a deal to acquire it. The company said it had liabilities of $10 billion to $50 billion, and a liquidity crunch was putting it in jeopardy. FTX sought bankruptcy protection after its customers started withdrawing funds at a rapid pace, leaving the exchange short of capital.
FTX has a long list of backers, including Sequoia Capital, BlackRock, SoftBank Group Corp. and Tiger Global Management. But these investors are unlikely to be the ones to save the company.
FTX is incorporated in Antigua. Its assets and liabilities are spread over 130 affiliated companies. The company has more than 100,000 creditors, with a potential shortfall of $8 billion.
FTX has been under investigation by the Securities and Exchange Commission and the Department of Justice. It was under review for possible manipulation of customer funds. It is also looking for funding from investors. The company says it has been forced to seek a new buyer, and it will have to look at a number of scenarios to make up the shortfall.
FTX CEO Sam Bankman-Fried is known to spend millions of dollars on endorsement deals. But he has lost his billionaire status in just two days. Bankman-Fried's crypto empire also includes a trading firm, Alameda Research.
FTX has a few white knights, including Sequoia Capital, which has invested in FTX and its sister firm, Third Point. But they are unlikely to be able to save the exchange.
FTX's founder warns crypto market faces 2008-style crisis
FTX, a crypto exchange, filed for bankruptcy protection last week. Its assets are between $10bn and $50bn, according to its filing. It also had about 100,000 creditors. The Securities and Exchange Commission is investigating FTX and reportedly considering a criminal probe.
FTX was one of the world's largest crypto exchanges. It was also associated with big names like Tom Brady, Tony Blair and Bill Clinton. It was a popular investment for mega investors. FTX also bailed out struggling crypto broker Voyager Digital.
Its chief executive, Sam Bankman-Fried, has been a public face of FTX. Bankman-Fried graduated from MIT with a physics degree. He is the son of Stanford University law professors. His business empire was built on tapping into FTX customer funds. He needed $8 billion to cover withdrawals, which were happening at an ever-increasing rate.
The FTX meltdown is spreading to other crypto exchanges. FTX's main international exchange had $9 billion in unbacked liabilities. Its Australian arm has been put into administration. Its US platform has warned trading may be suspended in the near future. Its US platform has also warned customers not to make new deposits.
The FTX group includes about 130 businesses, which are tied together by contractual agreements. Its parent company is based offshore, and the regulators have said they could not do much to protect the company.
FTX's chief executive was interviewed by police as part of the investigation. He apologised for communications. He also apologized for his financial calculations. His numbers did not add up, but he downplayed the problems he faced. He said he had tried to resolve the issues with existing investors.
FTX loaned $10 billion of customer funds to Alameda to invest
FTX has entered bankruptcy protection after experiencing a liquidity crisis due to a surge in customer withdrawals. The company owed more than $10 billion to its sister firm Alameda, according to two people familiar with the matter. This came as the company was under investigation by the Securities and Exchange Commission and the Justice Department.
Bankman-Fried, who founded both FTX and Alameda, has been under scrutiny for his involvement in the collapse of the crypto exchange. He was also accused of using his company's assets to help other crypto firms that were struggling in the market. Bankman-Fried also received personal loans from Alameda. He had a 75% share of the company, according to one person familiar with the matter. During Bankman-Fried's reign, Alameda was known for its aggressive trading strategies. It had more than $13 billion in assets on Sept. 30, but owed $1.5 billion to other financial firms.
FTX's chief executive Sam Bankman-Fried told an investor this week that Alameda owed FTX $10 billion. He said that the money was transferred from FTX to Alameda to help the exchange cover its liabilities. But two people familiar with the matter say that the money has since disappeared.
A CoinDesk article published on Nov. 2 suggested that Alameda's balance sheet may have been inaccurate. Alameda's holdings were mostly made up of its FTT token. That token was supposed to be used for trading activities, but the company used it as collateral for loans.
FTX believes co-founders and other insiders may have further information about additional crypto wallets
FTX, a multi-billion dollar crypto exchange, filed for bankruptcy last week after an attacker stole $663 million in cryptocurrencies from its wallets. The exchange had a black box database that allowed users to deposit and withdraw funds using wire transfers, and offered futures contracts and leveraged tokens.
The exchange has since moved its customer funds into offline wallets. In addition, FTX has contacted dozens of international financial regulators to try to recover the missing funds. The company is also in talks with law enforcement.
FTX was one of the largest CEXs (centralized exchanges) in the world. It offered leveraged tokens, spot markets, and futures contracts. It also provided nine fiat currencies to users. Its balance sheet showed $900 million in assets and $9 billion in liabilities. Its top 50 creditors are estimated to be almost half of its total creditors.
FTX's main competitor, Binance, reportedly has significant exposure to FTX, according to the Wall Street Journal. Binance's head also announced plans to form a global industry body.
The exchange's balance sheet showed a mess of entries, which could indicate a problem. The exchange had $9 billion in liabilities, and owed almost half that amount to its top 50 creditors. But the report is unclear on how much of the missing funds are actually owed to customers.
FTX's balance sheet also showed a significant amount of money owed to the Ontario Teachers' Pension Plan. The OTP invested $95 million in FTX.
FTX's assets in the Bahamas have been transferred to Delaware
FTX's assets in the Bahamas have been transferred to Delaware. FTX's assets in the Bahamas were seized by the Bahamas Securities Commission in November, after the company filed for bankruptcy protection in the United States. The Securities Commission used powers under the DARE Act to order assets to be transferred to government-controlled wallets.
FTX's assets in the Bahamas are managed by court-appointed liquidators. FTX has claimed in its filings that it has between $10 billion and $50 billion in liabilities. But FTX said its assets in the Bahamas were seized improperly, which puts the request by Bahamian regulators for recognition as liquidators in doubt.
In response to the Bahamian liquidators' complaint, FTX filed a motion to have its case heard in Delaware. It said it had evidence that the assets were improperly seized. The company also asked the judge to sign off on payments to employees and vendors. It said it hoped to engage in a "constructive" dialogue with the liquidators.
Lawyers representing the Bahamian liquidators have questioned whether the Chapter 11 proceedings in the United States are valid. They have also argued that FTX could not file bankruptcy in the United States. FTX has also criticized the liquidators' claims. FTX has argued that Bankman-Fried worked with Bahamian regulators to "undermine" the U.S. bankruptcy case.
FTX officials say Bankman-Fried ran the company as a personal fiefdom. They said he spent $300 million on luxury real estate. They also accused him of pillaging resources from the company. The company owes creditors $3.1 billion.
FTX needs $8 billion to back up its users' crypto assets
FTX, the crypto exchange that has thrown the crypto world into turmoil, filed for bankruptcy on Friday. According to court documents, the company owes more than three billion dollars to 50 creditors.
The company's balance sheet showed a big chunk of its venture portfolio had changed. It had $9 billion in liabilities and $900 million in assets. The company has hired restructuring administration firm Kroll to track claims against it.
The company also hired crypto custodian BitGo, which has a history of recovering funds. It estimates the amount of assets it has recovered to be more than $1 billion. FTX has been paying BitGo a monthly retainer of $100,000.
According to the FTX filing, the company is working with dozens of international financial regulators. It's also undergoing a criminal investigation in the Bahamas.
FTX chief Sam Bankman-Fried told investors that he would use personal wealth to help make their money whole. However, he didn't raise the funds he said he needed in time.
Bankman-Fried also denied reports that he had fled to Argentina. His lawyer did not respond to CNN Business' request for comment. Bankman-Fried said he was living in the Bahamas with nine other colleagues.
Bankman-Fried also said he would spend a week raising funds to cover user deposits. However, FTX has suspended withdrawals. According to Bloomberg, FTX has a liquidity shortfall of $8 billion. The company owes billions of dollars to customers.