What is happening with the bankrupt crypto exchange FTX?

Imploding cryptocurrency trading firm FTX is now missing billions of dollars after experiencing the crypto equivalent of a bank run.

The exchange, formerly one of the world’s largest, filed for bankruptcy protection last week and its CEO and founder resigned.

Hours later, the trading firm said there had been “unauthorized access” and funds had disappeared. Analysts say hundreds of millions of dollars may have disappeared.

The dissolution of the once gigantic exchange sends shock waves through the industry. Here’s a look at the company’s breakdown so far:

Bitcoin has already lost around 75 percent of its value in the last year.
Imploding cryptocurrency trading firm FTX is now missing billions of dollars after experiencing the crypto equivalent of a bank run. (Adobe Stock)

Customers fled the exchange fearing whether FTX had enough capital, and they agreed to sell themselves to rival crypto exchange Binance. But the deal fell through pending Binance’s due diligence of the FTX balance sheet.

FTX had valued its assets between A$15 billion and A$75 billion and listed more than 130 affiliated companies around the world, according to its bankruptcy filing.

In this photo illustration the FTX logo and mobile app ads seen on screens on November 10, 2022 in London, England.
In this photo illustration the FTX logo and mobile app ads seen on screens on November 10, 2022 in London, England. (Leon Neal via Getty Images)

FTX and dozens of related companies — including founder Sam Bankman-Fried’s hedge fund, Alameda Research — filed for bankruptcy in Delaware on Friday.

He was recently valued at $34 billion and was a prominent political contributor to the Democrats.

FTX confirmed on Saturday that unauthorized access to its accounts had taken place, hours after the company filed for Chapter 11 bankruptcy protection.

Debate erupted on social media over whether the exchange was hacked or funds were stolen by a company insider — a possibility cryptocurrency analysts couldn’t rule out.

The FTX logo appears on a home plate umpire's jacket at a baseball game with the Minnesota Twins on September 27, 2022 in Minneapolis.  Imploding cryptocurrency trading firm FTX is now missing billions of dollars after experiencing the crypto equivalent of a bank run.
The FTX logo appears on a home plate umpire’s jacket at a baseball game with the Minnesota Twins on September 27, 2022 in Minneapolis. Imploding cryptocurrency trading firm FTX is now missing billions of dollars after experiencing the crypto equivalent of a bank run. (AP Photo/Bruce Kluckhohn)

Exactly how much money is unclear, but analytics firm Elliptic estimated on Saturday that $713 million was missing from the stock market. FTX’s new CEO, John Ray III, said it was shutting down the ability to trade or withdraw funds and was taking steps to safeguard clients’ wealth.

People who own bitcoin should be okay with keeping them away from exchanges like FTX, which effectively operate as a “crypto casino gambling site,” said Cory Klippsten, the CEO of financial services firm Swan Bitcoin.

“Every exchange is a security risk,” said Klippsten. Some are more reputable than others, but he said a better option is to take control of your digital assets.

“Bitcoin gives you the ability to self-custody and de-exchange your coins,” he said.

Bitcoin crashes after losing nearly 15 percent in five days. (Google Finance)

Is FTX being studied?

The Royal Bahamas Police Force said Sunday it was investigating FTX, adding to the company’s problems.

Police said in a statement Sunday they are working with the Bahamas’ securities regulators to “investigate whether criminal wrongdoing has occurred” involving the exchange, which moved its headquarters to the Caribbean country last year.

Anyone else investigating?

Even before the bankruptcy filing and missing funds, the U.S. Department of Justice and the Securities and Exchange Commission began investigating FTX to determine whether it was engaged in criminal activity or securities crime, according to a person familiar with the matter who spoke to The Associated last week Press spoke on condition of anonymity because they could not publicly discuss details of the investigation.

What are the effects?

Companies that backed FTX are writing off investments, and Bitcoin and other digital currency prices have fallen.

Politicians and regulators are calling for tighter oversight of the sluggish industry.

FTX announced on Saturday that it is moving as many digital assets as possible to a new “cold wallet custodian,” which is essentially a way to store assets offline without allowing for remote control.

FTX had closed a number of sports-related deals, some of which are crumbling.

The NBA’s Miami Heat and Miami-Dade County decided on Friday to end their relationship with FTX and rename the team’s arena.

Earlier on Friday, Mercedes announced that it would immediately remove FTX logos from its Formula 1 cars.

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