The company’s founder, president and CEO, Sam Bankman-Fried, also resigned, the company announced. About 130 other companies related to FTX, including Bankman-Fried’s investment firm Alameda Research, have also filed for voluntary Chapter 11 bankruptcy proceedings, the company said. It’s the latest development in a whirlwind week for the company, which in a matter of days went from being one of the world’s largest cryptocurrency trading platforms with $16 billion in assets to bankruptcy, frozen customer accounts, regulatory and legal investigations and outcries of fraud.
“Black eye” for encryption
In a court filing, Alameda lists liabilities in excess of US$10 billion. On the company’s balance sheet, more than $4 billion of the company’s assets are made up of something called FTT, which is a cryptographic token created by FTX. This time last week, one FTT token was worth about US$80. On Friday morning, they were changing hands for about $3. That’s a major red flag, says Charley Cooper, a former managing director with the commodities regulator the CFTC, because it means the company is “valuing itself on something it invented.” “The first problem is that a lot of their balance sheet was in the token itself that they created, which nobody really knew what it was worth,” he said. Cooper calls the FTX saga a “black eye” for crypto and shows how it is essentially far more dangerous than the conventional financial system. “This industry has a lot of exposure to itself. You have a group of entities within an ecosystem trading with each other, holding positions in each other’s crypto tokens. Money is moving back and forth quite often and also drawing in various different retail customers , which creates a reputational problem if one of them goes down,” he said. The fall of FTX is just the latest fall of a major crypto platform. Earlier this year, crypto firm Celsius folded after the value of some so-called stablecoins plummeted and the exchange was unable to process the deluge of withdrawal requests from customers. “I think you’re going to see a more aggressive push in the wake of the FTX collapse with these regulators trying to negotiate a claim,” Cooper said. Bankman-Fried, the founder of FTX, has emerged in recent years as one of the faces of crypto, appearing at glitzy events alongside celebrities such as Bill Clinton and supermodel Gisele Bundchen. The only advantage of FTX insolvency: Gisele Bündchen, who kept all her money in FTX, will probably return to modeling🤝 pic.twitter.com/H9R6JDwmUX —@CryptoHub210 Bankman-Fried, 30, was born in Silicon Valley and lives in the Bahamas, but his crypto empire stretched as far as Canada. The Ontario Teachers’ Pension Plan participated in a funding round for FTX as recently as 2021, with a stake of about $95 million. “While there is uncertainty about the future of FTX, any financial loss on this investment would have a limited impact on the plan, given that this investment represents less than 0.05 percent of our total net assets,” the pension plan said. In June, Calgary-based cryptocurrency startup Bitvo agreed to be acquired by FTX, but that deal has not yet closed and the company continues to operate independently. “We wanted to assure our customers that your money is safe with Bitvo and that transactions as well as withdrawals and deposits have and will continue to be seamless,” the company said.
