It took less than a week for FTX to go from the third-largest cryptocurrency exchange in the world to bankruptcy court.
File - The FTX logo appears on home plate umpire Jansen Visconti's jacket at a baseball game with the Minnesota Twins on Tuesday, Sept. 27, 2022, in Minneapolis. Embattled cryptocurrency exchange FTX, short billions of dollars, is seeking bankruptcy protection, Friday, Nov. 11, following its collapse this week.
FTX's unraveling is causing ripple effects. Already companies that backed FTX are writing down their investments. Politicians and regulators are ramping up calls for stricter oversight of the crypto industry. And this latest crisis has put pressure on the prices of bitcoin and other digital currencies. The total market value of all digital currencies dropped by about $150 billion in the last week, according to CoinMarketCap.com.
The investigation is centered on the possibility that FTX may have used customers’ deposits to fund bets at Alameda Research. In traditional markets, brokers are expected to separate client funds from other company assets. Violations can be punished by regulators. Financial company MF Global effectively failed for a similar practice roughly a decade ago when it intermingled client assets with its own bets.
FTX had agreed earlier this week to sell itself to bigger rival Binance after experiencing the cryptocurrency equivalent of a bank run. Customers fled the exchange after becoming concerned about whether FTX had sufficient capital.
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