Troubled crypto exchange FTX is officially insolvent. Tech entrepreneur Sam Bankman-Fried’s group applied for bankruptcy protection in the United States on Friday, according to its own statements. Bankman-Fried also announced his resignation as CEO. The previous evening, the Bahamian securities regulator announced that it had frozen certain FTX assets and had applied for an insolvency administrator to handle the transaction.
The imbalance of the large trading platform for digital currencies such as Bitcoin has kept the crypto market in suspense for days. Many customers fear for their money. The crypto empire of Bankman-Fried, who was celebrated a few months ago as a child prodigy and a beacon of hope in the industry, collapsed within just a week. At first it seemed like only the Bahamas-based international business was in distress. Now it is clear: the whole group is bankrupt.
“I fucked up,” Bankman-Fried said Thursday. But he still assured customers in America that their deposits were safe. Just one day later, FTX filed for bankruptcy. According to the group, the US proceedings under Chapter 11 of the insolvency law affect, among other things, the American crypto exchange FTX US, which Bankman-Fried had just described as “100 percent liquid”, and 130 other companies that together form the FTX Group.
Battered crypto market burdened
Bankman-Fried’s international crypto platform FTX.com ran into payment difficulties on Sunday after doubts about capital reserves led to customer flight and billions in withdrawals. According to the Bahamian securities regulator, the company is suspected of embezzling customer funds, among other things. On Wednesday it initially looked as if the competitor Binance would take over most of the ailing group. But that plan fell through the next day.
The decline of FTX is breathtaking even for the crypto industry, which is characterized by excess speculation and extreme price fluctuations. The group, which was valued at 32 billion dollars by investors at times, collapsed completely within a few days. Bankman-Fried, who, as a 30-year-old star entrepreneur, graced the front pages of well-known US business publications such as “Fortune” just a few months ago, is standing by the rubble of his company empire and, according to US media, is facing investigations by supervisory authorities.
The FTX debacle has weighed heavily on the already badly battered crypto market in the past few days. The insolvency did not really come as a surprise, so that Bitcoin was initially relatively stable at around $17,000 on Friday after heavy losses over the course of the week. On Wednesday, concerns about FTX had pushed the price to a two-year low below $16,000. For comparison: In November 2021, the market’s largest, oldest and best-known cryptocurrency had reached a record high of just over $68,000.
