Days after bigger rival Binance withdrew from a planned acquisition, the announcements were made.
On November 11 – The troubled cryptocurrency exchange FTX said on Friday that it would file for bankruptcy in the US as its Chief Executive Sam Bankman-Fried quit, potentially setting off one of the largest market meltdowns ever.
The company made the news on its Twitter account days after bigger rival Binance backed out of a planned purchase, leaving it scrambling to raise nearly $9.4 billion from investors and competitors.
The firm claimed that Alameda Research, a trading company owned by Bankman-Fried, is also covered by bankruptcy protection. According to sources, it is partially to blame for FTX’s problems and owes FTX almost $10 billion.
The demise of FTX represents a spectacular turnabout in fortunes for the business and its founder Sam Bankman-Fried, who was once regarded as a “white knight” and was compared to the wealthy Warren Buffett.
It also makes one wonder what will happen to smaller enterprises like BlockFi and the bankrupt cryptocurrency lender Voyager Digital, which had signed rescue agreements with FTX after the stunning TerraUSD meltdown in May brought so many businesses to the verge of failure.
After experiencing a liquidity crisis brought on by consumers withdrawing money at a rapid clip, FTX was looking for a lifeline. It also fuels worries about the future of the cryptocurrency sector, which has difficulty winning mainstream investors’ trust.