'%20x='0'%20y='0'%20height='100%25'%20width='100%25'%20%0A%20%20%20%20%20%20%20%20%20%20xlink%3Ahref='data:image/jpg;base64,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'%3E%3C/image%3E%3C/svg%3E)
2022 hasn't been a great year for crypto investors, and the latest news related to FTX isn't going to make things any better.
On Friday, November 11, the cryptocurrency exchange, headquartered in the Bahamas and managed from within the United States, filed for bankruptcy.
According to the official statement posted on the firm's Twitter handle, the crypto firm, alongside FTX US, Alameda Research, and approximately 130 additional affiliated companies (together, the FTX Group), voluntarily filed for Chapter 11 bankruptcy protection on November 11, 2022.
The reason behind the sudden collapse of the crypto exchange is the liquidity crunch, which has also forced CEO Sam Bankman-Fried, aka SBF, to step down on Friday. John Ray III replaced SBF as the new chief executive of the company he founded in 2019.
Bahamian crypto exchange FTX, alongside its sister firm Alameda, goes bankrupt amidst a liquidity crisis
The chaos began with a report from Coindesk published on Wednesday, November 2. According to the report, the balance sheet of SBF's hedge fund firm, Alameda Research, held billions of dollars FTT, the tokens of Bankman-Fried's crypto exchange firm.
Coindesk further reported that Alameda was using FTT as collateral in loans it took. Moreover, the publication claimed that as of June 30, the "unlocked FTT" was the most significant asset on Alameda's $14.6 billion balance sheet. Additionally, the third biggest asset was $2.16 billion worth of "FTT collateral.
Thus, the businesses of both firms were intertwined, making Alameda Research highly volatile. A plunge in the value of FTX's crypto token, FTT, would have drastically affected the crypto hedge fund company. Unfortunately, the speculation came true later.
On Sunday, November 6, another significant development took place when Changpeng Zhao, Binance's chief executive, tweeted about liquidating any remaining FTT on their books due to "recent revelations that have come to light."
Amidst all of the speculations, FTT's value also plummeted, resulting in panic among the customers of the crypto exchange, who tried withdrawing their funds from the platform.
Ultimately, Bankman-Fried's crypto giant faced a "giant withdrawal surge," with users trying to pull out $6 billion in cryptocurrency within three days.
On Tuesday, FTX's competitor, Binance, tried to bail it out from the crisis after agreeing to acquire the company. However, Binance backed out on Wednesday due to uncontrollable circumstances as it cited discoveries in the due diligence process.
All of the chaos and developments ultimately resulted in the collapse of FTX, with the company filing for bankruptcy on November 11. Although John Ray III has replaced Sam Bankman-Fried, the former will help with the transition.
Sam Bankman-Fried, born into a family of academics and a graduate of the Massachusetts Institute of Technology, was part of the billionaire's club before the liquidity crisis. However, on November 8, the Bloomberg Billionaires Index dropped him from the list as his net worth plunged around 94% in a day to $991.5 million.
On November 11, the day of filing for bankruptcy, Bloomberg Billionaires Index estimated Bankman-Fried to have no material wealth.
