The collapse of cryptocurrency exchange FTX is sending shockwaves through the industry. Analysts and politicians alike have called for more regulations and oversight of the industry. The timing of the hack leads some to speculate it was a case of insider trading. However, it is unclear what happened to the funds.
In the past week, FTX has filed for bankruptcy and its CEO, Sam Bankman-Fried, has resigned. It has not responded to requests for comment at this time. While FTX is undergoing an investigation into the loss of hundreds of millions of dollars in crypto assets, it is unlikely the company will be back in business anytime soon.
The collapse of FTX has raised questions about the legitimacy of other privately held cryptocurrency exchanges. Unlike traditional financial institutions, crypto exchanges are run by private companies with offshore bases. Moreover, the majority of crypto exchanges are not regulated. One of the only exceptions is Swissquote, which has a Swiss banking license. Even though it has recently launched a crypto exchange, it has not seen a significant increase in the volume of crypto traded on its platform. It is unclear what exactly led to the FTX collapse, but the SEC is monitoring the situation.
The FTX crash occurred as the market saw a drop of about $8 billion. FTX’s liquidity problem has left the company scrambling to meet investor demands. As a result, Binance has pulled out of the deal. Meanwhile, the Royal Bahamas Police Force is investigating potential misconduct relating to FTX. In addition, Visa has ceased its global credit card agreement with FTX.
Binance is a major cryptocurrency exchange. Binance recently sold a substantial stake in FTT and prompted a bank run on FTX. A short time later, the two exchanges formed an alliance. Binance even offered to merge with FTX. However, the deal fell through on Wednesday night.
The collapse of FTX has caused many firms to write off their stakes in the exchange. This means that Bankman-Fried will struggle to raise new funds. Moreover, the company’s troubles have prompted Binance to consider acquiring it. However, the investment company decided against taking over the company due to concerns regarding misconduct and an investigation by the US Securities and Exchange Commission. A week ago, the stock of FTX was trading at around US$24. Today, it is trading at less than US$4.
Bankman-Fried, one of the co-founders of FTX, was a former hedge fund manager. In addition to FTX, he had also been associated with other companies. While he had no direct involvement in the FTX bankruptcy, he had significant exposure to it. In the last three years, he has made a substantial contribution to several political parties and charities.
The collapse of FTX has put a lot of pressure on the crypto market. However, it is not the first crypto company to go under. The founders of FTX, Sam Bankman-Fried, have bailed out several other struggling crypto firms. Now, he is looking for a $8 billion investment to help the company survive.