The crypto industry took a further twist on its long and perilous road recently when the struggling exchange FTX filed chapter 11 bankruptcy proceedings in the US. This follows the stepping down of the company’s chief executive Sam Bankman-Fried in what marks a massive shakeup for the once-healthy firm. Only days ago the 30-year-old was at the helm of the second-largest crypto exchange in history. Sam Bankman-Fried, a significant figure in the development of cryptocurrency trading had a net worth of over $15 billion and is seeing his fortunes change as quickly as crypto slid in November last year.
He tweeted the news with an apology on Twitter “I’m really sorry, again, that we ended up here. Hopefully, things can find a way to recover; I was shocked to see things unravel the way they did.”
This situation arose so quickly it has engulfed the firm, it seems incredible that all this has happened in such a short time, but the recent rumours that financial insecurity loomed over Mr Sam Bankman-Fried’s empire lit the fuse and saw massive volumes of customers attempting to withdraw their capital from the FTX exchange.
The swift action taken by Mr Bankman-Fried while attempting to realise a financial bailout package for the firm subsequently failed and this left many of the exchange’s customers unable to move their money. It was hoped that the rival exchange, Binance, would buy FTX earlier in the week but as this offer disappeared the larger firm’s Chief Executive officer, Changpeng Zhao wrote “FTX going down is not good for anyone in the industry. Do not view it as a win for us. User confidence is severely shaken,”
Changpeng Zhao’s appraisal appears correct and there are no obvious winners in this situation. The very core of crypto has shaken, causing a huge loss of confidence that has rocked the entire crypto industry.
What is The Latest News With FTX?
The company is permitted to continue trading as it moves forward under the supervision of the US courts while it attempts to restructure debts.
The exchange’s new chief executive officer, John J Ray III made a statement indicating the firm’s intentions to start the process of assessing the company’s assets with a view to generating capital. He made a short statement saying “The FTX Group has valuable assets that can only be effectively administered in an organised, joint process.”
John J Ray III is no stranger to prominent bankruptcy proceedings. The lawyer who has previous experience working at a venture capital company will be looking towards an estimated portfolio of assets and liabilities valued at more than $10 billion. The number of creditors is in excess of 100,000 individuals.
Not limited to only focusing on the FTX exchange, the preceding will include Almeda Research, which Mr Bankman-Fried formed with a number of affiliates. In a slightly more upbeat message, Mr Bankman-Fried commented “Ultimately I’m optimistic that Mr Ray and others can help provide whatever is best.”
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These words may seem somewhat hollow from a figure so influential within the crypto industry. They also may not come as much comfort to customers still unable to withdraw their funds and facing no clarification on how long the asset liquidation process will take.
Mr Bankman-Fried has in the past spoken for the cryptocurrency industry in regulatory matters and supported the democrats with healthy donations for the last US elections. He helped promote crypto and bring it to the attention of the public at large; the memorable campaign was bolstered by celebrities like Gisele Bundchen and Tom Brady.
As Mr Bankman-fried built his empire around himself, others raised questions concerning how Almeda and FTX were being run and if this posed a conflict of interest. Ultimately this week has seen a heavy downturn in the values of major Cryptocurrencies with Bitcoin seeing losses of 18%. All eyes are on crypto now and the companies involved have a tough road ahead of them to restore lost confidence.
This year has been tough on crypto with the sector seeing a significant drop in the value of many Cryptocurrencies and other near collapses for the firms involved. BlockFi, a firm with links to FTX recently also stopped its customer’s attempts to withdraw funds in reaction to the fast-changing situation.
What’s Happening with Cryptocurrency?
As traditional traders and investors have taken more of a position within crypto, the regulators have been quick to point out the risks the industry faces whilst not backed up by the kinds of legislation that figure heavily in regular currencies or investments. Some detractors of cryptocurrency have said that the fact cryptocurrency has so little centralised regulation is why the industry is so volatile, unlike the gambling industry and casinos accepting PayPal.
To this end, it is no surprise that FTX has been reported as being the subject of more than one financial authorities investigation procedure.
With backing from large investment companies like Blackrock and the Ontario Teachers’ Pension Plan, it is inevitable there will be on-going concerns that the Cryptocurrency sudden downturn could herald problems becoming widespread within the stock market.
FTX, which is now reportedly under investigation by several financial authorities, had enjoyed backing from major investment firms, including Blackrock, Softbank and the Ontario Teachers’ Pension Plan in Canada.
As the industry makes its mind up on the situation, many are wondering if this is an isolated problem, one of Mr Bankman-Frieds’ making or something industry-wide with greater implications further down the road for cryptocurrency.
Is This The Beginning of the End for Cryptocurrency?
Although there are plenty of different opinions when it comes to Cryptocurrency and its future, most agreed that it isn’t likely to go anywhere soon. Whether we’ll see a repeat of the boom we have seen in the past is another question, but with it being more acceptable mainstream and becoming more accessible most people agree that Bitcoin and friends are around for at least the immediate future and the rest we’ll just have to wait and see.