The aftershocks of last week’s spectacular crash of the Bahamas-based cryptocurrency exchange FTX have continued into this week.
FTX last week, which was among the largest cryptocurrency exchanges in the world, It collapsed into Chapter 11 bankruptcy protectionAfter a series of setbacks.
Prior to the bankruptcy, former CEO Sam Bankman-Fried had explored all options and sought up to $9 billion in additional financing from outside sources, amid reports that the exchange faced a total commitment of $7 billion.
This funding failed to materialize, and it made things even worse for the cryptocurrency exchange Binance said last Wednesday that it is withdrawing from its deal To buy FTX trading.
FTX has agreed to sell itself to Binance, after trying out the cryptocurrency equivalent of banks – after panicked traders withdrew $6 billion from the exchange in just 72 hours.
Clients reportedly fled the exchange after becoming concerned about whether FTX had enough capital.
Binance said that after it carried out due diligence on FTX’s balance sheet, it had significant concerns that convinced it to back out of the bailout deal.
Soon after, FTX filed for Chapter 11, and Bankman-Fried stepped down as CEO and was replaced by John J. Ray III.
The collapse of FTX shook the cryptocurrency world, and on Monday the CEO of a Singapore-based cryptocurrency exchange Crypto.com tried to reassure nervous investors when it said the platform was in good financial healthand “hold reserves for every coin saved on the platform.”
Currently Reuters reported FTX’s Chapter 11 filing with the US Bankruptcy Court, published late Monday in the US, reveals that FTX is experiencing an “acute liquidity crisis” and the group could have more than 1 million creditors.
The FTX filing also revealed that it had contacted financial regulators and appointed five new independent directors at each of its major companies, including sister business Alameda Research.
“FTX experienced an acute liquidity crisis that necessitated filing these cases on an emergency basis last Friday,” the court filing reads.
“Questions have been raised about Mr. Bankman Fried’s leadership and handling of FTX’s complex portfolio of assets and businesses under his direction,” it added.
Reuters, citing a New York Times report on Monday, reported that FTX founder and former CEO Sam Bankman-Fried indicated that he expanded his business too quickly and failed to notice signs of trouble in the exchange.
Bankman-Fried also attempted over the weekend to raise money from investors to pay off FTX traders and institutional clients, Reuters added, citing a Wall Street Journal report on Tuesday.
It appears that the FTX bankruptcy case has more than 100,000 creditors, the filings said, and that figure could exceed 1 million.
The numbers were revealed when FTX asked several FTX group companies to submit one consolidated list of major creditors, rather than a separate list, Reuters reported.
The filings also confirmed that FTX responded to a cyberattack on November 11, after it said on Saturday that it had seen “unauthorized transactions” on its platform.
FTX has reportedly been in contact with the US Attorney’s Office, the SEC, the CFTC, and dozens of federal, state, and international regulatory agencies over the past 72 hours.
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