FTX files for bankruptcy protection under Chapter 11, and FTX CEO Sam Bankman-Fried steps down on fund mismanagement leading to a crash in crypto prices.
FTX Cryptocurrency Exchange Seeks Bankruptcy Protection
FTX CEO Sam Bankman-Fried filed for bankruptcy last week, causing a knee-jerk slip in the crypto market. Though FTX’s valuation was around $32 billion just a few days ago, it has filed for bankruptcy protection Chapter 11, shocking investors in the crypto market exchange.
FTT prices saw a sharp downturn from $25 on November 7, 2022, to $2.71 on Friday, November 9, 2022. FTT is the native token of the FTX exchange.
FTX is one of the largest cryptocurrency exchanges that have many users. Bankman-Fried runs FTX and its sister concern Alameda Research. Bankman-Fried allegedly used customer deposits which led to FTX’s insolvency. Bitcoin prices slipped from life-high levels, at $68,000 in November last year, to $16,000 in November 2022. BTC prices are trading at a two-year low.
FTX CEO Bankman-Fried Steps Down
FTX cryptocurrency exchange CEO Sam Bankman-Fried has filed for bankruptcy protection. He stepped down as CEO but will continue to assist the company in its legal proceedings on bankruptcy protection.
Bankman-Fried is one of the top leaders in the crypto industry. The 30-year billionaire is also one of the biggest donors of the Democratic Party in the United States. The Democrats have taken huge donations from the FTX CEO. Bankman-Fried had also donated for the 2020 elections in which President Joe Biden won in the US. He has also donated towards the victory of Democratic candidate Peter Welch and Robert J. Menedez in the recent elections.
Changpeng Zhao is the CEO of Binance, another leading crypto exchange. His announcement to sell around $530 million worth of FTT crypto tokens set off a series of withdrawals by investors who preferred to sell their investments and lower their exposure to the crypto market. Investors withdrew about $5 billion worth of investment money in a panic move on Friday, on the announcement from CEO Zhao. Leading cryptocurrencies like Bitcoin and Ethereum were the worst hit. Meme coins also followed suit.
John J. Ray III is the new CEO of FTX, as FTX filed for bankruptcy. He will take over and lead the company as Sam Bankman has stepped down.
Similar institutions that collapsed recently are Voyager Digital, Celsius Network, Three Arrows Capital, and Terra Luna. BlockFi is another crypto platform that has halted customer withdrawals. It has fuelled concern from regulatory authorities over the collapse of large firms in the crypto market.
The sudden crash in the crypto market resulted in a major loss to investors who lost most of their capital. Many new investors entered the crypto market during the pandemic. Investors find good returns on their investments in the cryptocoins. However, the recent crash in the crypto market exposes the vulnerability that surrounds regulatory measures in the crypto market.
The crypto industry needs aggressive enforcement of regulations to protect consumers who have huge sums of money in the crypto market. The sudden jerks in prices are eroding consumer investments.
The FTX trading programs have come under SEC scrutiny. The CFTC and SEC are leading institutions that probe into scams that rip money off investors. The collapse of the FTX and Alameda has instilled fear among crypto investors.
Cryptocurrency Price Update
The cryptocurrency market capitalization slipped to a low of $770 billion last week, a 24% drop in market cap. However, it recovered 16% after the panic selling, lending stability to the volatile market.
Bitcoin and Ethereum were the biggest losers. BTC and ETH prices dropped on Friday when FTX announced its intention to file for bankruptcy proceedings. It triggered a meltdown in crypto prices. Sam Bankman is one of the leading faces in the crypto market, and the bankruptcy news sent shock waves in the crypto market.
Bitcoin prices slipped to below $16,000 levels last week. For two days on November 9 and 10, BTC prices were at $15,600. Bitcoin slipped more than 22% last week. Bitcoin prices recovered to trade above $16,500 levels. Bitcoin plummeted to $15,700 before recovering to $16,800. In 2021, BTC prices were at $69,000.
ETH, the second largest cryptocurrency, recovered to 1,272 after it slipped to the lows at $1,076 last week.
MATIC prices saw a volatile movement last week. It lost almost 32% in two days as investors thrashed the MATC prices on the FTX scam.
Meme coins were also part of the crypto slide. DOGE prices slid to $0.0706 but recovered to $0.0930
High inflation in global countries is another reason for the weakness prevailing in the crypto market. Digital assets are under pressure as inflation hits the economic conditions of leading countries. There is immense volatility in the crypto market, and experts predict that crypto prices may slide further in the days ahead.