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FTX to file for U.S. bankruptcy protection, CEO Bankman-Fried resigns
Important developments in the crisis gripping the cryptocurrency sector.
Crypto exchange FTX has announced it is commencing bankruptcy proceedings in the United States, after efforts to arrange a rescue floundered.
Sam Bankman-Fried, founder of the company, is resigning from his role as chief executive officer. He’ll stay to help with an “orderly transition”.
New CEO John J. Ray III said that FTX has “valuable assets that can only be effectively administered in an organized, joint process”
The move comes days after larger rival Binance walked away from a proposed acquisition, after FTX experienced the cryptocurrency equivalent of a bank run.
That left FTX scrambling to try to raise billions of money from investors and rivals to plug a financial hole in the exchange that could be as deep as $8bn, according to multiple reports, as customers rush for the exit.
The move to file for bankrupcy protection comes after the Bahamas securities regulator froze the assets of the Bahamas subsidiary of FTX, as the world’s second largest cryptocurrency exchange struggles for survival.
The Securities Commission of the Bahamas said on Thursday it had frozen the assets of FTX Digital Markets and related parties, as well appointing a liquidator for the unit.
“The powers of the directors of FDM have been suspended and no assets of FDM, client assets or trust assets held by FDM, can be transferred, assigned or otherwise dealt with, without the written approval of the provisional liquidator,” the commission said.
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Shares in some crypto-focused companies are also falling followin FTX’s bankrupcy filing.
Crypto bank Silvergate Capital are down 5%, while bitcoin miners such as Riot Blockchain (-4%) and Hut 8 Mining (-6.5%) are also taking a hit.
It’s the biggest destruction of wealth in crypto history
The FTX collapse shows that regulators must monitor the crypto space more closely, says Naeem Aslam, chief market analyst at Avatrade.
The biggest destruction of wealth has happened today in the history of crypto as FTX files for bankruptcy, leaving its customers hanging high and dry.
This is the best time for regulators to come and start tightening up the grip, we can no longer afford to have different privileges for crypto exchanges and the whole space needs to be monitored by the regulators.
Aslam predicts that bitcoin could continue to slide, if the fall of FTX causes a ‘domino effect’:
As for bitcoin, this is certainly another major set back and this is causing pressure on the price, and the chances are that we may see the price moving toward the 13K level.
Bitcoin is already down around 63% so far this year, having peaked at $69,000 a year ago.
News of FTX’s bankrupcy filing has knocked crypto currencies.
Bitcoin fell up to 7% to $16,361, close to yesterday’s two-year low.
The downfall of FTX, and Sam Bankman-Fried, has been astonishing – both in its speed and its scale.
Earlier this year, the exchange was valued at $32bn, while Bankman-Fried’s wealth peaked at $26bn in March.
Even at the start of this week, he was worth $16bn, but that entire fortune has now been wiped out –- one of history’s greatest-ever destructions of wealth.
The Bloomberg Billionaires Index had slashed its value of FTX’s US business — of which Bankman-Fried owns about 70% — to $1.
Sam Bankman-Fried’s trading firm Alameda Research, which sat at the heart of his digital-asset empire, is also part of the bankruptcy protection, FTX says.
There have been reports that Alameda was partly behind FTX’s problems and reportedly owes FTX roughly $10bn.
The US Securities and Exchange Commission and Justice Department are reportedly investigating FTX following its sudden implosion this week.
The investigation into Bankman-Fried and FTX – by those in the crypto world as well as securities regulators – were examining whether the firm used customers’ deposits to fund bets at Alameda Research.
In traditional markets, brokers are expected to separate client funds from other company assets. More here:
FTX to file for U.S. bankruptcy protection, CEO Bankman-Fried resigns
Important developments in the crisis gripping the cryptocurrency sector.
Crypto exchange FTX has announced it is commencing bankruptcy proceedings in the United States, after efforts to arrange a rescue floundered.
Sam Bankman-Fried, founder of the company, is resigning from his role as chief executive officer. He’ll stay to help with an “orderly transition”.
New CEO John J. Ray III said that FTX has “valuable assets that can only be effectively administered in an organized, joint process”
The move comes days after larger rival Binance walked away from a proposed acquisition, after FTX experienced the cryptocurrency equivalent of a bank run.
That left FTX scrambling to try to raise billions of money from investors and rivals to plug a financial hole in the exchange that could be as deep as $8bn, according to multiple reports, as customers rush for the exit.
The move to file for bankrupcy protection comes after the Bahamas securities regulator froze the assets of the Bahamas subsidiary of FTX, as the world’s second largest cryptocurrency exchange struggles for survival.
The Securities Commission of the Bahamas said on Thursday it had frozen the assets of FTX Digital Markets and related parties, as well appointing a liquidator for the unit.
“The powers of the directors of FDM have been suspended and no assets of FDM, client assets or trust assets held by FDM, can be transferred, assigned or otherwise dealt with, without the written approval of the provisional liquidator,” the commission said.
Despite the looming recession, the pound has risen to its highest level against the US dollar since late August today.
Sterling has gained half a cent to $1.176, adding to the three cent surge on Thursday.
The dollar has also dropped against the euro, as traders continue to hope that the worst of America’s inflation surge is over, with CPI dropping to 7.7% in October, from 8.2%.
Analysis: manufacturing shrank 2.3% as government ‘abandons’ sector
Phillip Inman
When the minor ups and downs caused by the extra bank holiday for the Queen’s funeral are stripped out of the latest GDP figures, it is clear the long decline of Britain’s industrial base has accelerated.
Protected by the government through the coronavirus pandemic, this year, factory owners say ministers have abandoned them to cope with a long recession without so much as a glance in their direction.
The squeeze from inflated materials costs, a shortage of workers that has pushed up wages and declining demand for their products is especially crippling while the government spends its time navel-gazing, they say.
British Chambers of Commerce, clear on the reason the UK economy is a basket-case:
“Europe remains a major export destination and Brexit has introduced barriers to trade that did not exist before 2021.” https://t.co/BulXIWqdCt
— Chris Shaw (@The_ChrisShaw) November 11, 2022
As the British Chambers of Commerce makes clear in its response to figures showing the economy shrank by 0.2% in September, there is another factor damaging the outlook for manufacturing and exporters more generally, and that is Brexit….
More here:
There is an ‘elevated risk’ that the UK economy also contracts in the fourth quarter of this year, the NIESR think tank says.
It predicts the UK economic situation will worsen, after the economy shrank 0.2% in the third quarter.
Paula Bejarano Carbo, NIESR data analyst, explains:
“Today’s ONS estimates confirm a production-driven contraction in GDP in the third quarter of this year, with a quarter-on-quarter fall of 0.2 per cent. We are currently expecting GDP to be flat in the fourth quarter of this year.
However, given that October PMIs recorded figures below the neutral 50 for both the services and manufacturing sectors, consumer and business confidence is plummeting, and higher-than-expected inflation and interest rates continue to squeeze budgets, the risk of a contraction in GDP in the fourth quarter of this year remains elevated.
Whether the Chancellor’s upcoming Autumn Statement will alleviate or aggravate current recessionary risks will become clearer next week.”
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