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Crypto Exchange Lost Billionaire Status: FTX files for bankruptcy

The declaration for bankruptcy by FTX was the culmination of an unusual week of business drama that rattled the markets for cryptocurrencies. It spurred government investigations that might lead to future embarrassing discoveries or criminal charges, and it sent shock waves across an industry struggling to acquire trust among mainstream audiences.

This year has seen many companies tied to cryptocurrencies go bankrupt, but FTX is the most recent and the biggest of the group. After the cryptocurrency market crashed in the spring, two cryptocurrency lending companies, Celsius Network, and Voyager Digital filed for bankruptcy, which sparked months of court fighting over the division of their remaining assets. In a strange turn of events, FTX emerged victorious in the competition to acquire the remainder of Voyager’s assets by placing the highest offer.

The corporation announced Mr. Bankman-Fried’s resignation in a tweet and named corporate turnaround expert John J. Ray III as the new CEO.

For Mr. Bankman-Fried, 30, whose reputation as a boy genius with a host of endearing quirks, including a habit of sleeping on a beanbag at the office, preceded his bankruptcy, this is a stunning fall from grace. Before his bankruptcy, he had a reputation as a boy genius with many endearing quirks. In the past, he was reported to have had a worth of $24 billion, which placed him among the wealthiest people working in his industry. In his social circle, he included actors, athletes, and former state leaders as his friends.

Investors in other cryptocurrencies have been taken aback by the lightning pace of FTX’s decline. As recently as a few days ago, Mr. Bankman-Fried was widely regarded as one of the crypto industry’s brightest executives and a powerful presence in Washington, D.C., where he was pushing to establish rules. In addition, FTX was generally acknowledged as one of the most reliable and reputable firms operating in the unrestricted crypto market.

Board members included Mr. Bankman-Fried, another FTX employee, and an attorney in Antigua and Barbuda, which was unusual for a big start-up.

FTX was headquartered in the Bahamas, and its senior executives, including Mr. Bankman-Fried, shared a compound at a high-end resort. Those who knew the situation said lower-level workers were caught off guard and perplexed by the company’s collapse this week.

Up to $8 billion in debt burdens the stock market.

Due to the bankruptcy, investors and consumers scramble to get their hands on what little of FTX still exists. This week, the firm saw an unprecedented influx of clients attempting to withdraw payments from the site. 

The crypto market was already hurting from a catastrophe in the spring that emptied $1 trillion from the market, and FTX’s demise has thrown the sector into disarray. Bitcoin and Ether, two of the most popular cryptocurrencies, have seen their values crash.

After FTX’s demise, crypto lending platform BlockFi announced it would pause operations.

Mr. Bankman-Fried has the support of prominent Silicon Valley VC firms, including Sequoia Capital and Lightspeed Venture Partners. Some investors have claimed that the nine-figure sums they invested into the crypto exchange FTX are now worthless, prompting concerns about how well they researched the company before investing.

The firm’s failure has also triggered an accounting of the crypto industry’s widespread adoption of hazardous methods. They were intended partly to correct the reckless financial engineering that contributed to the 2008 financial crisis.

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