LONDON, (Reuters) – Crypto exchange FTX filed for U.S. bankruptcy protection yesterday and its founder Sam Bankman-Fried resigned as chief executive, after the biggest blowup in the crypto industry drew calls for tighter regulation.
The distressed crypto trading platform had struggled to raise billions to stave off collapse as traders rushed to withdraw $6 billion from the platform in just 72 hours and rival exchange Binance abandoned a proposed rescue deal this week.
FTX, its affiliated crypto trading firm Alameda Research, and about 130 of its other companies have commenced voluntary Chapter 11 bankruptcy proceedings in Delaware, the company said in a statement on Twitter on Friday.
It was an abrupt fall from grace for a company that was once a darling of the crypto industry. FTX raised $400 million from investors in January, valuing the company at $32 billion. It attracted money from investors such as Singapore state investor Temasek and the Ontario Teachers’ Pension Plan as well as celebrities and sports stars.
Bankman-Fried, 30, known for his trademark shorts and t-shirt attire, has morphed from being the poster child of crypto’s successes to the protagonist of the industry’s highest-profile crash.
“The shock was that this guy was the face of the crypto industry and it turned out that the emperor had no clothes,” said Thomas Hayes, managing member at Great Hill Capital LLC in New York.
The week’s turmoil hit already-struggling cryptocurrency markets, sending bitcoin to two-year lows BTC=BTSP. Bitcoin dropped after FTX’s announcement and was down 4.3% at $16,803 on Friday afternoon.
Shares of cryptocurrency and blockchain-related firms also dropped on the news.
U.S. Senator Elizabeth Warren, a Democrat who has previously criticized the crypto industry, tweeted that the implosion of FTX was a wake-up call for Congress and regulators to hold the industry and its executives accountable.
“Too much of the crypto industry is smoke and mirrors. It’s time for stronger rules and stronger enforcement to protect ordinary people,” she said.
FTX was scrambling to raise about $9.4 billion from investors and rivals, Reuters reported citing sources, as the exchange sought to save itself after customer withdrawals.
