Collapse of Crypto Exchange Is Taking a Toll on Bitcoin

FTX files for bankruptcy, and the drama is hurting the value of the top cryptocoin
By Newser Editors and Wire Services
Posted Nov 11, 2022 9:40 AM CST
Crypto Drama Escalates as Exchange Files for Bankruptcy
An advertisement for Bitcoin cryptocurrency is displayed on a street in Hong Kong in this file photo.   (AP Photo/Kin Cheung, File)

Embattled cryptocurrency exchange FTX—short billions of dollars—is seeking bankruptcy protection following its collapse this week. Meanwhile, FTX and its CEO and founder Sam Bankman-Fried are under investigation by the DOJ and the SEC to determine whether any criminal activity or securities offenses were committed, per the AP. The investigation is centering on the possibility that the firm may have used customers' deposits to fund bets at Bankman-Fried’s hedge fund, Alameda Research. In traditional markets, brokers are expected to separate client funds from other company assets. Violations can be punished by regulators.

FTX had agreed earlier this week to sell itself to bigger rival Binance after experiencing the cryptocurrency equivalent of a bank run. Customers fled the exchange after becoming concerned about whether FTX had sufficient capital. The crypto world had hoped that Binance, the world’s largest crypto exchange, might be able to rescue FTX and its depositors. However, after Binance had a chance to look at the books of FTX, it became clear that the smaller exchange's problems were too big to solve. Amid the drama, Bitcoin has lost about 25% of its value this week, falling below $17,000 per coin as of Friday morning. (Bankman-Fried is an unusual CEO.)

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