Millions of FTX users were shocked when one of the biggest cryptocurrency exchanges in the world filed for bankruptcy in November 2022. The 2019 founded exchange, which had a $32 billion valuation at one point, was seen as a top-tier cryptocurrency competitor to Binance and Coinbase.
However, the demise of FTX has prompted concerns about the security and stability of the cryptocurrency sector. According to reports, FTX’s demise was brought on by the company using customer funds to do dangerous transactions through its sister company Alameda Research.
FTT, a proprietary token created by FTX that functioned as a loyalty program and was used as collateral for loans by Alameda, was also available. Due to these efforts, clients fled FTX amid concerns about its financial stability.
Rival startup Binance made an acquisition bid for FTX on November 9 but withdrew it the next day after reviewing the company’s financial records. On November 11, FTX filed for bankruptcy, and Sam Bankman-Fried, the company’s CEO, resigned. Once the US government brought criminal accusations against Bankman-Fried, the Bahamas authorities later detained him.
Many investors who suffered financial losses with FTX are seeking legal counsel. Partner Louise Abbott of UK law firm Keystone Law specializes in recovering cryptocurrency assets for defrauded parties. She covers investors with amounts ranging from $2,000 to $5 million. The failure of FTX has revealed the intricate interdependence of the cryptocurrency ecosystem, sparking a contagion that has affected a large number of businesses with exposure to failed firms
Several trading platforms have expressed anxiety following FTX’s demise, but their executives have promised investors that their platforms won’t experience the same issues as FTX.
Nonetheless, concerns have been expressed about the security and stability of the cryptocurrency market following the collapse of FTX. The industry’s dangerous lending methods and the use of speculative, volatile tokens as collateral have been made public, which has caused a number of high-profile collapses.