FTX implosion could affect 'more than one million' investors

The SEC and 'dozens of federal, state and international regulators' are getting involved.

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Steve Dent
November 15, 2022 6:17 AM
The logo of FTX is seen at the entrance of the FTX Arena in Miami, Florida, U.S., November 12, 2022. REUTERS/Marco Bello
Marco Bello / reuters

Bankruptcy documents filed by the crypto exchange FTX indicate that it currently faces more than 100,000 creditors, but that number could expand to over one million, The Financial Times has reported. The company also stated that it has been in contact with US federal prosecutors, as well as "dozens of federal state and international regulatory agencies" over the last few days. 

FTX filed for bankruptcy last week following the sudden collapse of its exchange. Today, the Securities Commission of The Bahamas said it had received court approval to appoint two partners from the Bahamas and Hong Kong to oversea the unwinding of FTX Digital Markets, a key part of FTX. The filing called the state of affairs "unprecedented," noting that "barely more than a week ago, FTX, led by its co-founder Sam Bankman-Fried, was regarded as one of the most respected and innovative companies in the crypto industry." 

In addition, the Royal Bahamas Police confirmed yesterday that they were working "to investigate if any criminal misconduct occurred," according to the FT. The day after the bankruptcy was filed, the company reported that millions of dollars went missing from crypto wallets following "unauthorized transactions." In addition, at least $1 billion worth of customer funds vanished from FTX prior to that.

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FTX's troubles started after the price of its native FTT token plunged and numerous users withdrew their cryptocurrency. After it was reported that FTX was facing a liquidity crisis, rival Binance said it would sell off around over $500 million worth of FTT, all but wiping out the token's value. Binance then said it would take over FTX, but backed out of the deal a day later, citing concerns that emerged while carrying out due diligence. Bankman-Fried said he plans to eventually publish an account detailing exactly what happened to FTX.

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FTX implosion could affect 'more than one million' investors