FTX Cryptocurrency Bankruptcy

30-year-old billionaire Sam Bankman-Fried, also known as SBF, is the founder and previous CEO of the crypto exchange FTX. In late 2017, SBF cofounded Alameda Research, a crypto hedge fund. Following the success of Alameda and inspired by the boom in popularity of cryptocurrencies like Bitcoin, Ether, Luna, Solana, and MATIC, SBF created his very own crypto exchange, FTX, in 2019. Users of the exchange company were led to believe that they could earn higher yields with FTX than with other traditional banking companies. 

In a period of 10 days in November 2022, FTX, the crypto exchange company, collapsed into bankruptcy merely days after a news site, CoinDesk, revealed that Almeda Research held a value at roughly $5 billion in FTT, the native token of FTX. CoinDesk went on to report that Alameda's investment foundation was also in FTT. This prompted grave concern across the cryptocurrency industry regarding SBF's companies' undisclosed leverage and solvency. 

Days later, Changpeng Zhao ("CZ"), the CEO of Binance, announced that he was selling all of Binance's FTT holdings, worth over $500 million. Then when the CEO of Alameda offered to purchase all of Binance's FTT at $22, it increased the suspicions that the value of FTT was heavily used as collateral to borrow other assets, further dropping the price of FTT as their loans began to liquidate.

On November 11, 2022, FTX filed for Chapter 11 bankruptcy. Then on December 12, the former founder and CEO Sam Bankman-Fried was arrested in the Bahamas and extradited to the U.S., where he would plead not guilty to eight criminal charges, including wire fraud and conspiracy to defraud investors.

FTT is a cryptocurrency token created by FTX. Similar to other popular instruments, such as Bitcoin, FTT holds value, can be traded, and is used to carry out financial transactions. The concern behind FTT began when a report stated Alameda, the sister company to FTX, held most of the FTT circulating supply, and the FTT token had low circulating liquidity. Meaning Alameda would only be able to sell some of its FTT, as there wouldn't be enough liquidity or buyers.

Hours after filing for bankruptcy, FTX alleged it was the victim of a hack. The exchange company noted "unauthorized transactions" that may have stolen roughly $500 million in assets. According to the report, the hacker continued to drain the wallets for days using what is known as "on-chain spoofing." Then allegedly, they invested the stolen funds in Ether (ETH), another popular form of cryptocurrency.

FTX's collapse has had a significant impact on the U.S. crypto market, inciting fear and concern among many investors. Cryptocurrency prices dropped below $16,000 on November 9. Then from November 8 – 15, it was reported that $3.4 billion of Bitcoin was taken off exchanges. Due to the collapse on November 9, Ethereum's price dipped below $1,100, and Solana fell below $13. However, Solana would continue to suffer, losing over $700 million in combined assets following CoinDesk's report that Alameda held a large amount of it.

Investors who have used FTX may have noticed a hold on their ability to cash out on their FTT tokens. If your FTX account has been frozen and/or you have not been able to access your currency, we may be able to help.

You deserve to know that your money is secure when investing in cryptocurrency. When your financial investments are on the line due to shady business practices, you need an ally who will do whatever it takes to fight for you. For over 30 years, our Morgan & Morgan has been helping victims of fraud and negligence get the justice they deserve when major corporations go under. 

For more information regarding the FTX cryptocurrency collapse and how you may be eligible to receive financial compensation, you can connect with one of our business trial group attorneys by completing our free, no-obligation case evaluation form today.