"3rd Place Coin Empire Collapses" FTX Finally Files for Bankruptcy Protection... Debt of 66 Trillion Won

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] Cryptocurrency exchange FTX, facing a liquidity crisis, has ultimately filed for bankruptcy protection under Chapter 11. This is the largest bankruptcy filing in the history of the cryptocurrency industry, with debts reaching up to 66 trillion won. Sam Bankman-Fried, CEO of FTX and once called the "Warren Buffett of the crypto world," has also resigned.

On the 11th (local time), FTX stated on Twitter, "We have voluntarily initiated bankruptcy protection procedures to liquidate assets and begin an orderly review process for the benefit of all stakeholders worldwide." Chapter 11 of the U.S. Bankruptcy Code is a restructuring process under court supervision aimed at rehabilitation, similar to court receivership in Korea.

John J. Ray III, who succeeded Bankman-Fried as CEO, confirmed, "The FTX Group holds valuable assets but can only be efficiently managed through a systematic collective process," adding, "We will carry out these efforts diligently, thoroughly, and transparently."

FTX reported to the court that its debts exceed 66 trillion won. FTX’s liabilities range from $10 billion to $50 billion (13.2 trillion to 66.2 trillion won), with assets of a similar scale. There are over 100,000 creditors of FTX.

The bankruptcy protection filing also includes about 130 affiliates, among them Alameda Research, considered one of the sources of FTX’s liquidity crisis. It is known that FTX’s debt caused by Alameda alone amounts to $10 billion (13.2 trillion won). Major foreign media reported, "The crypto empire that once ranked third collapsed instantly due to liquidity issues," and "This case is the largest bankruptcy filing in the history of cryptocurrency."

This is interpreted as an inevitable step after Binance, which had previously expressed intent to acquire FTX, withdrew its offer within a day. The previous day, Bloomberg reported that Binance decided not to proceed with the acquisition due to findings from due diligence and investigations by U.S. regulatory authorities, stating, "Binance executives quickly reviewed FTX’s books and found a discrepancy of over $6 billion between liabilities and assets, confirming a financial ‘black hole.’"

As FTX’s liquidity crisis worsened following Binance’s withdrawal, Bankman-Fried attempted to raise $9.4 billion in emergency funding but ultimately failed and resigned from the CEO position.

With FTX entering bankruptcy proceedings, fear has sharply increased in the cryptocurrency market. Major cryptocurrencies also plunged. Bitcoin is currently trading around 16,800, down about 4.5% from the previous session. Ethereum is also trading over 3% lower at around 1,260.

Among experts, there are concerns that if the FTX crisis worsens, it could become a replay of the Terra-Luna incident in May, which caused the collapse of the coin market. At that time, Terraform Labs, led by CEO Kwon Do-hyung, issued TerraUSD and Luna, which experienced a 'Death Spiral' phenomenon where prices plummeted simultaneously due to problems in the trading algorithm. This incident later led to the chain bankruptcies of Singapore-based crypto hedge fund Three Arrows Capital and U.S. crypto lenders Voyager Digital and Celsius.

Earlier, Pascal Gauthier, CEO of cryptocurrency wallet manufacturer Ledger, told CNBC, "This incident shows that no one is 'too big to fail.' FTX seemed untouchable," reflecting the shock within the industry over the FTX crisis.

This content was produced with the assistance of AI translation services.