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In just one week, FTX went from being the third largest cryptocurrency exchange in the world to Chapter 11 bankruptcy in Delaware.

FTX’s sudden and rapid fall came after the company – which was facing a liquidity crisis – agreed to sell to rival Binance for an undisclosed amount. Customers fled the exchange after worrying about whether FTX had enough capital.

But Binance, the world’s largest crypto exchange, backed out of the non-binding deal after looking at FTX’s books, at which point it became clear that the smaller exchange’s problems were too much to handle.

CEO Sam Bankman-Fried warned investors earlier this week that the company may have no choice but to file for bankruptcy without an infusion of $8 billion in cash.

FTX FILE FOR PERFORMANCE AS CEO US DEGREES UNDER BANK-FRIED DOWN

Sam Bankman-Fried, CEO of FTX US Derivatives, testifies during a House Agriculture Committee hearing titled Changing Market Roles: FTX Proposal and Trends in New Clearing House Models, in the Longworth Building on Thursday, May 12, 2022.

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FTX is a cryptocurrency exchange, meaning it enables consumers to buy, sell and store digital currencies like bitcoin and ethereum as well as other digital assets like NFTs.

The company, which is headquartered in the Bahamas, was founded by Bankman-Fried in 2019. As of 2019, FTX had more than 1 million users.

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Before this week, FTX and Binance processed the most of all crypto trades worldwide, according to CoinMarketCap, an industry data tracker.

Bankman-Fried is a 30-year-old entrepreneur who built FTX into a $32 billion empire over the past three years. Until Friday, Bankman-Fried was the Chief Executive Officer of FTX.

A regular presence on Capitol Hill and a prominent political donor to Democrats, Bankman-Fried is also a leading advocate for the cryptocurrency industry. But the eruption of FTX drew scrutiny from the Biden administration and top Democratic lawmakers, who criticized FTX and called for greater oversight of the crypto industry.

Binance

The Binance logo is displayed on a phone screen and an illustration of cryptocurrencies can be seen in this demonstration photo taken in Krakow, Poland on June 28, 2021.

“F-ed up, and should have done better,” tweeted Bankman-Fried on Thursday.

Bankman-Fried’s net worth has nearly evaporated: As of Monday, he was worth an estimated $15.6 billion, according to the Bloomberg Billionaires Index, making him one of the world’s 100 richest people. In March, the index valued it at around $26 billion.

But on Friday, Bloomberg estimated his net worth to be around zero.

FTX, billions of dollars short, is seeking bankruptcy protection after the exchange experienced the crypto equivalent of a bank run. FTX, its affiliate hedge fund Alameda Research, and dozens of other companies filed for bankruptcy on Friday.

Although Binance and its CEO Changpeng Zhao initially agreed to step in and acquire FTX, the company changed course citing reports of “mishandled customer funds and alleged US agency investigations.”

“Initially, we hoped to be able to support FTX customers to provide liquidity,” Binance said in a tweet on Wednesday. “But the issues are beyond our control or our ability to help.”

Filing for Chapter 11 bankruptcy will allow FTX to continue operating while it develops a plan to pay off its creditors.

Cryptocurrency lender BlockFi announced on Twitter late Thursday that it is “unable to conduct business as usual” and is halting client withdrawals as a result of the FTX push.

In a letter posted to its Twitter profile late Thursday, BlockFi — which bailed out Bankman-Fried’s FTX early last summer — said it was “shocked and disappointed by the news regarding FTX and Alameda.”

The company concluded by saying that any future communication about its status will be “less than our clients and other interested parties are used to.”

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Bitcoin fell immediately after the letter was posted, losing close to 5% before surging above $17,000 overnight.

The original cryptocurrency, bitcoin was hovering around $20,000 for months before the FTX’s problems became public this week, which briefly sent it to around $15,500.

The Associated Press contributed to this report

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