FTX Trading Ltd., commonly known as FTX (short for “Futures Exchange“), is a bankrupt company that formerly operated a cryptocurrency exchange and crypto hedge fund. The exchange was founded in 2019 by Sam Bankman-Fried and Gary Wang and, at its peak in July 2021, had over one million users and was the third-largest cryptocurrency exchange by volume. FTX is incorporated in Antigua and Barbuda and headquartered in the Bahamas. FTX is closely associated with FTX.US, a separate exchange available to US residents.
Since November 11, 2022, FTX has been in Chapter 11 bankruptcy proceedings in the US court system. Public concern began when a November 2022 CoinDesk article stated that FTX’s partner firm Alameda Research held a significant portion of its assets in FTX’s native token (FTT). Following this revelation, rival exchange Binance‘s CEO Changpeng Zhao announced that Binance would sell its holdings of the token, which was quickly followed by a spike in customer withdrawals from FTX. FTX was unable to meet the demand for customer withdrawals. Binance signed a letter of intent to acquire the firm, with due diligence to follow, to ensure that customers could recover their assets from FTX in a timely manner, but Binance withdrew its offer the next day, citing reports of mishandled customer funds and U.S. agency investigations.[20] On December 12, 2022, founder Sam Bankman-Fried was arrested by the Bahamian authorities for financial offences, at the request of the US government.[21]
The current CEO of FTX is John J. Ray III, who specializes in recovering funds from failed corporations. Speaking of its previous management, Ray stated: “Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here.” He added that “this situation is unprecedented.”
History
Sam Bankman-Fried and Zixiao “Gary” Wang founded FTX in May 2019. FTX began within Alameda Research, a trading firm founded by Bankman-Fried, Caroline Ellison, and other former employees of Jane Street in 2017, in Berkeley, California. FTX is an abbreviation of “Futures Exchange”. Changpeng Zhao of Binance purchased a 20% stake in FTX for approximately $100 million, six months after Bankman-Fried and Wang started the firm.
In August 2020, FTX acquired Blockfolio, a cryptocurrency portfolio tracking app, for $150 million. In July 2021, the venture raised $900 million at an $18 billion valuation from over 60 investors, including Softbank, Sequoia Capital, and other firms. Bankman-Fried bought out Zhao’s stake for approximately $2 billion. In September of that year, FTX moved its headquarters from Hong Kong to The Bahamas.
On January 14, 2022, FTX announced a $2 billion venture fund named FTX Ventures, raising $400 million in Series C funding at a $32 billion valuation that month. The FTX Ventures website went offline in November 2022. On February 11, 2022, FTX.US announced that the company would soon begin offering stock trading to its US customers.
In February 2022, it was reported that FTX was creating a gaming division that would help developers add cryptocurrency, NFTs, and other blockchain-related assets into video games.
In July 2022, FTX finalized a deal giving it the option to buy BlockFi for about $240 million. The deal included a $400 million credit facility for BlockFi.
In August 2022, the Federal Deposit Insurance Corporation (FDIC) issued a cease-and-desist order to FTX for making “false and misleading representations” about deposits being covered by FDIC insurance following FTX president Brett Harrison’s tweet implying otherwise. Following the regulatory action, Harrison deleted the tweet and Bankman-Fried clarified in another tweet that FTX deposits are not insured by the FDIC.
On September 26, 2022, FTX.US won its bid at auction for the digital assets of bankrupt crypto brokerage Voyager Digital. The value of the deal was approximately $1.42 billion, including $1.31 billion in Voyager-held cryptocurrency and $111 million in additional consideration. The deal was subject to approval by bankruptcy courts and Voyager’s creditors. Following the FTX bankruptcy, in December 2022, the US subsidiary of Binance won the bid to buy the assets of Voyager for approximately $1 billion.
On September 27, 2022, FTX.US President Brett Harrison announced he would be stepping down from an active role at the exchange but would stay on in an advisory capacity. The company did not immediately announce a replacement for Harrison, who had been FTX.US president since May 2021.
In October 2022, it was reported that FTX was under investigation in Texas for allegedly selling unregistered securities.
In August 2023, it was reported that the company plans to restart offering cryptocurrency trading services after a restructuring of the bankrupt company is completed
