STORY: Collapsed crypto exchange FTX has warned it could have over one million creditors pursuing it for payback.
The firm filed papers with a bankruptcy court late Monday (November 14) in the U.S.
In the papers it blames a “severe liquidity crisis” for its problems.
The filing also says questions arose about the leadership of boss Sam Bankman-Fried, and his handling of the firm’s assets.
Until recently, FTX was a rising star of the crypto market, with a valuation put at $32 billion in January.
Its sudden collapse has roiled crypto markets, with bitcoin down around a fifth just this month.
Now the company faces probes by regulators in the U.S. and elsewhere.
And contagion is the big fear, with analysts looking to see what other firms might be in trouble.
Landsberg Bennett chief investment officer Michael Landsberg says the scandal is a huge setback for the whole sector:
“This episode probably puts crypto back five-plus years. In terms of institutionally who can own it - if you’re running a pension fund, or I’m running millions of dollars for individual clients, you can’t possibly be owning… it’s one thing to lose money for clients, it’s another thing to be investing in frauds, and I think that’s where it looks like this is probably headed.”
Bankman-Fried hasn’t given up though.
On Tuesday (November 15) the Wall St Journal said he was still trying to raise funds from investors.
FTX’s few remaining staff reportedly spent the weekend making calls.
The Journal says it isn’t clear whether any investors were willing to put up new cash.