Fried stepped down from the Bahamas-headquartered company last week, and its new chief John Ray has initiated a strategic review of its global assets. The company now plans to sell or reorganise some businesses as it tries to find ways to protect user money.

Apart from FTX, Alameda Research, a hedge fund run by Fried and FTX US, which is the U.S.-based subsidiary of FTX, has also filed for bankruptcy under Section 11.

How FTX ran into trouble

The crises in FTX emerged after reports regarding its shaky financials gained ground over the past couple of weeks. On November 2, CoinDesk, a crypto news website, reported close links between Alameda Research and FTX as the now-leaked balance sheets of the hedge fund showed unusually heavy amounts of FTT tokens. Both, despite being owned by Fried, Alameda Research and FTX are supposed to be two different entities.

On November 6, Binance's Changpeng Zhao said as part of Binance’s exit from FTX equity last year, it received roughly $2.1 billion USD equivalent in cash (BUSD and FTT). He said due to “recent revelations”, Binance has decided to liquidate the remaining FTT on its books. This showed Alameda's majority of financial health rested on a coin invented by its sister company.

It has been alleged that Fried secretly moved $10 billion of FTX customer funds to Alameda Research. Of this, a major chunk worth ₹1.7 billion has gone missing.

FTX, at its peak, was valued at $32 billion and is backed by existing investors like Ontario Teachers’ Pension Plan, Tiger Global, Temasek and Softbank Vision Fund. In 2019, the crypto exchange, for the first time raised $900 million at a valuation of $18 billion. FTX has its native cryptocurrency token, FTT, which traders use for operations.

Nishad Singh

Crypto firm FTX owes over $3.1 bn to 50 largest creditors