Collapsed crypto exchange FTX expects to have more than one million creditors, the firm has revealed in bankruptcy filings, as regulators and policy makers circle founder Sam Bankman-Fried and look to stave off further collapses across the industry.
In filings to a US bankruptcy court, FTX outlined the “severe liquidity crisis” that had sparked its downfall last week and said it was now speaking with financial regulators as it looked to wind up and pay creditors.
The implosion of FTX, one of the biggest exchanges in the sector and previously regarded as one of the most stable, has shaken the industry and sparked fears of contagion. The filings from the firm showed there are expected to be 100,000 creditors involved in the bankruptcy but warned the figure could swell to more than one million.
Regulators across jurisdictions are now closing in on the firm amid accusations of mishandling up to $10bn of customer funds. FTX said in the filings it had been in contact with the Securities and Exchange Commission, the Commodity Futures Trading Commission, “dozens of federal, state and international regulatory agencies” as well as federal prosecutors since its collapse.
Shockwaves are still rippling across the industry as the now disgraced former billionaire Bankman-Fried scrambles for ways to raise funds to pay customers. The Wall Street Journal reported today that the 30-year old and several of his remaining FTX acolytes have been ringing round to firms in search of up to $8bn cash in the hope of repaying customers in full.
Regulators in the Bahamas, where FTX is headquartered, have already appointed liquidators to run its unit in the country, after saying they were looking for any “criminal misconduct” by the collapsed crypto exchange.
“Given the magnitude, urgency, and international implications of the unfolding events with regard to FTX, the Commission recognized that it had to, and moved swiftly… to further protect the interests of clients, creditors, and other stakeholders globally,” the Securities Commission of the Bahamas said in a statement.
Bankman-Fried has fuelled speculation over the collapse, posting a series of cryptic messages on his Twitter profile asking his followers “what happened”.
The collapse has ignited calls for tighter regulatory oversight of the sector in the UK and beyond as investors face up to massive losses.
“The collapse will add further impetus to the clamour for the Financial Services and Markets Act framework to regulate activities relating to crypto-assets,” said Jonny Williams, head of London law firm Womble Bond Dickinson’s Financial Services Regulatory team.
“An addition to the Financial Services and Markets Bill, currently awaiting its report state in the Commons, provides the power to include all defined “cryptoassets” not only within the scope of the financial promotion restriction but also within in the scope of the “general prohibition” on regulated activities.”