What’s happening at the cryptocurrency exchange FTX

FTX used to be one of the largest in the world exchanges for digital money called cryptocurrency. FTX’s problems worsened over the weekend and threatened the entire industry.

Sam Bankman-Fried founded FTX in 2019. He quickly grew the trading company by attracting major investors to Silicon Valley.

Last week, FTX filed for bankruptcy. Bankman-Fried has resigned. The company said some money was missing. And experts say hundreds of millions of dollars may have been lost.

The collapse of FTX comes as a shock to the cryptocurrency industry, which has seen a fair number of woes this year.

Bitcoin, the world’s largest cryptocurrency, has lost around 65% in value over the year. and ether, the second most valuable cryptocurrency in the world, has lost 20% over the past weekend, data from CoinDesk showed on Monday.

Why did FTX fail?

Investors fled FTX last week over fears that the company had enough cash. And FTX has agreed to sell itself to another cryptocurrency exchange Binance. But the deal fell through while Binance was researching FTX’s finances.

On Friday, FTX and several related companies filed for bankruptcy. The company had valued itself at between $10 billion and $50 billion. It has listed more than 130 partner companies around the world, its bankruptcy filing said.

And Bankman-Fried, who bailed out several cryptocurrency firms, also stepped down as chief executive of FTX.

FILE – FTX CEO Sam Bankman-Fried poses for a photo, at an unspecified location, in this undated handout photo obtained by Reuters on July 5, 2022. (FTX/Handout via REUTERS)

Has it been hacked?

On Saturday, FTX said there had been “not allowed access” to his accounts, just hours after filing for bankruptcy. A debate started on social media as to whether the swap was violated or a company member had stolen money.

It’s unclear exactly how much money is involved. But analyst firm Elliptic estimated on Saturday that $477 million was missing from the trade. The new head of FTX, John Ray III, said he would halt any trades or pullbacks and take steps to secure investors’ money.

Is my bitcoin safe?

Cory Klippsten is the head of financial services firm Swan Bitcoin. He said people who own bitcoins should be fine if they keep them away from exchanges like FTX. He said they work like a crypto”gamble website.”

“Any exchange is a security risk,” Klippsten said. Some work better than others, but she said a better option is to take control of your digital resources. With bitcoin, it is possible to take coins off the exchange, he said.

Is FTX Under Investigation?

On Sunday, the Royal Bahamas Police Force said it was investigating FTX, adding to the company’s woes. The company had moved its headquarters to the Caribbean country last year.

Even before the bankruptcy filing and missing money, the US Department of Justice and the Securities and Exchange Commission began looking into FTX. Agencies were looking into whether criminal activity or financial crimes had been committed, said a person familiar with the issue The Associated Press.

What will happen next?

The outcome of the FTX bankruptcy is uncertain. But its failure will likely result in the destruction of billions of dollars of wealth and create even more doubts about cryptocurrencies.

Sequoia Capital has invested in several successful companies which have become Apple, Cisco, Google, Airbnb and YouTube. He described his meeting with Bankman-Fried as “talking to the world’s first trillionaire” and decided to invest in FTX.

After FTX filed for bankruptcy, Sequoia wrote off its $213 million in investments. It’s a pension the fund in Ontario, Canada also canceled its investment.

Bankman-Fried had come under some criticism prior to the collapse of FTX. It largely operated FTX out of US oversight from its headquarters in the Bahamas. But Bankman-Fried spoke of the need for more regulation of the cryptocurrency industry.

Many cryptocurrency proponents oppose government oversight. Now, FTX’s collapse may have helped support tighter regulation.

I’m Caty Weaver.

Dan Novak adapted this story for VOA Learning English based on reports from The Associated Press.

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Words in this story

exchange – n. an event where people exchange things of similar value to each other

not allowed — adj. without permission

access – n. a way to approach, a or to something or someone

hack – n. secretly gain access to files on a computer or network to gain information, cause damage, etc.

gamble — v.tr. to play a game in which you can win or lose money or property

pension – n. an amount of money that a company or the government pays to an elderly or sick person who is no longer working

regulation – n. an official rule or law that says how something should be done

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