It took FTX less than a week to go from the world's third largest cryptocurrency exchange to bankruptcy court.
Cryptocurrency exchanges have filed for bankruptcy protection after the exchange suffered a cryptocurrency equivalent. FTX, hedge fund Alameda Research and dozens of other subsidiaries filed for bankruptcy on Friday morning.
US FTX, which was not originally included in the bailout, was also part of the company's bankruptcy filing.
The company says CEO and founder Sam Bankman Fred has resigned.
Bankman-Fried was recently worth $23 billion and is a major political donor to Democrats. According to Forbes and Bloomberg, which closely track the fortunes of the world's richest people, their net worth has almost evaporated.
WATCH : FTX founder Sam Bankman-Fried's net worth drops from nearly $16 billion to zero.
"I'm amazed at how much better things have been since the beginning of this week," Bankman-Fried wrote in a series of tweets.
FTX corrosion causes a ripple effect. Companies that backed FTX have already canceled their investments. Politicians and regulators are increasingly calling for stricter oversight of the cryptocurrency industry. This latest crisis has pressured the value of Bitcoin and other digital currencies. According to CoinMarketCap.com, the total market cap of all cryptocurrencies fell by about $150 billion last week.
FTX's failure isn't just limited to financials. The company has major sports sponsorships, including Formula 1 racing and a sponsorship deal with Major League Baseball.
On Friday, Miami-Dade County decided to end its relationship with FTX, meaning the Miami Heat's venue will no longer be known as FTX Arena.
Mercedes says it will remove FTX from its race cars starting this weekend.
FTX and Bankman-Fried, as well as his brother, were early investors in Semaphore, a major news company run by former BuzzFeed editor-in-chief and New York Times columnist Ben Smith.
Pinkman-Fried has other problems as well. On Thursday, a person familiar with the matter said the U.S. Department of Justice and the Securities and Exchange Commission are investigating FTX to determine whether it committed a criminal act or a securities violation. The person was unable to discuss details of the investigation publicly and spoke to The Associated Press on condition of anonymity.
The investigation focused on the possibility that FTX may have used customer deposits to fund bets on Alameda Research. In traditional markets, intermediaries are expected to separate client funds from other companies' assets. Violations are punishable by regulatory authorities.
See : FTX lends more than half of its clients' money to authorized trading firms:
Financial firm MF Global failed in a similar practice nearly a decade ago when it bundled client assets into its own rates.
In its bankruptcy filing, FTX registered more than 130 branches worldwide. The company values its assets between $10 billion and $50 billion with correspondingly estimated liabilities. The company appointed John Ray III, a longtime bankruptcy lawyer best known for his cleanup of Enron after its collapse, as its new CEO.
The FTX bankruptcy will surely be the most difficult bankruptcy in recent years. The company has registered more than 100,000 creditors, according to bankruptcy lawyers, and since nearly all of its customers are creditors because they deposit their money with FTX, it will take months to figure out who owes what and what.
Cryptocurrencies are not legally protected and politicians on both sides of the aisle have issued statements against bailouts of crypto investors such as Lehman Brothers.
"Unlike where they are (protecting securities in the event of a brokerage failure) or when the FDIC steps in in the event of a bank failure, these clients are really at risk," said Daniel Besikoff, a partner at Loeb & Loeb in Bankruptcy Law LLP. .
Earlier this week, FTX agreed to sell itself to its biggest rival, Binance, after facing off against the bank's cryptocurrency equivalent. Customers left the exchange after they became concerned that FTX had sufficient capital.
The cryptocurrency world hopes that Binance, the world's largest cryptocurrency exchange, will be able to save FTX and its shareholders. However, after reviewing FTX's books, Binance concluded that the smaller exchanges' problems were too big to handle and pulled the deal.
FTX is the latest in a series of disasters that have rocked the cryptocurrency industry, which is now under pressure from dwindling prices and financial regulators. Its failure was felt across the cryptocurrency world.
See : "Is there such a thing as encryption?" The FTX failure threatened the industry's reputation in Washington
Venture capital fund Sequoia Capital said Thursday that it has liquidated about $215 million of its investment in FTX.
See : FTX issue is a huge headache for private investors.
Cryptocurrency lender BlockFi announced on Twitter last Thursday that it was "unable to conduct business as normal" and suspended customer withdrawals due to the fall of FTX.
In a message posted on its Twitter profile late Thursday, Blockfy, which was rescued by FTX Bankman-Fried earlier this summer, said it was "shocked and dismayed by the news from FTX and Alameda." The company concluded that any future communications about its status "will be less frequent than those of our customers and other interested parties."
Bitcoin prices plummeted shortly after the message was posted and traded below $17,000. The original cryptocurrency, Bitcoin, had hovered around $20,000 for several months before the FTX release this week, briefly dropping to $15,500.
Shares of publicly traded cryptocurrency exchanges Coinbase and online Robinhood rose about 12%.