Sam Bankman-Fried, co-founder of cryptocurrency platform FTX, has long been a vocal advocate for smoother access to the crypto market for the general public, particularly in the United States
Sam Bankman-Fried has stunned the cryptocurrency world with the rapid turnaround in fortunes of FTX

Further details on the bankruptcy of crypto exchange FTX emerged on Saturday, even as peers and partners distanced themselves from the firm and sources told Reuters at least a billion dollars of customer funds on the exchange had vanished.

The saga that has shaken the crypto world began with a rumour on Nov. 2 and culminated on Friday with FTX filing for U.S. bankruptcy court protection from creditors and founder Sam Bankman-Fried resigning as chief executive in the industry's highest-profile collapse.

The distressed crypto trading platform had struggled to raise billions to stave off bankruptcy as traders rushed to withdraw $6 billion from the platform in just 72 hours and rival exchange Binance abandoned a proposed rescue deal this week.

FTX, affiliated crypto trading firm Alameda Research and about 130 of its other companies have commenced voluntary Chapter 11 bankruptcy proceedings in Delaware, FTX said on Friday in a statement on Twitter.

In a follow-up tweet, FTX said subsidiaries LedgerX LLC, FTX Digital Markets, FTX Australia Pte Ltd, FTX Capital Markets, Embed Financial Technologies and Embed Clearing were not included in the Chapter 11 filings.

People familiar with the matter told Reuters at least $1 billion of customer funds have vanished from FTX.

Bankman-Fried secretly transferred $10 billion of customer funds from FTX to Alameda, they said. A large portion of that has since disappeared, they said, with one source put the missing amount at about $1.7 billion and another estimating the gap was between $1 billion and $2 billion.

The nine days of turmoil hit already-struggling cryptocurrency markets, sending bitcoin to two-year lows. Bitcoin dropped after FTX's announcement and is down 18% this month, at $16,818 on Saturday.

Shares of cryptocurrency and blockchain-related firms have declined. FTX's token FTT plunged 30% on Friday, bringing its collapse this month to 91%.

"Things will continue to simmer after the FTX crash," said Alan Wong, operations manager of Hong Kong Digital Asset Exchange.

"With a gap of $8 billion between liabilities and assets, when FTX is insolvent, it will trigger a domino effect, which will lead to a series of investors related to FTX going bankrupt or being forced to sell assets. In an illiquid bear market, the event will lead to a new round of cryptocurrency declines, as well as a liquidation of leverage."

It was an abrupt fall from grace for a company that was once a darling of the crypto industry. FTX raised $400 million from investors in January, valuing the company at $32 billion.

Bankman-Fried, 30, known for his shorts and t-shirt attire, has morphed from being the poster child of crypto's successes to the protagonist of the industry's highest-profile crash.

Graphic: Pain in crypto land,

CONTAINING LOSSES

In its bankruptcy petition, FTX Trading said it has $10 billion to $50 billion in assets, $10 billion to $50 billion in liabilities, and more than 100,000 creditors. John J. Ray III, a restructuring expert, has been appointed to take over as CEO.

Cryptocurrency exchange Coinbase Global Inc will write off the investment its ventures arm made in FTX in 2021, according to a person familiar with the matter. Its CEO Brian Armstrong told CNBC crypto markets need regulation to avoid more washouts like FTX.

U.S. video game retailer GameStop Corp said it was winding down its gift card marketing partnership with FTX US and providing full refunds to customers.

Bankrupt crypto lender Celsius said in a tweet it has some Serum tokens on FTX, most of which were locked, as well as some $13 million in loans to Alameda.

"We believe cryptocurrency markets remain too small and too siloed to cause contagion in financial markets, with an $890 billion market cap in comparison to U.S. equity's $41 trillion," Citi analysts wrote.

"Over four years, FTX raised $1.8bn from venture capital & pension funds. This is the primary way financial markets could suffer, as it may have further minor implications for portfolio shocks in a volatile macro regime."

Hedge fund Galois Capital had half its assets trapped on FTX, co-founder Kevin Zhou told investors in a recent letter, the Financial Times reported, estimating the amount to be around $100 million.