EXPLAINER: What is happening at the bankrupt crypto exchange FTX?

Imploding cryptocurrency trading firm FTX is now billions of dollars short after experiencing the crypto equivalent of a bank run.

The stock exchange, which used to be one of the world’s largest, filed for bankruptcy protection last week, and the CEO and founder resigned. Hours later, the trading firm said there had been “unauthorized access” and funds had disappeared. Analysts say hundreds of millions of dollars may have disappeared.

The dissolution of the once giant stock exchange sends shock waves through the industry. Here’s a look at the company’s collapse so far:

WHY DID FTX GO BANKRUPT?

Customers fled the exchange amid fears over whether FTX had sufficient capital, and it agreed to sell itself to rival crypto exchange Binance. But the deal fell through pending Binance’s due diligence on FTX’s balance sheet.

FTX had valued its assets between $10 billion and $50 billion, and listed more than 130 affiliates around the world, according to the bankruptcy filing.

FTX and dozens of affiliates — including CEO Sam Bankman-Fried’s hedge fund, Alameda Research — filed for bankruptcy in Delaware on Friday.

This week’s developments marked a shocking turnaround for Bankman-Fried, who was hailed as something of a savior earlier this year when he helped prop up a number of cryptocurrency companies that ran into financial trouble. He was recently estimated to be worth $23 billion and has been a prominent political donor to Democrats.

WAS IT HACKED TOO?

FTX confirmed on Saturday that there had been unauthorized access to the accounts, hours after the company filed for Chapter 11 bankruptcy protection.

A debate formed on social media over whether the exchange was hacked or a company insider had stolen funds – a possibility that cryptocurrency analysts could not rule out.

Exactly how much money is involved is unclear, but the analysis firm Elliptic estimated on Saturday that 477 million dollars were missing from the stock exchange. FTX’s new CEO John Ray III said it was shutting down the ability to trade or withdraw funds and taking steps to secure customers’ assets.

IS FTX UNDER INVESTIGATION?

The Royal Bahamas Police Force said on Sunday it was investigating FTX, adding to the company’s problems. The police force said in a statement on Sunday that it was working with Bahamian securities regulators to “investigate whether criminal acts have occurred” involving the exchange, which had moved its headquarters to the Caribbean country last year.

IS ANYONE ELSE INVESTIGATING?

Even before the bankruptcy filing and lack of funds, the U.S. Department of Justice and the Securities and Exchange Commission began investigating FTX to determine whether criminal activity or securities violations had been committed, according to a person familiar with the matter who spoke to The Associated Press last week on condition of anonymity because they could not discuss details of the investigations publicly.

WHAT ARE THE EFFECTS?

Companies that backed FTX are writing down investments, and the prices of bitcoin and other digital currencies have fallen. Politicians and regulators are calling for stricter oversight of the unwieldy industry. FTX said Saturday it was moving as many identifiable digital assets to a new “cold wallet manager,” which is essentially a way to store assets offline without allowing remote control.

FTX had also entered into a number of sports-related agreements, some of which are crumbling. The NBA’s Miami Heat and Miami-Dade County decided Friday to end their relationship with FTX, and will rename the team’s arena. Earlier on Friday, Mercedes said it would immediately remove FTX logos from its Formula 1 cars.

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