Crypto sell-off resumes as weeklong FTX saga ends in bankruptcy filing

Cryptocurrencies resumed their sell-off Friday as FTX announced it has filed for Chapter 11 bankruptcy in the U.S.

Bitcoin fell 3%, to $16,915.38, while ether lost 2%, to $1,276.66, according to Coin Metrics. They’re down 21% and 25%, respectively, for the week.

FTX CEO Sam Bankman-Fried has also resigned, according to a statement posted to FTX’s Twitter account Friday.

Bankman-Fried became a so-called white knight for the industry, helping bring crypto to the masses through his relationships with high-profile celebrities, regulators and institutions in addition to his exchange product.

Investors are monitoring the fallout from the three-year-old FTX and its sister company, trading firm Alameda Research, still unclear on the extent of the damage that will spread to the rest of the market.

About 130 additional global companies, including Alameda and FTX U.S., have also begun the bankruptcy process.

Some of the biggest names in finance — including SoftBank, BlackRock, Tiger Global, Thoma Bravo, Sequoia and Paradigm — invested in FTX, which was valued at $32 billion during its last funding round.

“We are in the midst of another deleveraging event in the crypto ecosystem and it is so far having limited spillover to broader equity markets beyond sentiment, as crypto institutions lent to each other,” Morgan Stanley analyst Sheena Shah said in a note Friday.

“We expect another round of crypto QT” — or what the firm has previously described as the “crypto equivalent of quantitative tightening” — “with creditor exposures revealed in coming weeks,” she added. “These creditors are currently selling crypto assets to cover risks, adding to volatility.”