The FTX crypto empire has been declared bankrupt, but what happens next?

Sam Bankman-Fried’s crypto empire has collapsed: FTX Group filed for Chapter 11 bankruptcy in Delaware less than a day after saying everything was fine. International exchange FTX.com, US platform FTX.US, hedge fund Alameda Research and about 130 affiliated subsidiaries are part of the lawsuit, writes Vice.

Chapter 11 bankruptcy would give the company a chance to continue operating while it figures out how to get customers back their money, but it’s unclear if that’s possible. According to reports, the firm used clients’ money to fund risky bets and acquisitions through Alameda Research, burning a $10 billion hole in its books, which is hardly news to clients of crypto firms that have suffered from previous crypto project failures.

Among the latest such examples is cryptobank Celsius, which suspended withdrawals after being exposed for making risky bets and investments using customer deposits, and shortly thereafter filed for the same Chapter 11 bankruptcy. Lender Voyager Digital also suspended withdrawals and was seen using customer deposits in similar high-risk transactions, and filed for bankruptcy shortly thereafter. Ironically, Bankman-Fried actually planned to buy Voyager and intended to save Celsius, but abandoned those plans.

Ironically, the FTX crypto exchange was promoted as a responsible and altruistic player in the chaotic crypto industry. The bankruptcy announcement adds another devastating twist, as many believed the U.S. arm of FTX.US was stable even as the international version of the exchange collapsed. During the chaos of the past week, Bankman-Fried did everything possible to create the impression that FTX.US was not involved in defrauding customers.

Bankman-Fried had already stepped down as chief executive and was replaced by John Jay Ray III, who had previously led Enron’s post-bankruptcy recovery. Bankman-Fried will remain with the company to “assist in an orderly transition.” The statement also said that employees around the world are expected to continue working for FTX Group and to assist Ray during the bankruptcy proceedings, but thousands of employees have already been laid off. The entire compliance and legal team, as well as employees of the FTX Future Fund charity, left.

FTX is unlikely to survive. Well-known venture capital firm Sequoia Capital, which led a $400 million investment round that valued FTX at $32 billion, has already written off its investment in the project. In addition, California became the first state to announce an investigation into FTX. And the US Department of Justice is already conducting a separate investigation into FTX.

The bankruptcy announcement is likely far from the end of the story, as crypto investors are watching the market for signs of “contagion” from the fall of FTX, which will of course undermine investor and client confidence in cryptocurrency projects.