FTX, one of the largest crypto exchanges in the world, founded by Sam Bankman-Fried and previously valued at $32 billion has now filed for bankruptcy amidst a massive liquidity crunch.

This came after FTX's sister company Alameda Research's balance sheet showed an alarming amount of FTT (FTX's native token) in it.

Following this, Binance CEO and founder, Changpeng Zhao – who was also an early investor in FTX – publicly announced his plans to sell off his FTT, which drove down the value of the token as customers frantically withdraw funds amidst fear of the company's future, leading to a stark 72% drop in FTT’s price. As FTT’s price fell, so did the value of FTX’s assets that were tied to it.

Shortly after, he announced the crypto exchange company was looking to fully acquire its US-based peer FTX but pulled out citing "due diligence and the latest news report regarding mishandled customer funds and alleged US agency investigations", in a tweet. This further precipitated crypto’s highest-profile collapse in recent years.

Following Binance's withdrawal from the deal and massive liquidity crunch, its market valuation fell from $32 billion to bankruptcy in a few days. The cryptocurrency exchange FTX said on Friday it was commencing bankruptcy proceedings in the United States and Sam Bankman-Fried is resigning from his role as chief executive officer.

In the middle of this, several investors including Sequoia capital have written off their investments in the crypto exchange company. Other companies, including Gamestop, and Visa Inc are also severing their partnerships with the firm.

More headwinds in the crypto space are expected ahead as events unfold, due to FTX's involvement with many institutions globally.