Embattled cryptocurrency exchange FTX, short billions of dollars, is seeking bankruptcy protection following its collapse this week.

FTX and its CEO and founder Sam Bankman-Fried are under investigation by the Department of Justice and the Securities and Exchange Commission to determine whether any criminal activity or securities offenses were committed. The person could not discuss details of the investigations publicly and spoke to The Associated Press on condition of anonymity.

The investigation is centering on the possibility that the firm may have used customers' deposits to fund bets at Bankman-Fried's hedge fund, Alameda Research. In traditional markets, brokers are expected to separate client funds from other company assets. Violations can be punished by regulators.

FTX had agreed earlier this week to sell itself to bigger rival Binance after experiencing the cryptocurrency equivalent of a bank run. Customers fled the exchange after becoming concerned about whether FTX had sufficient capital.

The crypto world had hoped that Binance, the world's largest crypto exchange, might be able to rescue FTX and its depositors. However, after Binance had a chance to look at the books of FTX, it became clear that the smaller exchange's problems were too big to solve.