Topline
Embattled cryptocurrency exchange FTX announced on Friday morning it has commenced Chapter 11 bankruptcy proceedings and that its former billionaire CEO Sam Bankman-Fried has resigned from the company following a liquidity crisis that forced a sudden unraveling of the exchange at one point worth $32 billion.
The announcement comes one day after Bankman-Fried said he “f**ked up, and should have done better.”
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Key Facts
In a press release, FTX said it would pursue the bankruptcy proceedings for FTX.com, FTX US, Bankman-Fried’s proprietary trading firm Alameda Research and approximately 130 additional affiliated companies.
Five subsidiaries were not included in the bankruptcy proceedings, FTX said: LedgerX (known as FTX US Derivatives), FTX Digitial Markets Ltd. and FTX Australia Pty Ltd. and FTX Express Pay Ltd.
A lawyer who led disgraced energy firm Enron through its storied collapse in the early 2000s, John J. Ray III has been tapped to replace Bankman-Fried, who will “remain to assist in an orderly transition,” the company said.
In a statement, Ray said “the immediate relief” of Chapter 11 is “appropriate” to provide FTX the opportunity to develop a process to maximize recoveries for stakeholders, adding FTX has “valuable assets that can only be effectively administered in an organized, joint process.”
Cryptocurrency markets, already down 20% over the past week, tumbled after the announcement, with the price of bitcoin falling 4% to $16,600 in the hour through 9:45 a.m. ET, while ether shed 5% to $1,230.
This is a developing story. Please check back for updates.
Key Background
FTX’s bankruptcy announcement and the overnight departure of its 30-year-old founder cap a week of turmoil for the crypto wunderkind. In a series of tweets on Thursday, Bankman-Fried addressed FTX’s liquidity crisis, saying the firm saw roughly $5 billion of withdrawals on Sunday—”the largest by a huge margin” after Binance CEO Changpeng Zhao tweeted his firm would sell all of its holdings in the FTX crypto token due to “recent revelations,” an apparent reference to a Coindesk report last Wednesday that Alameda Research largely held its assets in FTX’s coin. FTX paused user withdrawals, and its namesake token collapsed in value. In his Thursday tweet thread, Bankman-Fried said he was “substantially off on [his]
sense of users’ margins,” adding: “I f**ked up, and should have done better.”
Further Reading
Binance Bails On FTX Acquisition — Here’s What Led To The FTX Crypto Crash (Forbes)
Regrets? Bankman-Fried Has A Few (Forbes)
Source: https://www.forbes.com/sites/jonathanponciano/2022/11/11/ftx-files-for-bankruptcy-former-billionaire-sam-bankman-fried-resigns-as-ceo/