Beleagured crypto exchange FTX said Friday that it filed for bankruptcy and that its CEO Sam Bankman-Fried stepped down, just days after revealing a devastating financial crunch that has started to take down the broader digital currency market.
FTX filed for Chapter 11 bankruptcy in the U.S., meaning it will try to restructure its ailing business. The company — once one of the world's largest crypto trading platforms — halted customer withdrawals earlier this week after hints of financial instability triggered a run on the exchange.
“The immediate relief of Chapter 11 is appropriate to provide the FTX Group the opportunity to assess its situation and develop a process to maximize recoveries for stakeholders,” John Ray III, the company’s new CEO, said in a press release.
The bankruptcy filing was poised to deal another blow to the crashing crypto market and further destroy the industry's standing in Washington, where FTX and political megadonor Bankman-Fried in recent months led a campaign to influence emerging laws and regulations. Regulatory agencies around the world are circling FTX and Bankman-Fried in the aftermath of the trading scandal. Crypto startups with ties to FTX have also suffered disruptions to their operations.
The bankruptcy filing indicates that Bahamas-based FTX and more than 130 affiliates and subsidiaries, including Bankman-Fried’s investment firm Alameda Research, have between $10 billion to $50 billion of liabilities versus $10 billion to $50 billion of assets. The company disclosed more than 100,000 creditors, which likely include customers, and indicated that funds will be available for them.
Bankman-Fried will “assist in an orderly transition,” according to FTX. The 30-year-old former billionaire saw his fortune wiped out this week.
“The FTX Group has valuable assets that can only be effectively administered in an organized, joint process," said Ray, who was also involved in winding down Enron. "I want to ensure every employee, customer, creditor, contract party, stockholder, investor, governmental authority and other stakeholder that we are going to conduct this effort with diligence, thoroughness and transparency."
The company is pursuing Chapter 11 protection in Delaware federal court only hours after the Securities Commission of the Bahamas, where FTX is located, announced it was freezing the company’s assets.
“I'm really sorry, again, that we ended up here," Bankman-Fried said in a Twitter post after the bankruptcy petition was filed. "Hopefully things can find a way to recover. Hopefully this can bring some amount of transparency, trust, and governance to them."
FTX’s U.S. operation, which Bankman-Fried claimed Thursday had been "not financially impacted by this shitshow," is among the entities seeking bankruptcy protection. A source with knowledge of the situation said that “there aren’t many people left” at the company’s U.S. operation.
One key entity whose assets are not included in the sprawling company’s bankruptcy filing is its U.S. derivatives trading platform, which has reverted to the LedgerX name it carried before it was acquired by FTX last fall.
Officials at the Commodity Futures Trading Commission, where LedgerX has a license, had been monitoring the chaos surrounding Bankman-Fried over fears the Bahamas-based exchange’s problems could affect regulated markets in the U.S.
FTX did not respond to a request for comment.
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By: Sam Sutton and Declan Harty
Title: Crypto giant files for bankruptcy, megadonor CEO resigns
Sourced From: www.politico.com/news/2022/11/11/ftx-files-for-bankruptcy-ceo-resigns-00066479
Published Date: Fri, 11 Nov 2022 09:53:08 EST
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