FTX Files US Bankruptcy Proceedings, Sam Bankman-Fried Steps Down as CEO

Crypto exchange FTX filed for US bankruptcy on Friday and Sam Bankman-Fried stepped down as CEO, after a quick cash crisis at the cryptocurrency group prompted the intervention of regulators around the world.

The beleaguered crypto trading platform has been scrambling to raise billions in cash to stave off collapse after traders rushed to withdraw $6 billion (roughly Rs. 48,320 crore) from the platform in just 72 hours and rival exchange Binance abandoned a proposed rescue deal.

The company said in a statement shared on Twitter on Friday that FTX, its crypto-trading fund affiliated with Alameda Research and about 130 other companies have filed for Chapter 11 bankruptcy in Delaware.

John J Ray III has been appointed to take over as CEO of Bankman-Fried, the statement said.

“I’m so sorry, again, that we ended up here,” said FTX founder Bankman-Fried, in a series of tweets after the bankruptcy filing was first filed.

In her tweets, Bankman-Fried said the bankruptcy filing “doesn’t necessarily mean the end of the companies” and that she is “hopeful” the new team boss “will help deliver the best”.

In its bankruptcy filing, FTX Trading said it has $10 billion (about Rs. 80,530 crore) to $50 billion (about Rs. 4,02,660 crore) of assets, $10 (about Rs. 800 ) to $50 billion in debt, and more. there are 100,000 creditors.

The week’s turmoil hit already struggling cryptocurrency markets, sending bitcoin to a two-year low.

FTX was trying to raise about $9.4 billion (about Rs. 75,740 crore) from investors and rivals, Reuters reported citing sources, as the exchange sought to save itself after customer withdrawals.

“The filing of Chapter 11 is a necessary step to allow the company to assess the situation and develop plans going forward for the benefit of stakeholders,” Ray said in a Slack memo to FTX employees seen by Reuters.

“I realize that the recent news of this situation has been troubling and stressful, but I also know that the bankruptcy filing will be the beginning of the way forward.”

Other investors, including Sequoia and SoftBank, had already marked FTX’s investment at zero. SkyBridge Capital is working to buy back its FTX stake, the company’s founder Anthony Scaramucci said in an interview with CNBC on Friday.

regulatory processing

These developments mark a rapid turnaround for Bankman-Fried, a 30-year-old crypto magnate, whose wealth was estimated by Forbes at around $17 billion (roughly Rs. 1,36,850 crore) two months ago.

Bitcoin fell after the FTX announcement, down 3.9 percent on the day at $16,816 (roughly Rs. 13 lakh) at 1603 GMT (09:33 pm IST).

Shares of cryptocurrency and blockchain-related firms also fell on the news.

FTX token FTT fell 30 percent on Friday, facing a weekly loss of 88 percent.

As FTX problems mount regulators around the world step in.

FTX is under investigation by the US Securities and Exchange Commission, the Department of Justice, and the Commodity Futures Trading Commission, according to a source familiar with the investigation.

The Securities and Exchange Commission of Cyprus has asked FTX EU to suspend its operations on November 9, the regulator said on Friday.

Bankman-Fried did not respond to Reuters requests for comment.

“If Binance stopped buying FTX after only 24 hours of hard work the writing was on the FTX wall,” said Antoni Trenchev, founder of crypto Lender Nexo.

“We are now entering the next phase of the fall, where we see the second-order effects and find out what associations have been exposed to FTX and Alameda.”

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