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FTX Files For Bankruptcy—Former Billionaire Sam Bankman-Fried Resigns As CEO

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.

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 Digital Markets Ltd., FTX Australia Pty Ltd. and FTX Express Pty 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 that FTX has “valuable assets that can only be effectively administered in an organized, joint process.”

“I was shocked to see things unravel the way they did earlier this week,” Bankman-Fried said in tweets about the bankruptcy shortly after the announcement, adding that the proceedings “[don’t] necessarily mean the end for the companies or their ability to provide value and funds to their customers.”

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. EST, while ether shed 5% to $1,230.

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 that 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. Binance quickly swooped in on a rescue mission, announcing a nonbinding agreement to purchase FTX on Tuesday—but backed out one day later, citing liquidity issues “beyond our control or ability to help.” 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.”

Tangent

Bankman-Fried’s fortune swelled to more than $26 billion as pandemic-era trading helped push FTX’s valuation to as much as $32 billion at the end of last year. Just last month, the 30-year-old referred to himself as a modern-day J.P. Morgan for helping to acquire struggling crypto firms. Following FTX’s own collapse, Bankman-Fried was pulled from Forbes’ billionaire ranks.

Further Reading

Stripe, Deloitte, Sullivan & Cromwell Are Among 53 FTX Advisors, Vendors And Bankers Weathering Exchange’s Collapse (Forbes)

Exclusive: These Investors Stand To Lose The Most From FTX’s Implosion (Forbes)

Binance Bails On FTX Acquisition — Here’s What Led To The FTX Crypto Crash (Forbes)

Regrets? Bankman-Fried Has A Few (Forbes)