FTX Files for Chapter 11 Bankruptcy and SBF Resigns
Sam Bankman-Fried has resigned from his position as FTX CEO, and the many companies in his crypto empire, will file for chapter 11 bankruptcy.
By: Aleksandar Gilbert •FTX Crisis
Sam Bankman-Fried has resigned from his position as FTX CEO and the many companies in his crypto empire will file for chapter 11 bankruptcy.
Referred to collectively as the FTX Group, the approximately 130 affiliated companies filing for bankruptcy include FTX US, FTX.com and Alameda Research, the storied trading firm Bankman-Fried founded, according to a news release.
The bankruptcy, filed in Delaware, will “begin an orderly process to review and monetize assets for the benefit of all global stakeholders,” while Bankman-Fried will “remain to assist in an orderly transition.”
John J. Ray III, the attorney who steered Enron through bankruptcy, has assumed the position of FTX Group CEO, according to a news release.
A Stunning Fall
It is a stunning fall for a company and its founder. Bankman-Fried was perhaps the most famous of the industry’s representatives, a 30-year-old billionaire who graced magazine covers, towering billboards, and made regular trips to Washington, D.C. to lobby lawmakers.
Only 10 days ago, FTX was seen as a model company, apparently lean and profitable. But a report published Nov. 2 by CoinDesk suggested FTX and Alameda were on shaky financial footing, with almost half of the latter’s assets tied up in FTT, an illiquid token issued by FTX. Further reports, including from The Wall Street Journal and Bloomberg News, said that FTX is being investigated by regulators for lending out billions of user funds to Alameda.
Bankman-Fried wrote on Twitter Friday morning he hoped the proceedings could “bring some amount of transparency, trust, and governance” to customers.
“This doesn’t necessarily have to mean the end for the companies or their ability to provide value and funds to their customers chiefly, and can be consistent with other routes,” he said.
On Sunday, Binance founder Changpeng Zhao said his company would sell $500M in FTT it held due to recent “revelations,” sparking a run on FTX’s deposits and a fire sale on FTT.
FTX did not have enough money to honor its customers’ withdrawal requests. A bailout from Binance materialized, then crumbled amid Binance’s scrutiny of FTX’s financial statements.
Bankman-Fried took to social media Thursday to apologize for FTX’s collapse, saying it was the result of a labeling and subsequent math error. But he did not address reports about misappropriation of customer funds.
On Friday, he said a post-mortem would be coming soon.
“I’m piecing together all of the details, but I was shocked to see things unravel the way they did earlier this week,” he wrote.