Crypto giant FTX files for bankruptcy and CEO resigns in disgrace
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Crypto Giant FTX Files for Bankruptcy After $32 Billion Collapse: CEO Sam Bankman-Fried Resigns in Disgrace in the Face of SEC Investigation as Attorney Overseeing Enron Liquidation
FTX, the troubled cryptocurrency exchange, has filed for bankruptcy after a stunning financial implosion exposed concerns over the handling of client funds.
The Bahamas-based company, recently valued at $32 billion, said Friday morning it will file Chapter 11 bankruptcy proceedings in federal court in Delaware.
Controversial FTX founder and CEO Sam Bankman-Fried has stepped down and remains in an advisory role to help ensure an “orderly transition,” the company said.
Bankman-Fried, the crypto prodigy known by his initials SBF, is reportedly under investigation by the US Securities and Exchange Commission for possible securities law violations.
FTX said John J. Ray III, the Chicago-based attorney who oversaw the liquidation of Enron after that company’s collapse, will take over as CEO to guide the company through bankruptcy.
FTX Founder and CEO Sam Bankman-Fried Has Resigned as Company Files for Bankruptcy
FTX’s collapse follows a week of whiplash developments, starting with a confidence crisis after Changpeng “CZ” Zhao, the CEO of the world’s largest crypto exchange Binance, ordered a sell-off of FTX’s internal token.
Panicked FTX customers attempted to withdraw $6 billion in cash within 72 hours, and the company was unable to meet its depositor obligations due to a “liquidity crisis.”
According to the Wall Street Journal, FTX may have used customer deposits to fund risky bets by its affiliate hedge fund, Alameda Research.
After FTX was forced to freeze customer withdrawals, Binance intervened with an offer to bail the company out, but pulled out of the deal after it reportedly found a huge $8 billion hole in the company’s books.
Bankman-Fried struggled to find other financiers to bail out FTX, but as reports of federal investigations into his handling of client funds grew, he found no buyers.
Now, the company that made headlines with a Super Bowl ad featuring actor Larry David expressing skepticism about cryptocurrency is facing liquidation as it goes bankrupt.
“The immediate relief of Chapter 11 is appropriate to give the FTX Group an opportunity to assess its situation and develop a process to maximize recovery for stakeholders,” new FTX CEO Ray said in a statement.
Ray pledged to conduct the bankruptcy proceedings with “zeal, thoroughness and transparency.”
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