FTX has filed for Chapter 11 bankruptcy as Sam Bankman-Fried stepped down from his position as CEO of the company.
Bankman-Fried made the announcement last Friday after what was a volatile week for FTX plagued by financial and solvency issues. John J. Ray III will replace Bankman-Fried as CEO.
Alameda Research, FTX’s investment sister firm, and reportedly up to 130 affiliated companies are also a part of the bankruptcy voluntary proceedings.
“Today, I filed FTX, FTX US, and Alameda for voluntary Chapter 11 proceedings in the US,” stated Bankman-Fried.
“I’m really sorry, again, that we ended up here. Hopefully things can find a way to recover. Hopefully this can bring some amount of transparency, trust, and governance to them. Ultimately hopefully it can be better for 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.
“Ultimately I’m optimistic that Mr. Ray and others can help provide whatever is best.”
FTX’s valuation plummeted from $32bn to bankruptcy in the space of five days after it was revealed last Sunday Binance will liquidate all its holdings of FTX’s native token FTT, which started a ripple effect that would hinder the cryptocurrency’s price.
But what was more revealing, and what ultimately led to FTX’s downfall was that Alameda Research was relying on FTT’s price and funds from FTX to run, after it has since been reported by The Wall Street Journal that the ex-CEO of FTX transferred $10bn of consumer funds to Alameda.
Binance were initially interested in acquiring FTX but its CEO Changpeng Zhao swiftly backed out of the deal due to corporate due diligence and reports of the mishandling of consumer funds.
Ray III spoke on FTX’s decision to file for bankruptcy and his new role within the firm, stating: “The immediate relief of Chapter 11 is appropriate to provide the FTX Group the opportunity to assess its situation and develop a process to maximise recoveries for stakeholders.
“The FTX Group has valuable assets that can only be effectively administered in an organised, joint process. 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.”
FTX is also being investigated by the Securities and Exchange Commission (SEC) and the Justice Department as a result of its financial problems.
As a part of the department’s wider crackdown on crypto exchange platforms and the cryptocurrencies used on their sites, of particular interest for SEC is whether or not the cryptocurrencies listed on FTX were securities.