UPDATED 11:15 EDT / NOVEMBER 11 2022


Crypto exchange FTX files for Chapter 11 bankruptcy as CEO steps down

Sam Bankman-Fried’s cryptocurrency exchange FTX Trading Ltd. filed for Chapter 11 bankruptcy in the United States, according to a statement published today on Twitter.

Bankman-Fried also resigned as chief executive and has been replaced by John J. Ray III, the attorney who oversaw the liquidation of Enron.

According to the statement, an additional 130 affiliated companies, including FTX US and Alameda Research, will also be joining the exchange in the bankruptcy process. The subsidiaries LedgerX LLC, FTX Digital Markets Ltd., FTX Australia Pty Ltd. and FTX Express Pay Ltd. were excluded from the proceedings.

“The immediate relief of Chapter 11 is appropriate to provide the FTX Group the opportunity to assess its situation and develop a process to maximize recoveries for stakeholders,” Ray said. “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.”

The news comes after a tumultuous week of news for the exchange that began with rumors that FTX was insolvent after Binance Holdings Ltd., competitor and largest exchange by volume, announced plans to liquidate its entire holdings of FTX’s native FTT tokens. This announcement came after news of irregularities in the balance sheets between FTX and Alameda Research, a quantitative crypto trading firm and sister company to FTX, that showed that it was more tightly entangled with FTX than it appeared.

The liquidation news led to a run of withdrawals on FTX, which caused illiquidity issues and soon reports of sluggish and suspended withdrawals surfaced.

On Wednesday morning Binance tendered a tentative offer to acquire FTX in order to ease the exchange’s liquidity problems pending due diligence. However, the deal faltered and Binance backed out after reviewing FTX’s corporate structure and books.

“As a result of corporate due diligence, as well as the latest news reports regarding mishandled customer funds and alleged US agency investigations, we have decided that we will not pursue the potential acquisition of FTX.com,” Binance wrote on Twitter.

On Thursday, Bankman-Fried apologized in a series of tweets, saying that he “f—ked up” and “should have done better.” He added that he was winding down Alameda Research and was in talks with investors to raise capital that would go to users.

Once the third-largest exchange, according to CoinMarketCap, FTX has fallen off the list of the top 100. The top three spots are now controlled by Binance, Coinbase and Kraken.

Photo: Brian Turner/Wikimedia Commons

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