FTX Filing for Chapter 11 Bankruptcy, SBF Stepping Down
FTX is filing for bankruptcy and SBF is bowing out following its liquidity crunch.
Key Takeaways
- FTX and its affiliated companies have filed for Chapter 11 bankruptcy.
- Sam Bankman-Fried is also stepping down from his role as FTX CEO and will be replaced by John J. Ray III
- The news comes less than a week after FTX suffered a catastrophic meltdown due to a liquidity crunch.
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John J. Ray III will replace Sam Bankman-Fried as CEO.
FTX Ready for Chapter 11
FTX is filing for bankruptcy.
Press Release pic.twitter.com/rgxq3QSBqm
— FTX (@FTX_Official) November 11, 2022
The embattled crypto exchange announced the news on Twitter Friday, saying it was preparing for a Chapter 11 filing.
The statement added that Sam Bankman-Fried, the exchange’s CEO and central figure in its demise, is stepping down. He’ll be replaced by John J. Ray III. In the statement, Ray said:
“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… 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 adds to a week of chaos that’s seen FTX and Bankman-Fried suffer a catastrophic meltdown due to a liquidity crunch. The exchange’s issues first came to light after it emerged that Alameda Research, a trading firm co-founded by Bankman-Fried, was suffering from insolvency issues. FTX then suffered from a bank run scenario that was accelerated in no small part by an announcement from Binance CEO Changpeng “CZ” Zhao, causing a crisis for both FTX and Alameda as customers took flight with their funds. FTX then halted withdrawals, sparking major concern among the exchange’s users. Binance announced a plan to buy the exchange for a rumored $1 fee, but it backed out of the arrangement hours later.
It’s since emerged that FTX has a $9.4 billion hole in its accounts and Bankman-Fried misappropriated customer funds on the exchange, sending billions of dollars worth of assets to Alameda to bail them out in the fallout from Terra’s May blowup. The disgraced founder is now facing potentially devastating repercussions and U.S. agencies like the Department of Justice and Securities and Exchange Commission have started investigating the incident.
The crypto community has been calling for Bankman-Fried and other insiders at FTX and Alameda to face legal consequences, while most FTX users are still unable to withdraw their funds.
The events caused a market selloff that sent the global value of the crypto market below $900 million for the first time in months, and the crypto space is bracing for major ramifications over the years ahead.
Now that FTX is bankrupt, the chances of customers retrieving their assets anytime soon have got even slimmer, despite what the company has previously claimed.
This story is developing and will be updated as further details emerge.
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