FTX, the troubled cryptocurrency exchange, has filed for bankruptcy following a financial break-in that raised concerns about the handling of customer funds and rocked the broader crypto markets.
The Bahamas-based company, recently valued at as much as $32 billion, said Friday morning that it and related companies will file Chapter 11 bankruptcy proceedings in federal court in New York. Delaware.
Embattled FTX founder and CEO Sam Bankman-Fried has stepped down and will remain in an advisory role to support an “orderly transition,” the company said.
Bankman-Fried, a cryptocurrency known by its initials SBF, is being investigated by the US Securities and Exchange Commission for possible violations of securities laws.
FTX said John J. Ray III, the Chicago-based attorney who oversaw the liquidation of Enron after the company collapsed in 2001, will take over as CEO to lead the company through bankruptcy.
FTX founder and CEO Sam Bankman-Fried resigned as company filed for bankruptcy
FTX, the troubled crypto exchange, has filed for bankruptcy after a financial explosion sparked concerns over the handling of customer funds and rocked the broader crypto market.
SBF: The son of a vegetarian who wears a Stanford Law professor’s hoodie sleeps 4 hours a night
Sam Bankman-Fried, a vegan who sleeps four hours a night, has become the face of crypto, with a personal fortune once estimated at nearly $25 billion.
The success of FTX allowed the platform to forge prestigious partnerships, especially with American football legend Tom Brady and former supermodel Gisele Bundchen, and it featured comedian Larry David in a Super Bowl TV commercial.
Almost always sporting a dark hoodie and t-shirt, Bankman-Fried has pledged to donate nearly all of his fortune to his charitable causes, such as animal welfare and the fight against pollution. global warming.
The son of Stanford Law School professors and an elite Massachusetts Institute of Technology (MIT) graduate, he was born on the Stanford campus and raised in California.
Sam Bankman-Fried, 30 years old
He worked as a broker on Wall Street before switching to crypto in 2017.
Bankman-Fried has moved the company to the Bahamas, where there are virtually no taxes, saying the Caribbean nation is ‘one of the few countries with a comprehensive licensing regime for cryptocurrencies and cryptocurrency exchanges.’
He is a strong advocate for smoother access to the cryptocurrency market for the general public, especially in the United States.
The crash of FTX comes after an unusual week, which began with a crisis of confidence after Changpeng ‘CZ’ Zhao, the CEO of the world’s largest cryptocurrency exchange Binance, issued a statement. FTX’s internal token sale order.
Panicked FTX customers attempted to withdraw $6 billion in 72 hours, and the company was unable to pay its obligations to its depositors due to a ‘liquidity downturn’.
FTX may have used customer deposits to fund risky bets by its affiliated hedge fund, Alameda Research, according to the Wall Street Journal — a move that is legally dubious for sure. will attract regulatory scrutiny.
After FTX was forced to freeze customer withdrawals, Binance stepped in with an offer to bail out the company – but backed out of the deal after reportedly finding a massive $8 billion hole in the company. company books.
Bankman-Fried tried to find other financial backers to rescue FTX, but when reports were published about federal investigations into the handling of client funds, he did not. see someone.
Bankman-Fried, 30, once considered the ‘poster guy’ of crypto, had an estimated net worth of $15.2 billion as of Monday, but by the end of the week his fortune was we have been erased.
Despite the enormous potential legal risk he faces, Bankman-Fried remains active on Twitter, writing Friday morning: ‘I’m really sorry, again, we ended up in this.’
‘Hopefully things can find a way to recover. Hopefully this can bring transparency, trust and governance to them. Ultimately hopefully it can be better for customers, he added.
“I’m putting all the details together, but I was shocked to see things unravel the way they did earlier this week,” he wrote, vowing to compose a statement. longer father detailed the downfall of his company.
Now, the company has come to prominence with a Super Bowl commercial featuring actor Larry David expressing skepticism about the cryptocurrency facing liquidation as it goes bust.
“The immediate Chapter 11 mitigation is appropriate to provide the FTX Group with the opportunity to assess its situation and develop a process to maximize recovery for its stakeholders,” the CEO said. FTX Ray’s new operator said in a statement.
Ray vowed to proceed with bankruptcy proceedings with ‘care, thoroughness and transparency.’
Prior to filing for bankruptcy, FTX managed to raise about $9.4 billion from investors and rivals, Reuters reported citing sources, as the exchange sought to save itself after a wave of bankruptcy. customer withdrawal.
FTX is the latest in a series of calamities that have rocked the crypto sector, which is currently under intense pressure from collapsing prices and revolving financial regulators.
The crisis comes after a year of intense pressure on the crypto market, as rising interest rates prompted investors to abandon risky or speculative assets.
And alarm bells were ringing even before the FTX failure, following the collapse of several crypto lenders, including Celsius and Voyager, major tokens terraUSD and Luna, and hedge fund Three Arrows Capital.
Despite the enormous potential legal risk he faces, Bankman-Fried remains active on Twitter
FTX released this statement on Thursday announcing that it has filed for Chapter 11
Now the failure of FTX is also sending tsunami-like waves throughout the crypto universe.
Cryptocurrency lender BlockFi announced on Twitter late Thursday that it was ‘unable to do business as usual’ and halted customer withdrawals due to the FTX outage.
In a letter posted to Twitter late Thursday, BlockFi – underwritten by Bankman-Fried’s FTX early last summer – said it was ‘shocked and dismayed by the related news. to FTX and Alameda.’
The company ended by saying that any future communications about its status ‘will be less frequent than what our customers and other stakeholders are used to.’
Bitcoin tumbled shortly after the letter was posted, losing nearly 5% before inching back above $17,000 overnight.
The original cryptocurrency, Bitcoin. hovered around $20,000 for months before the FTX issues went public this week, sending it briefly to around $15,500, a two-year low.
Timeline of the rapid rise and rapid fall of crypto exchange FTX
Cryptocurrency exchange FTX was on the brink of failure on Thursday after a bailout from bigger rival Binance crashed. CEO Sam Bankman-Fried said he is exploring all options for his company.
Here is the history of FTX since its founding in 2019:
Maybe – Former Wall Street trader Sam Bankman-Fried and former Googler Gary Wang founded FTX, the owner and operator of the FTX.COM cryptocurrency exchange.
August – FTX has acquired mobile portfolio tracking app, Blockfolio for $150 million.
July – The $900 million funding round valued FTX at $18 billion.
September – FTX has signed a sponsorship deal with Mercedes’ Formula 1 team.
October – FTX has raised capital at a $25 billion valuation from investors including Singapore’s Temasek and Tiger Global.
January 27, year The US subsidiary of FTX said it was valued at $8 billion after raising $400 million in its first round of funding from investors including SoftBank and Temasek.
January 31, year FTX has raised $400 million from investors including SoftBank at a $32 billion valuation.
June 4 year FTX has signed an alleged $135 million sponsorship deal for the naming rights of the Miami Heat home ground.
July 1 – FTX has entered into an agreement with the option to buy BlockFi related crypto loans for up to $240 million.
July 22 – FTX has provided partial relief to bankrupt crypto lender Voyager Digital. Voyager calls it ‘low bid’.
July 29, year FTX says it has won full approval to operate the exchange and clearing house in Dubai.
August 19, year A US banking regulator has ordered crypto exchange FTX to stop the ‘false and misleading’ claims it has made about whether funds at the company are genuine. insurance coverage or not.
September 9 year FTX’s venture capital fund said it would buy a 30% stake in SkyBridge Capital.
November 2, year Cryptocurrency news website CoinDesk reported a leaked balance sheet showing that Alameda Research, Bankman-Fried’s crypto trading arm, is heavily dependent on FTX’s native token, FTT. Reuters was unable to verify the report.
November 6, year Binance CEO Changpeng Zhao said his company will liquidate its FTT holdings due to unspecified ‘recent revelations’.
November 7, year Bankman-Fried says ‘FTX is fine. The property is okay’.
November 8, year FTT crashed 72% when customers used the exchange with withdrawal requests. Binance offers a potential bailout in a non-binding agreement.
November 9, year Binance backs the rescue plan, saying: ‘Due to the due diligence of the company, as well as the latest news reports regarding the mishandling of customer funds and the agency’s alleged investigations. United States agency, we have decided that we will not pursue a potential FTX acquisition. com. ‘
Developing story, more to follow.