Troubled cryptocurrency platform FTX has filed for bankruptcy in the United States and its CEO Sam Bankman-Fried has resigned, it said Friday, the latest blow in a saga echoing across the digital currency landscape.
The filing comes after the world’s largest cryptocurrency platform, Binance, agreed to buy its rival earlier this week but backed out, prompting market participants to consider potential regulators’ reactions.
FTX Group said in a statement on Friday that it had filed for Chapter 11 bankruptcy, adding it had initiated an “orderly process of asset verification and monetization for the benefit of all global stakeholders.”
Chapter 11 is a US mechanism that allows a company to restructure its debt under court oversight while continuing to operate.
This week’s financial chaos on FTX has caused major cryptocurrencies, including Bitcoin, to crash.
Bankman-Fried issued a “sincere apology” on Thursday, adding that FTX will “do everything we can to raise liquidity.”
The ailing company added in its statement that it had appointed John J. Ray as chief executive, effective immediately.
“Chapter 11’s immediate relief is appropriate to allow FTX Group to assess its situation,” Ray said in the statement.
“Stakeholders should understand that events have changed rapidly and the new team has only recently been hired.”
“Many FTX Group employees in various countries are expected to remain with FTX Group and assist Mr. Ray and independent professionals in their operations during the Chapter 11 proceedings,” the statement said.
Binance agreed to buy FTX.com on Tuesday — before abandoning the acquisition just a day later.
Binance CEO Changpeng Zhao defended himself against allegations of a targeted conspiracy after the deal fell through.
“The failure of FTX is not good for anyone in the industry. Don’t look at it as a win for us. User confidence is badly shaken,” he tweeted.
The collapse of the platform came as a shock, even to an already turbulent industry.
Bankman-Fried, who worked as a Wall Street broker before moving to Hong Kong in 2017, had been nurturing friends in Washington and basking in enthusiastic tributes when he stepped in to bail out other ailing crypto companies earlier this year.
The FTX turmoil is a spectacular turnaround for the founder and one-time cryptocurrency prodigy.
“This is another black eye for the industry,” said David Holt, a cryptocurrency industry expert at CFRA, of FTX’s woes.
– Growing Doubts –
Doubts about FTX’s financial stability had already been mounting, despite Bankman-Fried’s good standing in Washington as the public face of crypto investing.
Attention had focused on the relationship between FTX and Alameda Research, a trading house also owned by Bankman-Fried, which was taken offline on Wednesday, reports said.
Specialist media site CoinDesk reported that 40 percent of Alameda’s balance sheet consisted of FTX’s FTT tokens. That caused a stir among crypto experts as a potential conflict of interest.
According to media reports, FTX had to raise around $8 billion to plug a huge hole in its finances and avoid bankruptcy.
Binance, meanwhile, halted its FTX acquisition deal late Wednesday, citing recent press reports of mismanagement of customer funds — and investigations by US regulators.
The son of Stanford Law School professors and a graduate of the elite Massachusetts Institute of Technology, Bankman-Fried has long been a vocal advocate for smoother access to the crypto market for the general public, particularly in the United States.
