FTX CEO Sam Bankman-Fried has stepped down from his position as the company files for Chapter 11 bankruptcy. However, the ex-CEO promised to help facilitate an orderly transition as John Ray III assumes office.
In a statement on the company’s official Twitter account, FTX announced they had commenced voluntary Chapter 11 bankruptcy proceedings. The development nullifies efforts by founder Sam Bankman-Fried (SBF) to raise funding to inject the $9.4 billion hole left consequent of fund mismanagement.
FTX US To Attend Proceedings
Almost 130 affiliated companies, according to an FTX tweet on November 11, are participating in the proceedings, including FTX Trading, FTX US, under West Realm Shires Services, and Alameda Research. Alameda trading firm is closely linked to FTX and allegedly received billions of dollars of customer funds from FTX.
Notably, FTX US is among the companies to attend the proceedings, contradicting claims by outgoing CEO Sam Bankman-Fried a few days ago on Twitter about FTX.com and FTX US operating distinctly.
“Note that FTX US and Binance US–two separate companies–are not currently impacted by this. FTX US’s withdrawals have been live, are fully backed 1:1, and operating normally.”
In a filing dubbed LedgerX, FTX Digital Markets (aka FDM, the group’s subsidiary in the Bahamas), FTX Australia, and FTX Express Pay will not be part of the bankruptcy proceedings. As his first order in the office, however, John Ray III has already been announced as the new CEO, actualizing the bankruptcy rumors. He 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.”
Ray added that the FTX Group has valuable assets that can only be effectively administered in an organized collaborative process. The announcement reads:
“The FTX Group has valuable assets that can only be effectively administered in an organized, joint process. I want to ensure every employee, customer, creditor, contract party, stockholder, investor, governmental authority, and other stakeholder that we will conduct this effort with diligence, thoroughness, and transparency.”
The announcement does not explain a potential recovery plan for FTX investors. Many users have been trying to access funds from the FTX exchange due to reported liquidity issues. To this effect, FTX’s website announced that it could not process withdrawals.
However, Ray assured that more information would come out in the coming few days, urging stakeholders to remain to understand as events and activities have been unfolding fast, with the new team only settling in.
FTX’s SBF’s actions of mismanaging funds have seen his crypto empire add to the list of bankruptcy filings this year after Voyager Digital and Celsius called for Chapter Six protection only months past. Many international lawmakers are concerned with the situation, with others already proposing more comprehensive regulations for cryptocurrency companies.
Crypto Market Reacts
The crypto market immediately responded to the bankruptcy news, recording sell-offs as extreme as when the news broke of FTX’s fund mismanagement. As of press time, Bitcoin (BTC) is trading at $16,699 on CoinGecko, down by 5.2%. Ether (ETH) has lost 7.3% over the past 24 hours to trade at $1,244 simultaneously. The broader crypto market is recording the same sentiment, indicating sell-off pressure. It is hard to tell whether any bounce will be sustainable.
The number of firms suffering from FTX’s collapse remains unknown, but revelations are bound to happen as the company has filed for bankruptcy. Nevertheless, given the size of FTX’s operation, it is safe to assume the damage will be significant. Sequoia Capital, for instance, has already marked its $250 million investment to $0, while others like Alameda Research record liabilities ranging from $10 billion to $50 billion, according to the bankruptcy filing.