Crypto exchange FTX filed for US bankruptcy proceedings on November 11 and Sam Banksman-Fried stepped down as CEO, following an acute liquidity crisis at the cryptocurrency conglomerate, which prompted intervention from regulators around the world. The distressed crypto was struggling to raise billions of funds to save the trading platform from collapse after traders rushed to withdraw $6 billion from the platform in just 72 hours and abandoned a hedge deal proposed by rival exchange Binance.
FTX, its affiliated crypto trading fund Alameda Research and about 130 other companies have initiated voluntary Chapter 11 bankruptcy proceedings in Delaware, the company said in a statement shared on Twitter on Friday. John J Ray III has been appointed to take over as CEO from Bankman-Fried, the statement said.
“This means that FCX in its current form and clearly under its current leadership is finished,” said Alex Zardin, founder and principal at Capital Peak Strategies and a senior fellow at the Center for a New American Security. “FCX may be able to reorganize itself in some other shape or form in the second half of its bankruptcy proceedings. However, this is unlikely.”
The week’s turmoil affected the already struggling cryptocurrency markets, sending bitcoin to a two-year low. Bitcoin fell by 3.9% on Friday to $16,816 by 1603 GMT following the FTX announcement.
Shares of cryptocurrency and blockchain-related firms also fell on the news.
Press release pic.twitter.com/rgxq3QSBqm— FTX (@FTX_Official) November 11, 2022
“This is not going to be the last bankruptcy, the last bankruptcy in the crypto ecosystem,” Zardin said. “Unfortunately, other companies are likely to be affected by the FCX collapse and broader market conditions right now.”
FTX’s token FTT fell 30% to $2.57 on Friday, marking an 88% weekly loss.
The collapse of FTX also led to a spectacular decline in the fortune of its founder, Bankman-Fried, whose net worth was estimated by Forbes at more than $26.5 billion a year ago.
“I’m really sorry, again, that we ended up here,” Bankman-Fried said in a series of tweets after the bankruptcy filing began.
According to a source familiar with the investigation, FTX is under investigation by the US Securities and Exchange Commission, the US Department of Justice and the Commodity Futures Trading Commission.