NEW YORK, 12 Nov 2022:
Cryptocurrency exchange platform FTX yesterday announced it had filed for bankruptcy protection and that its founder Sam Bankman-Fried had resigned as CEO.
The move confirmed the collapse of one of the biggest exchange platforms in the crypto sector. Once valued at around US$32 billion, FTX has struggled with liquidity issues in recent days – prompting a flight of users.
In a statement, FTX said seeking bankruptcy was the appropriate decision in order to “maximise recoveries for stakeholders.”
The filing will affect 130 affiliated companies – including investment firm Alameda Research – but not Ledger Ledgerx.LLC, FTX Digital Markets, LTD, FTX Australia or FTX Express Pay.
John J Ray III has been appointed as CEO, but Bankman-Fried and a number of other employees would continue to help with the transition, the statement added.
The bankruptcy announcement came hours after regulatory authorities in the Bahamas – where FTX is headquartered – froze its assets and appointed a liquidator.
FTX moved to the Bahamas from Hong Kong in 2021, having started out in the Asian finance hub and becoming one of the most successful exchange platforms in the sector.
News of its solvency problems in recent days sparked a run as clients pulled their money from the platform – leaving FTX struggling for funds even more.
Its situation worsened on Wednesday when Binance, the world’s leading crypto exchange platform, withdrew its offer to acquire FTX.
“In the beginning, our hope was to be able to support FTX’s customers to provide liquidity, but the issues are beyond our control or ability to help,” Binance said in a statement.
The announcement triggered a sharp drop in FTX’s digital token FTT, a shock that rippled across the cryptocurrency markets.
On Thursday, Bankman–Fried apologised, saying he had committed errors in calculating the liquidity levels the company required.
The liquidity hole at FTX is estimated to be as much as US$8 billion.