The troubled cryptocurrency exchange FTX announced on Twitter on Friday that it was getting ready to file for Chapter 11.
Sam Bankman-Fried, the exchange’s CEO and a key player in its demise, announced in the statement that he is resigning. John J. Ray III is going to take his place. Ray stated in the statement:
“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… I want to ensure every employee, customer, creditor, contract party, stockholder, investor, governmental authority, and other stakeholder that we are going to conduct this effort with diligence, thoroughness, and transparency.”
The revelation adds to a week of instability that has seen FTX and Bankman-Fried go bankrupt due to a liquidity crisis. The exchange’s problems were revealed after it was found that Alameda Research, a trading firm co-founded by Bankman Fried, was insolvent. FTX then saw a bank run, aided in no small part by an announcement from Binance CEO Changpeng “CZ” Zhao, resulting in a crisis for both FTX and Alameda as consumers fled with their assets. Withdrawals were then suspended by FTX, causing widespread alarm among the exchange’s users. Binance revealed an intention to buy the exchange for a reputed $1 price, but it eventually backed out of the deal.
It has recently been revealed that FTX has a $9.4 billion hole in its finances and that Bankman Fried misused customer cash on the exchange, moving billions of dollars in assets to Alameda to bail them out in the aftermath of Terra’s May meltdown. The discredited founder is now facing potentially disastrous consequences, and US agencies such as the Department of Justice and the Securities and Exchange Commission have begun examining the matter.
While most FTX users are still unable to withdraw their funds, the crypto community has been pushing for Bankman-Fried and other insiders at FTX and Alameda to face legal consequences.
The incidents triggered a market selloff, sending the global worth of the crypto market below $900 million for the first time in months, and the crypto ecosystem is bracing for significant consequences in the coming years.
Customers’ chances of recovering their assets are considerably slimmer now that FTX is insolvent, despite what the business previously said.
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