FTX Group announced through its official Twitter page on Friday that it has filed for voluntary Chapter 11 bankruptcy in the United States and that its CEO, Sam Bankman-Fried, had resigned, marking a stunning collapse for one of the largest and most influential players in the cryptocurrency industry.
FTX announced that Sam Bankman-Fried, the 30-year-old crypto whiz behind the exchange, will stay on to help with the transition. FTX’s crypto hedge fund, Alameda Research, as well as approximately 130 other sister companies, are included in the bankruptcy proceedings.
According to FTX, John Ray III has been appointed as the new CEO, and many exchange employees are expected to remain to run the company through Chapter 11.
Ray stated that bankruptcy will allow FTX to “assess its situation and develop a process to maximize recoveries for stakeholders.”
The collapse of FTX, which was unthinkable only a few days ago, is shaking the crypto industry to its core. After grave concerns about the FTX balance sheet were raised last week, it was precipitated by a crisis resembling a bank run.
Regulators are currently trying to determine what went wrong, and some lawmakers are calling for a crackdown.
On Thursday, securities regulators in the Bahamas, where FTX is headquartered, froze some of the exchange’s assets.
According to The Wall Street Journal, the Justice Department and the Securities and Exchange Commission (SEC) are both looking into FTX. The Department of Justice declined to comment, and the SEC stated that it does not comment on the existence or nonexistence of investigations.
Bankman-Fried was a prominent figure in the cryptocurrency industry, amassing a fortune worth $25 billion that has since vanished. He was regarded as the crypto world’s “white knight,” stepping in to save floundering businesses. FTX, backed by elite investors such as BlackRock and Sequoia Capital, quickly became one of the largest crypto exchanges.
FTX spent a lot of money to get endorsement deals with celebrities like Gisele, Tom Brady, and Steph Curry. The company’s logo and name can be found on the Miami Heat’s home and even on the logos of MLB umpires.
According to the Journal, the implosion of FTX was initiated by a decision by a sister hedge fund to lend billions of dollars in customer assets to fund risky bets. According to the paper, that trading arm, Alameda, now owes FTX a staggering $10 billion, which the crypto exchange had difficulty raising.
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