Cryptocurrency exchange FTX filed for Chapter 11 bankruptcy in the U.S. and its CEO Sam Bankman-Fried stepped down on Friday morning.
- FTX filed for Chapter 11 bankruptcy in the U.S. while its CEO Sam Bankman-Fried resigned on November 11.
- The crypto exchange will be run by new CEO John J. Ray III.
- FTX reportedly didn't inform all of the 134 companies named in the bankruptcy filing.
Bankruptcy Process Begins
FTX said it would file for bankruptcy protection for FTX.com, FTX U.S., and Bankman-Fried's proprietary trading firm Alameda Research, as well as approximately 130 additional affiliated companies. There are five subsidiaries that are not affected by the bankruptcy proceedings, including LedgerX (formerly FTX US Derivatives), FTX Digital Markets Ltd., FTX Australity Pty Ltd., and FTX Express Pay Ltd.
FTX Employees Were Not Informed
FTX reportedly didn't notify all of the 134 companies named in the bankruptcy filing and employees learned about it via Twitter. Social media posts claim that employees have been asking the CEO about their salaries, but have not received an answer.
It has also been reported that in spring Bankman-Fried sold FTX equity to employees at a 50% discount, and as bankruptcy loomed, employees were seeking to liquidate their assets.
CoinDesk reported that only an inner circle consisting of Bankman-Fried and a few other executives knew what was going on. It quoted a source as saying FTX as being run by a "gang of kids from the Bahamas'' who all dated each other.
FTX In The Hands of The New CEO
The crypto exchange will be run by John J. Ray III, though the outgoing chief will assist with the transition.
“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 are going to conduct this effort with diligence, thoroughness and transparency,” said the new chief.
He also said that stakeholders should understand that the situation has been fast-moving and that the new team has only been engaged for a short time.
The Bottom Line
FTX went from a $32 billion valuation to bankruptcy in a matter of days. It is catastrophic not only for the crypto exchange but also for the entire cryptocurrency market as FTX emerged as one of the most recognizable brands in the crypto world.
(Rahul Nambiampurath contributed to this article.)