Chapter 11 for cryptocurrency exchange FTX, after it failed to secure rescue bid and additional funding. CEO Sam Bankman-Fried resigns
Cryptocurrency exchange FTX has collapsed into Chapter 11 bankruptcy protection, after a series of setbacks this week.
Earlier this week CEO Sam Bankman-Fried told staff he was exploring all options for his failing crypto exchange platform. He sought additional funding of up to $9bn from outside sources, as it reportedly faced $7 billion in total liability.
That funding failed to materialise, and to make matters worse crypto exchange platform Binance confirmed on Wednesday it was pulling out of its deal to purchase FTX Trading.
FTX had agreed to sell itself to Binance, after experiencing the cryptocurrency equivalent of a bank run.
Customers reportedly fled the exchange after becoming concerned about whether FTX had sufficient capital.
The non-binding rescue bid had been agreed by the CEOs of both crypto exchange platforms on Monday, but was subject to Binance carrying out due diligence on FTX’s balance sheet.
After an initial review, Binance said in a statement Wednesday that it had significant concerns that convinced it to back out of the deal.
“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 was quoted as saying in a statement.
Not a good sign, and on Friday FTX confirmed it had filed for bankruptcy protection in a statement posted on Twitter.
Press Release pic.twitter.com/rgxq3QSBqm
— FTX (@FTX_Official) November 11, 2022
It confirmed that FTX Trading, Alamedia Research, and 130 additional affiliated companies, “have commenced voluntary proceedings under Chapter 11 of the US bankruptcy code.”
It also added that Bankman-Fried has also stepped down as CEO and has been replaced by John J. Ray III, but the outgoing CEO will stay on to assist with the transition.
“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,” said the new FTX CEO Ray.
“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,” continued Ray.
FTX’s own crypto token, known as FTT, had plunged more than 30 percent this week. The token, now worth around $2.65, was worth 10 times that amount only a week ago.