Embattled crypto exchange FTX files for bankruptcy

Currency
By Editor_1
Sam Bankman-Fried, the chief executive of FTX, during a panel at Crypto Bahamas conference in Nassau, Bahamas, on April 27, 2022. The cryptocurrency exchange FTX said on Nov. 11 that it was filing for bankruptcy, capping a stunning week that has upended crypto markets and sent shock waves through the industry -Erika P. Rodriguez/The New York Times
By David Yaffe Bellany

NEW YORK – The cryptocurrency exchange FTX on Friday (11) said that it was filing for bankruptcy, capping a stunning week that has upended crypto markets and sent shock waves through the industry.

In a statement on Twitter, the company said that FTX’s 30-year-old founder, Sam Bankman-Fried, had resigned. John J. Ray III has been appointed chief executive.

FTX collapsed this week after a three-day run on deposits sparked by the chief executive of its top rival, Binance, who posted tweets over the weekend questioning the stability of its business.

The announcement completed a remarkable fall for Bankman-Fried. Just days ago, he was considered one of the wisest and most powerful figures in the crypto industry, an influential figure in Washington who was lobbying to shape crypto regulations. With a $32 billion valuation, FTX was widely viewed as one of the most stable and responsible companies in the freewheeling, loosely regulated crypto industry.

Now the company is the target of investigations by the Securities and Exchange Commission and federal prosecutors in New York. Bankman-Fried’s fortune — once estimated to be as large as $24 billion — has dwindled to less than $1 billion.

FTX’s collapse has destabilized the crypto industry, which was already reeling from a crash in the spring that drained $1 trillion from the market. The prices of the leading cryptocurrencies, bitcoin and ether, have plummeted. The crypto lender BlockFi, which was closely entangled with FTX, announced Thursday (10) that it was suspending operations as a result of FTX’s collapse.

Bankman-Fried’s problems started over the weekend, when Binance’s chief executive, Changpeng Zhao, suggested publicly that FTX might be on shaky financial footing. A rush of customers tried to withdraw their crypto holdings from the platform, and FTX was unable to meet the demand.

Then Bankman-Fried struck a deal to let Zhao buy FTX in what amounted to a bailout. But after reviewing the company’s financial documents, Binance pulled out of the agreement, leaving Bankman-Fried with limited options.

In calls with investors and messages to employees, he apologized repeatedly, but stressed that he was working hard to raise money and resolve the situation. But the hole was ultimately too big to fill: In all, FTX owed as much as $8 billion.

The announcement Friday is the latest — and by far the biggest — in a series of bankruptcies that have shaken the crypto world this year. After a market crash in the spring, two crypto lending companies, Celsius Network and Voyager Digital, filed for bankruptcy, kicking off months of legal manoeuvring over how their remaining assets should be divided.

As it enters the process, the company will be led by Ray, who has ample experience managing distressed situations. He helped manage Enron following the collapse of its business in an accounting fraud scandal. And he helped liquidate the trust of subprime mortgage company ResCap following its 2012 bankruptcy.

The bankruptcy process may be only the beginning of Bankman-Fried’s legal troubles. Federal investigators are examining the relationship between FTX and its sister company, a trading firm called Alameda Research that Bankman-Fried also founded, focusing on whether FTX misused customers’ funds to prop up Alameda.

Alameda was included in the bankruptcy filing.

-New York Times

 

 

Editor_1
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