FTX Files For Bankruptcy As Bankman-Fried Resigns
FTX, the high-flying cryptocurrency exchange platform established by Sam Bankman-Fried, has filed for bankruptcy after failing to secure funding in the face of a liquidity crisis. According to an official press release shared on Twitter by FTX, Bankman-Fried has resigned as the CEO of FTX Group, which includes the namesake cryptocurrency exchange, its venture arm, and Alameda Research, among nearly 130 companies under the umbrella.
To recall, Alameda research is said to the company that triggered the domino effect and eventually spelled doom for its sister companies. According to balance sheets obtained by CoinDesk, a significant portion of Alameda's worth was tied to FTT, the cryptocurrency token offered by FTX. Soon after it was reported that regulatory agencies are looking into the FTX saga, Alameda's website was taken private.
As for the troubled founder, who witnessed a 94% drop in his wealth within a few days, Bankman-Fried will still assist with the bankruptcy proceedings moving ahead. Regarding the bankruptcy filing, FTX Group's newly-appointed chief John J. Ray III mentioned that "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."
How it all came crashing down for FTX?
FTX's demise comes at a time when the crypto industry is bleeding billions and investor faith is at an all-time low. FTX was no exception. Facing an acute liquidity crisis, the company reached out to its arch-rival with an acquisition offer to rescue the sinking ship. However, once it came to public knowledge that FTX will be facing regulatory scrutiny over allegations of mishandling customer funds, Binance pulled out of the deal.
Interestingly, Binance was among the early backers of FTX and its CEO Changpeng Zhao — also known as CZ — personally invested $100 million in the company. But as the relations between the two crypto companies and their respective CEOs soured due to competition, Bankman-Fried bought back Zhao's stake for over a billion dollars, reports Reuters based on information received from insider sources.
With the Binance deal falling apart,Bankman-Fried told investors that FTX was staring at bankruptcy unless he gets a cash infusion as big as $8 billion. That apparently didn't happen, and just as industry watchers had prophesized, FTX group has filed for bankruptcy as the last viable recourse.
As for customers, FTX had paused withdrawals earlier this month and even warned customers from making deposits. How exactly is FTX going to return the investment to concerned customers and what entails for Bankman-Fried's future will become clear once the bankruptcy proceedings conclude and the investigations are over.