FTX filed for bankruptcy and announced the resignation of CEO Sam Bankman-Fried on Friday, marking a stunning downfall for the 30-year-old billionaire seen as one of the cryptocurrency sector’s most prominent figures.
FTX.com, FTX’s US operations, and Bankman-Fried’s cryptocurrency trading firm Alameda Research are among about 130 FTX Group companies covered by the bankruptcy filing, the company said in a statement.
“I’m really sorry, again, that we ended up here.” Bankman-Fried tweeted Friday. “Hopefully things can find a way to recover. Hopefully this can bring some amount of transparency, trust, and governance to them. Ultimately hopefully it can be better for customers.”
The crypto evangelist’s empire has plunged to about $1 billion after being valued at $32 billion as recently as January.
Bankman-Fried will be replaced as CEO by John Ray — a corporate restructuring expert who oversaw doomed energy giant Enron’s fall into bankruptcy.
“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,” Ray said in a statement.
“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,” Ray added.
Bankman-Fried will remain as an adviser to “assist in an orderly transition,” the company said. Ray added that “many employees” will continue working under new leadership during the Chapter 11 bankruptcy proceedings.
“This doesn’t necessarily have to mean the end for the companies or their ability to provide value and funds to their customers chiefly, and can be consistent with other routes,” Bankman-Fried added in his Friday tweetstorm. “Ultimately I’m optimistic that Mr. Ray and others can help provide whatever is best.”
“I’m going to work on giving clarity on where things are in terms of user recovery ASAP.”
He closed the thread by saying: “I’m piecing together all of the details, but I was shocked to see things unravel the way they did earlier this week. I will, soon, write up a more complete post on the play by play, but I want to make sure that I get it right when I do.”
On Thursday, the fallen crypto king apologized to the public and investors in a profanity-laced Twitter thread, admitting that he had “f—ked up” his management of the platform.
Bankman-Fried said he had misjudged FTX’s liquidity and users’ margin prior to the crisis.
“I’m sorry. That’s the biggest thing. I f–ked up, and should have done better,” Bankman-Fried tweeted.
FTX had scrambled to secure a bailout this week after a sudden liquidity crunch emerged and put the leading cryptocurrency exchange at risk of a complete collapse. Rival platform Binance initially agreed to buy the firm – only to back out of the non-binding deal due to concerns about the company’s crippled finances.
The firm’s problems began after revelations that Alameda was heavily invested in FTT, a token issued by FTX. Panicked users and institutions began wondering if the platform was solvent, sparking a rush of withdrawals.
FTX faced a shortfall of up to $8 billion and needed to secure billions in immediate relief to stay afloat in the short term.
Regulatory scrutiny of the situation is already underway. The Securities and Exchange Commission and the Commodity Futures Trading Commission have launched probes into FTX’s downfall.
Bankman-Fried had emerged as a celebrity on the cryptocurrency scene, building a massive fortune during the pandemic-era surge of bitcoin and other tokens. FTX drew endorsements from the likes of NFL legend Tom Brady, NBA superstar Stephen Curry, “Seinfeld” co-creator Larry David and supermodel Gisele Bundchen during the surge.
Bankman-Fried also became active in politics and aimed to become a “kingmaker” in Democratic circles by pouring millions of dollars into the 2022 midterms.