Crypto’s no-good, very bad 2022 got even worse as FTX (along with its international platform, the independent FTX.us exchange, and Alameda Research), previously the world’s third-largest crypto exchange by volume, couldn’t come up with the money to satisfy customers’ withdrawal requests and then suffered an aborted acquisition attempt by a competitor.
Now, the company is filing for Chapter 11 bankruptcy in the United States while announcing that founder and CEO Sam Bankman-Fried has resigned from his post. Seamus Hughes pointed out that the bankruptcy filing itself is now available (pdf), and it lists a total of 134 corporate entities included in today’s announcement, as well as the proposed appointment of crypto investor Stephen Neal as chairman of the board for FTX and Alameda.
However, Neal will not be taking over. saying that he is “unable to serve in that position for reasons having nothing to do with FTX, Inc. or its former CEO.”
The negative ripple effect across the industry started last night with Blockfi, another crypto services firm, freezing customer withdrawals as a result of the FTX problems. After the announcement, the price of Bitcoin dropped sharply before recovering slightly and remains under the $17,000 mark.
Bankman-Fried’s personal assets, as recorded by Bloomberg, peaked at around $26 billion in March of this year before plunging in value from a reported $16 billion to zero over just a few days. Yesterday, The Wall Street Journal and Reuters reported that the founder, known as SBF, had used $10 billion in customer funds from the exchange to prop up his other crypto business, Alameda Research. In a series of tweets, SBF said, “I fucked up, and should have done better,” without specifically admitting how the shortfall occurred.
In a thread posted today, SBF said, “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.”
A liquidity crunch spurred by CoinDesk’s report about the arrangement, and a statement from Binance founder Changpeng Zhao saying he planned to sell his cache of FTX’s crypto token, caused a liquidity crunch exposing a reported $8 billion hole in the beleaguered company’s balance sheet.
In a note posted to the company’s Twitter account, it said Bankman-Fried would stick around to participate in an “orderly transition.” We’ve already seen investors in FTX like Sequoia mark down the value of their holdings to $0 as everyone waits to find out if there will be anything of value left. On Friday morning, the Mercedes AMG F1 team announced a suspension of its sponsorship deal with FTX, although there’s no word yet about other sports partnerships, like its naming rights on the Miami Heat basketball arena.
Newly appointed CEO John J. Ray III is quoted saying, “The FTX Group has valuable assets that can only be effectively administered in an organized, joint process. I wanted 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.”
Update November 11th, 10:55AM ET: Added bankruptcy filing, tweets from Sam Bankman-Fried, and noted that Sir Lewis Hamilton’s F1 car will not bear FTX branding at this weekend’s upcoming race.
Update November 11th, 6:42PM ET: Updated to note that Neal will not become chairman of FTX as proposed.