The crypto exchange FTX Group announced on Friday that it had initiated Chapter 11 bankruptcy proceedings in the United States and its CEO, Sam Bankman-Fried, had resigned and been replaced with John J. Ray III.
“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 [sic] 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. Stakeholders should understand that events have been fast-moving and the new team is engaged only recently. Stakeholders should review the materials filed on the docket of the proceedings over the coming days for more information.”
The FTX Group includes the FTX.com entity as well as FTX US, Alameda Research and “approximately 130 additional affiliated companies.”
Shan Jun Fok, co-founder of Hong Kong-based crypto investment firm Moonvault Partners, told CNN that “Everyone’s a little bit in shock. A lot of people trusted FTX as the gold standard.”
The decision comes at the end of a tumultuous two weeks that began with CoinDesk revealing that Alameda, a quantitative trading firm also set up by Bankman-Fried, held billions in collateral from FTX in the form of FTT, the exchange token issued by FTX - a sizeable portion of the total FTT in circulation. Days later, Binance CEO Changpeng Zhao announced his company was selling its entire portfolio of FTT, triggering a sharp decline in FTT’s value and a subsequent bank run on FTX.
By Tuesday, FTX had lost 80% of its $32 billion value and was looking to Binance to save it. However, the following day they backed out, saying that FTX’s “issues are beyond our control or ability to help.” Binance specifically cited a Wall Street Journal report that the US Securities and Exchange Commission (SEC) and US Department of Justice (DOJ) were investigating FTX.
The man now appointed to save FTX, Ray, is also the person brought in to help steer Enron after it went bankrupt in 2001, according to his website. However, he has his own history with the SEC. Documents on file with the agency show he has been accused of insider trading at three separate companies.