Crypto’s not-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, could not get the funds to meet customer withdrawal requests and then faced an aborted takeover attempt from a competitor.
utilities, the company files for Chapter 11 bankruptcy in the United States, announcing that founder and CEO Sam Bankman-Fried has stepped down. Seamus Hughes pointed out that: the bankruptcy application 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.
Neal won’t take over, though. saying he “cannot serve in that position for reasons unrelated to FTX, Inc. or its former CEO.”
The negative ripple effect across the industry started last night with Blockfi, another crypto service company, freezing customer withdrawals due to the FTX issues. Following the announcement, Bitcoin’s price fell sharply before recovering slightly and staying below $17,000.
personal belongings of Bankman-Fried, as recorded by Bloomberg, peaked at about $26 billion in March this year before falling in value from a reported $16 billion to zero in just a few days. Yesterday, The Wall Street Journal and Reuters reported that the founder, known as SBF, had used $10 billion in client money from the exchange to support his other crypto firm, Alameda Research. In a series of tweets, SBF said, “I fucked up and should have done better,” without specifically admitting how the deficit came about.
In a thread posted today, SBF said“I was shocked to see things unravel as they did earlier this week. I’ll be doing a more complete post on each one shortly, but I want to make sure I’m doing it right when I do.”
A liquidity crisis spurred on by CoinDesk’s report on the schemeand a statement from Binance founder Changpeng Zhao saying he planned to sell his cache of FTX’s crypto token triggered a liquidity crisis that exposed a reported $8 billion hole in the beleaguered company’s balance sheet.
A note on the company’s Twitter account said Bankman-Fried would remain to participate in an “orderly transition.” We’ve already seen investors in FTX like Sequoia mark the value of their property up to $0 while everyone else waits to find out if there’s anything of value left. On Friday morning, the Mercedes AMG F1 team announced a suspension of its sponsorship deal with FTXthough there’s no word yet on other sports partnerships, such as the naming rights to the Miami Heat’s basketball arena.
Newly appointed CEO John J. Ray III is quoted as saying, “The FTX Group has valuable assets that can only be managed effectively in an organized, collaborative process. I wanted to assure every employee, customer, creditor, contractor, shareholder, investor, government and other stakeholders that we will carry out this effort with dedication, thoroughness and transparency.”
Update Nov 11, 10:55 AM ET: Added bankruptcy filing, tweets from Sam Bankman-Fried, noting that Sir Lewis Hamilton’s F1 car will not carry any FTX branding during this weekend’s race.
Update Nov 11, 6:42 PM ET: Updated to note that Neal will not become the chairman of FTX as proposed.