Sam Bankman-Fried quits as FTX CEO amid bankruptcy filing

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Billionaire until Tuesday Sam Bankman-Fried resigned as CEO of FTX in bankruptcy proceedings for FTX.com, FTX US, Alameda Research and approximately 130 affiliates – collectively FTX Group, as of of Friday.

John J. Ray III has been named CEO of FTX Group, and Bankman-Fried “will stay on to help with an orderly transition.” the company announced.

“The immediate Chapter 11 relief is appropriate to give FTX Group the opportunity to assess its situation and develop a process to maximize recoveries for stakeholders,” Ray said.

“The FTX Group has valuable assets that can only be administered effectively through an organized, joint process,” said Ray, who also played a role in the Enron liquidation, according to Bloomberg. “I want to assure every employee, customer, creditor, contractor, shareholder, investor, government authority and other stakeholder that we will conduct this effort diligently, thoroughly and transparently.”

It’s the latest development in a dramatic freefall of one of the market’s most prominent cryptocurrency exchanges, FTX, which went from a valuation of $32 billion to bankruptcy in a matter of days.

The wealth of Bankman-Fried, long considered the white knight of crypto and little wonderfallen from $16 billion to $0 this week, up from a high of $23 billion earlier this year.

The balance sheet of FTX, which since January “couldn’t stop fundraising,” was questioned last week after CoinDesk reported that sister company Alameda Research had $14.6 billion in assets and $8 billion in liabilities, with most of its net equity in FTX’s FTT token.

The saga was kicked off when Changpeng Zhao, CEO of rival cryptocurrency exchange Binance, said he would dump his FTT holdings due to these “recent revelations,” sparking a Twitter battle where Bankman -Fried accused Zhao of going after FTX with “false rumors” before finally calling him asking for a bailout.

Zhao announced that Binance acquire FTX “to protect users” Tuesday but backed down on Wednesday after seeing his books, noting that “the problems are beyond our control or the ability to help.

Amid the possible deal with Binance, it was revealed that the Securities and Exchange Commission, Commodity Futures Trading Commission and Department of Justice were search in whether the FTX.com crypto trading platform mishandled client funds. The SEC investigation has been going on for months, according to Bloomberg.

Bankman Fried took to Twitter on Thursday to take responsibility for FTX’s downfall: “I screwed up and I should have done better,” he said, adding that his team “spent the week doing everything in their power to lift cash”.

Sources said The Wall Street Journal this FTX loaned billions of dollars in client assets to “fund risky bets” by Alameda Research, laying the bricks for FTX’s current financial turmoil. Bankman-Fried called the lending of customer assets to Alameda “poor judgment,” sources said.

On Thursday, FTX.com’s assets were frozen in the Bahamas, where the company is headquartered, in a “prudent course of action” to preserve assets, according to the Bahamas Securities Commission, Bloomberg reported.

Also on Thursday, cryptocurrency lender BlockFi said it was limiting activity, including suspend withdrawals due to its exposure to FTX.

“We are shocked and appalled by the news regarding FTX and Alameda,” BlockFi tweeted. “Given the lack of clarity on the status of FTX.com, FTX US and Alameda, we are unable to operate as usual.”

FTX provided Jersey City, New Jersey-based BlockFi with a $400 million revolving credit facility over the summer amid a liquidity crunch related to the ongoing crypto bear market.

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