Distressed cryptocurrency exchange FTX officially filed for bankruptcy early Friday, and CEO Sam Bankman-Fried resigned, the company said. FTX Group, which includes FTX.com, FTX US, Alameda Research and 130 affiliated companies will commence Chapter 11 bankruptcy proceedings. Bitcoin fell near $17,000 on the news.
The company has a massive hole in its balance sheet and sister trading firm Alameda Research currently owes the exchange around $10 billion, the Wall Street Journal reports.
John J. Ray III has been appointed to serve as chief executive officer, while Bankman-Fried will remain on in an advisory role to assist with the transition. Ray III previously served as chairman for Enron and oversaw its liquidation after the energy company's bankruptcy and accounting scandals two decades ago.
"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 the release. "The FTX Group has valuable assets that can only be effectively administered in an organized, joint process."
The company will conduct the effort with "diligence, thoroughness and transparency," Ray said. But "events have been fast-moving and the new team is engaged only recently."
New materials will be filed in the proceedings docket over the coming days. Meanwhile, subsidiaries LedgerX, FTX Digital Markets, FTX Australia Pay and FTX Express Pay are not included in the bankruptcy filings.
FTX Rapidly Deteriorates
The filing comes less than two weeks after reports emerged that the exchange's FTT token made up a majority of Alameda Research's balance sheet. On Sunday, Binance announced the liquidation of its FTT holdings, causing users to rush to withdraw $6 billion from FTX within 72 hours.
Binance signed a nonbinding letter of intent to buy FTX as cryptocurrency prices crashed early in the week. Bitcoin and Ethereum fell to two-year lows by Wednesday. But Binance decided to pass on the deal after reviewing the company's internal data and loan commitments.
Meanwhile, FTX faces regulatory probes from the SEC and CTFC over its handling of client funds and lending practices.
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