FTX to file for US bankruptcy protection

Chief executive Sam Bankman-Fried resigns from his position

FTX has commenced bankruptcy proceedings in the US. Getty
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Cryptocurrency exchange FTX.com has commenced bankruptcy proceedings in the US following its collapse this week, and chief executive Sam Bankman-Fried has resigned from his position, the company said on Friday in a statement posted on its Twitter page.

"FTX Trading Ltd, West Realm Shires Services, Alameda Research and approximately 130 additional affiliated companies have commenced voluntary proceedings under Chapter 11 of the United States Bankruptcy Code in the District of Delaware," the statement said.

The company will begin "an orderly process to review and monetise assets for the benefit of all global stakeholders", it said.

John J Ray III has been appointed chief executive of the FTX Group, the company said, adding that Mr Bankman-Fried will remain to "assist in an orderly transition".

"The immediate relief of Chapter 11 is appropriate to provide the FTX Group the opportunity to assess its situation and develop a process to maximise recoveries for stakeholders," Mr Ray said.

Cryptocurrency markets extended losses after the announcement, with Bitcoin sliding as much as 8 per cent to $16,376 as of 6.34pm UAE time.

Ether fell by 9.2 per cent, and FTX’s FTT token slipped up to 50 per cent on Friday.

Speaking of a "major setback" for Bitcoin, Naeem Aslam, chief market analyst at AvaTrade, said this is "causing pressure on the price, and the chances are that we may see the price moving toward the 13K level".

"The biggest destruction of wealth has happened today in the history of crypto as FTX files for bankruptcy, leaving its customers hanging high and dry," Mr Aslam said.

"The fall of FTX is bound to create a domino effect, and all that means is that more companies will have to sell their bitcoin in order to shore up funds. But bitcoin is the kind of a beast that never gives up and can come back even stronger every time a bogus project blows out."

Sam Bankman-Fried, who co-founded FTX Exchange in 2019, and who had a personal fortune of $16 billion earlier this week, has now had his entire fortune wiped out. Bloomberg

FTX, co-founded in 2019 by Mr Bankman-Fried and Gary Wang, halted withdrawals on Tuesday, citing a liquidity crunch, and agreed to a buyout offer from Binance, which backed out of the deal a day later.

Mr Bankman-Fried, who had a personal fortune of $16 billion earlier this week, has now had his entire fortune wiped out, according to a Bloomberg report, following the company's bankruptcy. At the peak, the 30-year-old was worth $26bn.

Meanwhile, many employees of the FTX Group in various countries are "expected to continue with the group and assist" the newly-appointed chief executive and independent professionals in its operations during the Chapter 11 proceedings, the statement said.

"The FTX Group has valuable assets that can only be effectively administered in an organised, joint process," Mr Ray said.

"Stakeholders should understand that events have been fast-moving and the new team is engaged only recently."

The Bloomberg Billionaires Index now values FTX’s US business — of which Mr Bankman-Fried owns about 70 per cent — at $1 because of a potential trading halt, from $8bn in a January fundraising round, a Bloomberg report said.

This is the "best time for regulators to come and start tightening up the grip", said Mr Aslam of AvaTrade.

"We can no longer afford to have different privileges for crypto exchanges and the whole space needs to be monitored by the regulators."

Updated: November 11, 2022, 4:50 PM
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