Cryptocurrency giant FTX has declared bankruptcy and its once-vaunted CEO has resigned following a turbulent week in which clients lost confidence in its ability to pay out claims.
FTX announced it was entering voluntary Chapter 11 proceedings on Friday morning after a week that saw the company, one of the largest in the digital asset sphere, essentially collapse, roiling the markets. Its CEO, 30-year-old Sam Bankman-Fried, a top donor to Democrats in the 2022 midterm elections, has also resigned.
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He was replaced by John Ray III, although Bankman-Fried, known in the crypto world as SBF, will remain to assist with the transition, the company said in a news release.
“The immediate relief of Chapter 11 is appropriate to provide the FTX Group the opportunity to access its situation and develop a process to maximize recoveries for stakeholders,” Ray said. “Stakeholders should understand that events have been fast-moving and the new team is engaged only recently.”
Ray said he wanted to assure involved parties, such as stockholders, investors, employees, and customers, that he and FTX will conduct the bankruptcy effort with “diligence, thoroughness, and transparency.”
Bitcoin, which reached two-year lows amid this week’s FTX news, extended those losses on Friday after news of the bankruptcy was announced. The flagship cryptocurrency tumbled to about $16,500 after the news broke, off about 4% from the day before. Ethereum was also down more than 5.5%.
The saga of FTX’s collapse began earlier this week when the company was facing a liquidity crunch that culminated with Bankman-Fried’s rival, Changpeng Zhao’s Binance, moving in to buy the company.
Further causing turmoil in the cryptocurrency market, Binance then decided to pull out of the deal after Bankman-Fried withheld the company’s U.S. operation from the acquisition. Bankman-Fried took to Twitter on Thursday to apologize for the company’s sudden and ugly fall from grace.
“I’m sorry. That’s the biggest thing,” he said. “I f***ed up and should have done better.”
Bankman-Fried had attracted a lot of attention over the past couple of years, with some fawning over him and pegging him as the next Warren Buffett, the legendary billionaire investor.
Bankman-Fried used his own substantial earnings to bankroll political campaigns this year in the lead-up to Tuesday’s midterm elections.
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Bankman-Fried has spent nearly $40 million on campaigns. Among those donating primarily to Democrats, he is second only to billionaire philanthropist and Republican bogeyman George Soros, according to data from Open Secrets.
After the FTX liquidity crunch this week, Bankman-Fried’s net worth had fallen from more than $15 billion to just below $1 billion, according to Bloomberg. It was the biggest one-day decline among the billionaires that the company keeps track of — and it could decline further as the dust settles.
