Cryptocurrency Giant FTX Files for Bankruptcy, CEO Sam Bankman-Fried Retires

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Cryptocurrency giant FTX and its subsidiaries have begun the process of filing for Chapter 11 bankruptcy, with founder Sam Bankman-Freed stepping down as CEO.

The filing represents a stunning turnaround for the cryptocurrency exchange, which was once valued at $32 billion and has been considered the face of the industry thanks to massive marketing and promotional efforts.

Bankman-Fried’s retirement, 30, is staggering. He was a cryptocurrency wunderkind who graced the covers of Forbes and Fortune and became a major Democratic donor and leader of what has been called the “effective altruism” movement that sought to reshape philanthropy.

Last week, the exchange faced the equivalent of a bank withdrawal as observers and customers questioned whether the exchange is both liquid (meaning it can provide on-demand currency for payment to customers who want to withdraw funds) and solvent, which Which means it’s solvent. loans and investments were worth more than their debts.

“I want to assure every employee, customer, lender, contracting party, shareholder, investor, government agency, and other interested party that we will carry out this job with diligence, diligence, and transparency,” John J. Ray, new CEO of FTX. Group,” says the company’s official Twitter account.

On Friday, Bankman-Fried sent out a series of tweets expressing hope that FTX could continue operations after bankruptcy.

“I’m putting all the details together, but I was surprised to see it all fall apart like it did earlier this week,” he said.

Chapter 11 bankruptcy allows a business to develop a plan to reorganize and maintain its business while working to pay its creditors.

The media reported that the Securities and Exchange Commission and the Department of Justice are currently investigating FTX.

The effects of the crisis have also affected Bankman-Freed’s charitable group, Future Fund. On Thursday night, the fund team announced his resignation.

“We are very sorry that it has come to this,” the team said in a letter, adding: “To the extent that FTX management may have been involved in deception or dishonesty, we condemn such behavior in the strongest possible terms. We believe that being a good actor in the world means striving to act with honesty and integrity.”

Bitcoin, already in a recent downturn, fell to $16,500 on Friday. In September, it was around $22,000.

FTX has become one of the most recognizable brands of the recent cryptocurrency boom thanks to sponsorship deals that have placed its logo on Miami Heat Stadium and on the jerseys of every MLB referee.

Founded in 2019, FTX has grown to 1 million users worldwide in two years, with an average daily trading volume of $10 billion. In 2021, it raised $900 million in funding from prominent venture capitalists and hedge funds, including SoftBank Group and Sequoia Capital.

The exchange managed to outperform the competition in part thanks to the presence of Bankman-Fried, a humble MIT physics graduate who worked for three years at a Wall Street quantitative trading firm and was committed to the philosophy of effective altruism, according to which philanthropy should be as efficient as possible.

The FTX breakup was sparked by a Nov. 2 news article on cryptocurrency news website Coindesk.com that published a leaked balance sheet showing that the assets of an affiliated trading company run by Bankman-Fried called Alameda Research depended on largely from FTX’s own holdings. . tab, FTT. NBC News has not independently verified this report.

A few days after the report, rival crypto exchange Binance announced the liquidation of its FTT holdings. Despite Bankman-Fried’s assurances about FTX’s financial health, within two days FTX was inundated with clients requesting to withdraw their assets to FTT, causing its value to drop by 72%.

When FTX faced a sudden crisis, Binance briefly held takeover talks. But Binance ultimately backed down, stating, “As a result of corporate due diligence, as well as recent news about mishandling of customer funds and alleged investigations by the US agency, we have decided that we will not We will proceed with the possible acquisition of FTX.com.”

By Thursday, Bankman-Fried found itself seeking outside financing to salvage the platform. He also published a series of tweets in which he acknowledged some mistakes. “I’m sorry. That’s the most important thing. I was wrong and I should have done better.”

On the same day, the Bahamas Securities Commission, where FTX is located, announced the freezing of FTX’s assets.

“The Board is aware of public allegations suggesting that client assets have been mishandled, mismanaged and/or transferred to Alameda Research,” the Board said. “According to information from the Commission, any such action would be contrary to normal management, without the consent of the client and potentially illegal.”

Finding no way out, FTX filed for bankruptcy on Friday morning.

 

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