FTX Files for Bankruptcy Protection in US; CEO Bankman-Fried Resigns

Bankruptcy filings attributed to FTX US and Alameda Research estimate each company has $10 billion to $50 billion in liabilities.

AccessTimeIconNov 11, 2022 at 2:18 p.m. UTC
Updated Nov 11, 2022 at 10:39 p.m. UTC

Nikhilesh De is CoinDesk's managing editor for global policy and regulation. He owns marginal amounts of bitcoin and ether.

CORRECTION (Nov. 11, 21:39 UTC): Corrects second to last paragraph to remove mention of BitPesa as it was incorrectly included in the bankruptcy filings. Adds comments from BitPesa.

Crypto exchange FTX filed for bankruptcy protection in the U.S., the Bahamas-based company said Friday.

CEO and founder Sam Bankman-Fried also resigned his role, but will "assist in an orderly transition." John Ray III is the new CEO. Ray appears to be the same individual who previously oversaw the Enron Corporation bankruptcy.

"In the short term we have some long days and hard work ahead of us," Ray told employees in a message verified by CoinDesk. He called the bankruptcy filing "the beginning of a path forward."

Respective bankruptcy filings said FTX US and Alameda Research had between $10 billion and $50 billion in liabilities and a similar range in assets, and estimated that "funds will be available for distribution to unsecured creditors."

FTX Group entities, which include the FTX.com entity as well as FTX US, Alameda Research and “approximately 130 additional affiliated companies,” have filed for Chapter 11 bankruptcy proceedings, according to a press release. Chapter 11 bankruptcy proceedings are filed when the company hopes or expects to be able to restructure its operations, rather than Chapter 7 bankruptcy proceedings, which just liquidates assets.

Companies filing for Chapter 11 bankruptcy are able to continue their day-to-day operations.

In a Twitter thread posted after the bankruptcy, Bankman-Fried apologized, saying "hopefully things can find a way to recover."

"I'm piecing together all of the details, but I was shocked to see things unravel the way they did earlier this week," he said. "I will, soon, write up a more complete post on the play by play, but I want to make sure that I get it right when I do."

FTX Digital Markets, FTX Australia, FTX Express Pay and LedgerX (which does business as FTX US Derivatives) are not included, the release said.

“The FTX Group has valuable assets that can only be effectively administered in an organized, joint process,” Ray said in a statement. “I want to ensure every employee, customer, creditor, contract party, stockholder, investor, governmental authority and other stakeholder that we are going to conduct this effort with diligence, thoroughness and transparency.”

Events have been “fast-moving” and the new team in place only just began, he said.

Bitcoin’s price immediately fell over $1,000 on news of the bankruptcy, dropping to $16,500 within minutes.

Bankman-Fried announced FTX had “liquidity” issues earlier this week, first saying Binance had agreed to acquire the company before Binance pulled out and later announcing a deal with Tron’s Justin Sun to backstop TRX-based tokens. The status of this deal was unclear at press time.

FTX paused withdrawals, though FTX US withdrawals remained unaffected. FTX reopened withdrawals in the Bahamas at regulators’ urging and began announcing certain other jurisdictions had begun some partial withdrawals over the last several hours.

The full list of companies include Alameda and various local holdings, Blockfolio, over a dozen FTX entities and Quoine, among others, according to a bankruptcy filing.

"I was shocked and disappointed to see that FTX named BTC Africa S.A. and other AZA Finance entities in its Chapter 11 bankruptcy filing today," said Elizabeth Rossiello, CEO and founder of BitPesa and AZA Finance in a statement. "To be clear: AZA Finance entities are not affected by the FTX bankruptcy, and we are taking steps to correct the erroneous court filings," she added, noting that "in its disorganized haste, FTX erroneously listed our entities in their bankruptcy filing."

UPDATE (Nov. 11, 2022, 14:35 UTC): Adds context.

UPDATE (Nov. 11, 2022, 15:10 UTC): Adds further context.

UPDATE (Nov. 11, 2022, 15:30 UTC): Adds Twitter thread from Bankman-Fried.

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Nikhilesh De is CoinDesk's managing editor for global policy and regulation. He owns marginal amounts of bitcoin and ether.

CoinDesk - Unknown

Nikhilesh De is CoinDesk's managing editor for global policy and regulation. He owns marginal amounts of bitcoin and ether.