Twitter isn’t the only notable tech company to bandy around the word “bankruptcy” this week. After a stunningly rapid collapse, crypto exchange FTX has filed for Chapter 11 bankruptcy protection, while founder Sam Bankman-Fried has resigned as CEO.
The bankruptcy filing covers FTX Trading, FTX US, Alameda Research and around 130 other companies under the umbrella of the FTX Group, according to a press release. Some others, such as FTX Australia and FTX Express Pay, are not involved in the bankruptcy proceedings. Filing for Chapter 11 bankruptcy doesn’t necessarily mean that a company is dead in the water — it allows a business to keep trading while it figures out a plan to pay back creditors. However, it’s a tough position to come back from.
“The immediate relief of Chapter 11 is to provide the FTX Group the opportunity to assess its situation and develop a process to maximize recoveries for stakeholders,” new CEO John J. Ray III (a former Enron chairman who came in to oversee that company’s liquidation) said in a statement. “The FTX Group has valuable assets that can only be administered in an organized, joint process. I want to [assure] 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.” Ray suggested that stakeholders should remain patient, noting that “events have been fast-moving and the new team is engaged only recently.”
The company swiftly found itself in dire straits after the price of its native FTT token nosedived and many users withdrew their cryptocurrency. Following reports that FTX was facing a liquidity crisis, Changpeng Zhao, the CEO of rival crypto giant Binance, said his company would sell off around $529 million worth of FTT. That all but wiped out the token’s value.
Binance then agreed to bail out FTX by taking over the company. However, it backed out of the deal a day later, citing concerns that emerged while conducting due diligence. Bankman-Fried went on to apologize for the mess and said on Thursday he was doing everything he could to raise funds and do “right by users.” He stepped down just a day later.
Meanwhile, reports have suggested that the Department of Justice and Securities and Exchange Commission are investigating FTX. It’s not clear when the DOJ started looking into the company’s dealings, but the SEC’s investigation has reportedly been ongoing for several months.All products recommended by Engadget are selected by our editorial team, independent of our parent company. Some of our stories include affiliate links. If you buy something through one of these links, we may earn an affiliate commission. All prices are correct at the time of publishing.