FTX, the former high-flying cryptocurrency group, has filed for bankruptcy protection in the US, marking a stunning collapse of the $32 billion empire built by colorful 30-year-old entrepreneur Sam Bankman- Fried.
The filing in federal court in Delaware on Friday included major international exchange FTX, a US crypto market, Bankman-Fried’s proprietary trading group, Alameda Research and about 130 affiliated companies.
FTX’s failure came after Bankman-Fried desperately sought billions of dollars to save the exchange this week after it failed to cope with a flood of client withdrawals in a run fueled by health concerns finance and the links with Alameda.
The collapse of such a prominent group, which was announced during the US Superbowl and whose charismatic, shorts-wearing founder was a major donor to the Democratic Party, has shaken the notoriously volatile crypto industry.
Bitcoin fell 5 percent to a new two-year low of $16,492 after the FTX bankruptcy was announced. Changpeng Zhao, CEO of Binance, said earlier on Friday that the fall of FTX had led the crypto to face a 2008-like financial crisis and that more companies could fail after that.
Bankman-Fried, who a week ago was among the industry’s most respected figures with a personal fortune of $24 billion and close ties to Wall Street and celebrities, resigned as FTX’s CEO on Friday. John R Ray, a restructuring specialist who oversaw the bankruptcies of Enron and Nortel Networks, will take the reins.
“The FTX Group has valuable assets that can only be managed effectively in an organized joint process,” said Ray.
In just over three years, FTX had achieved a $32 billion valuation and courted a list of top investors, including Paradigm, SoftBank, Sequoia Capital and Singapore’s Temasek. Venture capital firms Sequoia and Paradigm have reduced their investment in recent days to zero.
The sprawling business empire run by a tight-knit group of longtime associates around Bankman-Fried, many of whom lived together in a Nassau penthouse in the Bahamas, has around 100,000 creditors and assets and liabilities between 10 and $50 billion, according to the filing.
The US Securities and Exchange Commission is investigating FTX, which includes examining the platform’s cryptocurrency lending products and handling of customer funds, according to a person familiar with the matter.
recommended
The bankruptcy filing follows a frenetic week in digital asset markets. Rumors about the financial health of FTX and its trading subsidiary Alameda Research culminated in a run on the stock market on Monday with insufficient readily accessible assets to meet $5 billion in customer withdrawals.
After appeals to its investors and rival exchanges, FTX dropped the lawsuits on Tuesday and agreed to a bailout by the world’s largest cryptocurrency exchange, Binance, led by Zhao, a former partner turned arch-rival of Bankman -Fried.
That deal was terminated a day later after Binance said due diligence revealed insurmountable financial problems at FTX. Last-ditch efforts to find another investor to supply up to $8 billion failed in recent days.
FTX Digital Markets Ltd, the group’s subsidiary in the Bahamas, where it is based, is not included in the bankruptcy proceedings. The Bahamas Securities Commission on Thursday froze the subsidiary’s assets and appointed a provisional liquidator.
LedgerX, a US regulated futures exchange and a subsidiary in Australia are among other units not included in the filing. The group’s Australian business has already been placed into administration, while Japanese watchdogs suspended the FTX subsidiary’s operations in the country.
Bankman-Fried has blamed misaccounting for liquidity and stock market leverage for the collapse.
“I’m sorry, again, that we end up here,” he said after Friday’s presentation. “I’m gathering all the details, but I was surprised to see things unfold the way they did earlier this week.”
Additional reporting by Stefania Palma in Washington
Video: Cryptocurrencies: How Regulators Lost Control