FTX Trading filed for Chapter 11 bankruptcy on Friday, limiting the sudden and shocking decline for one of the world’s largest cryptocurrency exchanges.
Founder and CEO Sam Bankman-Fried also resigned from the company, appointing John J. Ray III as its new chief executive. According to a statement Friday, Banksman-Fried plans to remain with FTX while it works through the bankruptcy process.
“The immediate relief of Chapter 11 is appropriate to provide the FTX Group with an opportunity to assess its position and develop a process for stakeholders to maximize recovery,” Ray said. Statement,
Since 2019, the FTX has also retained the naming rights to the area where the Miami Heat play their home games. FTX Arena is owned by Miami-Dade County.
However, on Friday evening, in response to the bankruptcy, Miami-Dade County and The Heat released joint statement In which they said they were “taking immediate action to terminate our business relationship with FTX,” and would seek a “new naming-rights partner.”
FTX’s problems surfaced earlier this week when Bankman-Fried told a group of investors that the company needed about $8 billion to back up the crypto assets of its users. He also warned that the company may have to file for bankruptcy without an imminent infusion of cash.
After Voyager Digital and Celsius Network, FTX’s move is the third crypto company to get bankruptcy protection this year. The filing also clouded the fortunes of BlockFi, a crypto lender that FTX helped bail out earlier this year with $400 million.
The bankruptcy filing involved the US operations of FTX and its business subsidiary, Alameda Research, which is now the target of a federal investigation. The Associated Press reported that the Securities and Exchange Commission is trying to determine whether Alameda employees used FTX client funds to make risky bets on the market.
California regulators said Thursday they are also considering FTX, but did not elaborate on the focus of the investigation.
Cryptocurrency prices fell on Friday morning following news of a fall in FTX. Bitcoin is down 4.8% while Ether is down about 5.5%. Ripple, Binance Coin and Dogecoin also sank. Solana, in which Alameda has a major share, fell about 4%.
Earlier this week, the CEO of rival crypto exchange Binance, Changpeng Zhao, said that his company has struck a deal., zhao raising questions about the financial viability of FTX.
Before stepping down, Bankman-Fried said that FTX was looking for ways to gain liquidity to back up user accounts. FTX announced late Thursday that customers can convert their crypto assets to Tron, a separate token owned by the blockchain Tronix. Tron founder Justin Sun told Reuters that he has been able to help FTX out of its financial woes.
This week marks the end of the chapter of FTX, led by Bankman-Fried, which is well respected in the crypto world. An early adopter of crypto, he has become one of the most visible campaigners in the industry.
Banksman-Fried was born in California to two Stanford University professors. He graduated from the Massachusetts Institute of Technology with a physics degree and later moved to Hong Kong to start Alameda.
After his short stint in China, Bankman-Fried moved to the Bahamas, where he founded FTX in 2019, just as the cryptocurrency was starting to gain popularity.
After buying a wide array of tokens a few years ago, Bankman-Fried saw his personal wealth balloon to $16.5 billion. According to the Wall Street Journal, he has used some of that money to become a major political donor, including spending $40 million primarily on Democratic candidates and progressive causes. Bloomberg reported that the 30-year-old also gave India $50 million in pandemic relief.
Widely known as a vegan who loves to play League of Legends video games, Bankman-Fried has lent millions of dollars to struggling crypto companies, earning him the nickname “crypto savior”.
FTX’s bankruptcy filing will likely put Bankman-Fried’s philanthropy on hold — at least for now. Within a few days, the value of his assets fell to $0, according to the Bloomberg index.