In a statement posted on the official FTX Twitter account, the firm announced that they had commenced voluntary Chapter 11 bankruptcy proceedings. The news comes despite efforts by founder Sam Bankman-Fried (SBF) to raise funding to plug the $9.4 billion hole left by fund mismanagement.
Sam Bankman-Fried’s cryptocurrency exchange FTX has filed for Chapter 11 bankruptcy in the US and SBF now stepped down as CEO. He has been replaced by John J. Ray III but will stay on to assist an “orderly transition”.
Approximately 130 affiliated companies are also part of the voluntary proceedings, including Alameda Research, the trading firm with close ties to FTX, which allegedly received billions of dollars of customer funds from FTX.
The new CEO, Ray, said
“The immediate relief of Chapter 11 is appropriate to provide the FTX Group the opportunity to assess its situation and develop a process to maximize recoveries for stakeholders,”
“The FTX Group has valuable assets that can only be effectively administered in an organized, joint process. 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,” he added.
Notably, FTX US has been included in the proceedings, despite what outgoing CEO, Sam Bankman-Fried said only a few days ago on Twitter
More information will come out “over the coming days” and stakeholders “should understand that events have been fast-moving and the new team is engaged only recently,” added Ray at the end of the announcement.
The crypto markets reacted instantly to the news, selling off in a similar fashion to when the news first broke of FTX’s fund mishandling earlier in the month.
Crypto Prices Crash Instantly Following The News
Unsurprisingly, crypto prices reacted negatively to the news. At the time of writing, BTC is down 2.5% within the past few minutes, ETH has shed 1.7% of its value at the same time, and the broader crypto markets are selling off as well. A bounce was witnessed shortly after, but it is difficult to say whether the rally can keep its momentum.
It remains to be seen just how many other firms have been impacted by the collapse, but given the size of FTX’s operation, it’s safe to assume the damage will be substantial. Sequoia Capital, for example, has already marked its $250 million investment to $0.
Crypto Presales A Better Alternative Right Now?
It will likely take some time for the full impact of the FTX contagion to come to light. That’s why some investors have begun looking at crypto presales as a way of making a quicker profit.
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