FTX Files for Chapter 11 Bankruptcy, SBF Resigns

  • FTX, FTX.US, Alameda Research, and around 130 companies associated with FTX Group, have filed for Chapter 11 bankruptcy protection in the district of Delaware.
  • FTX Australia, FTX Express, FTX Digital Markets, and LedgerX will not be participating in the FTX Group’s bankruptcy proceedings.
Sam Bankman-Fried, co-founder and CEO of FTX

Sam Bankman-Fried, former CEO of FTX, speaking at the Binance Blockchain Week, Singapore, 19 January, 2019. Binance

Less than week after the deal with Binance fell through, troubled cryptocurrency exchange FTX filed for Chapter 11 bankruptcy protection in the United States, the company said via Twitter on 11 November.

According to the announcement, around 130 companies affiliated with FTX Group — amongst which are FTX Trading, FTX US, Alameda Research, and more — have filed for bankruptcy in the district of Delaware. Sam Bankman-Fried (SBF) has also resigned from the position of FTX Group CEO, and has been replaced by John Ray. The new CEO said in a statement:

“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. 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.”

Ray also noted that FTX Group had a number of valuable assets which could only be effectively administered in an organized joint process such as a Chapter 11 bankruptcy proceedings. The press release also noted that LedgerX — which does business as FTX US Derivatives — FTX Australia, FTX Express, and FTX Digital Markets will not be participating in FTX Group’s bankruptcy proceedings.

The troubles of the FTX Group began last week, when a leaked balance sheet showed that a large portion of Alameda Research’s assets were in FTX Token (FTT), the native token of sister company FTX. Once this came to light, Binance decided to sell off its FTT holdings, which to some extent triggered panic on the market, and in less than 2 days the exchange started to experience a liquidity crisis. There was a potential acquisition deal with Binance, but that quickly fell through after the exchange did its due diligence and determined the issues were beyond its “control or ability to help”.

The only positive thing to come out of these events is that multiple exchanges — Binance, OKX, KuCoin, Poloniex, and Huobi to name a few — have agreed to be more transparent with their clients, and promised to provide a a Merkle Tree Proof-of-Reserve certificates within 30 days.

Discussion
Related Coverage
BlockFi Files for Bankruptcy Following FTX Collapse
  • BlockFi’s Chapter 11 filing revealed that it had $257 million in cash on hand, more than 100,000 creditors, and between $1 billion and $10 billion in both assets and liabilities.
  • The company’s largest creditors include FTX.US, which has a $275 million unsecured claim, and the Securities and Exchange Commission with a $30 million claim
2 days ago
BlockFi CEO Zac Prince

BlockFi CEO Zac Prince. CoinDesk

OKX Launches Proof-of-Reserves Page and Self-Audit Tool
  • OKX has become one of the first crypto exchanges to release a Proof-of-Reserves page, giving users a greater visibility in its reserves and liabilities.
  • Customers can also verify that their assets are backed 1:1 on the platform, and that they have become a “leaf” in the Merkle tree data structure.
Mining Giant Core Scientific to Deplete Cash Resources by End of 2022
  • Bitcoin miner Core Scientific said in a SEC filing that it would require additional liquidity in order to continue operations past November 2023.
  • The company, however, expressed doubts in its ability to raise funds through financing or capital markets due to “uncertainties and current market conditions”.