FTX Trading on Friday filed for Chapter 11 bankruptcy, capping a sudden and stunning decline for one of the world’s largest cryptocurrency exchanges.
Founder and CEO Sam Bankman-Fried also resigned from the company, which named John J. Ray III as its new CEO. Bankman-Fried plans to remain with FTX while it works through the bankruptcy process, according to a statement Friday.
“The immediate Chapter 11 relief is appropriate to give FTX Group an opportunity to assess its situation and develop a process to maximize recoveries for stakeholders,” Ray said in statement.
As of 2019, FTX also owns the naming rights to the arena where the Miami Heat play their home games. FTX Arena is owned by Miami-Dade County.
On Friday night, however, in response to the bankruptcy, Miami-Dade County and the Heat released a joint statement in which they stated that they were “immediately taking steps to terminate our business relationship with FTX” and that they would be looking for a “new naming rights partner”.
FTX’s problems came to light earlier this week when Bankman-Fried told a group of investors that the company needed about $8 billion to back up its users’ crypto assets. He also warned that the company may have to file for bankruptcy without an imminent influx of cash.
FTX’s move marks the third crypto company to seek bankruptcy protection this year, following Voyager Digital and Celsius Network. The filing also clouds the fate of BlockFi, a cryptocurrency lender that FTX helped bail out with $400 million earlier this year.
The bankruptcy filing includes FTX’s U.S. operations and its commercial subsidiary, Alameda Research, which is now the target of a federal investigation. The Securities and Exchange Commission is trying to determine whether Alameda employees used FTX client funds to place risky bets in the market, the Associated Press reported.
California regulators said Thursday they are also looking into FTX, but did not elaborate on the focus of the investigation.
Cryptocurrency prices fell on Friday morning after news of FTX’s fall. Bitcoin fell 4.8% while ether fell almost 5.5%. Ripple, Binance Coin and Dogecoin also took a dive. Solana, of which Alameda owns a large portion, fell about 4 percent.
Earlier this week, the CEO of rival crypto exchange Binance, Changpeng Zhao, said his company had entered into an agreement to. Zhao raising questions about FTX’s financial viability.
Before stepping down, Bankman-Fried said FTX was looking for ways to get liquidity to back up user accounts. FTX announced late Thursday that customers can convert their crypto assets into Tron, a different token that belongs to the Tronix blockchain. Tron founder Justin Sun told Reuters he is in a position to help extricate FTX from its financial woes.
This week marks the end of FTX’s chapter under the leadership of Bankman-Fried, who is highly respected in the crypto world. An early adopter of crypto, he has become one of the industry’s most visible evangelists.
Bankman-Fried was born in California to two professors at Stanford University. He graduated from the Massachusetts Institute of Technology with a degree in physics and later moved to Hong Kong to start Alameda.
After his brief stint in China, Bankman-Fried moved to the Bahamas, where he founded FTX in 2019, just as cryptocurrencies were starting to gain popularity.
After buying a wide variety of brands a few years ago, Bankman-Fried saw his personal fortune rise to $16.5 billion. He has used some of that wealth to become a major political donor, including spending $40 million mostly on Democratic candidates and progressive causes, according to the Wall Street Journal. The 30-year-old also gave $50 million for pandemic relief in India, Bloomberg reported.
Widely known as a vegan who loves to play League of Legends video games, Bankman-Fried has lent hundreds of millions of dollars to struggling crypto companies, earning him the nickname “crypto savior.”
FTX’s bankruptcy filing will likely end Bankman-Fried’s philanthropy — at least for now. In a few days, the value of his assets fell to $0, according to the Bloomberg Index.