Sam Bankman-Fried of FTX has resigned as CEO as the cryptocurrency exchange voluntarily filed for Chapter 11 bankruptcy proceedings in the US, according to a photo posted on the company’s Twitter account on Friday.
The 30-year-old FTX’s CEO and founder, Sam Bankman-Fried, will remain “to assist in an orderly transition,” the post said, adding that John Ray III is the new CEO. Ray, a restructuring expert who previously handled the Enron Corporation bankruptcy case.
The move comes as FTX.com suffers from liquidity due to a multibillion-dollar balance sheet deficit.
Bankman-Fried tweeted after the bankruptcy filing:
“I’m really sorry, again, that we ended up here.”
Earlier this year, once valued at $32 billion, the company said its crypto trading arm, FTX.com, FTX US, Alameda Research, and 130 additional sister companies are part of the bankruptcy process. LedgerX, FTX Australia, FTX Digital Markets, and FTX Express Pay are four subsidiaries not included in the proceedings.
FTX US and Alameda Research are currently unable to meet liabilities between $10 billion to $50 billion, despite having a similar range of assets, according to the bankruptcy filings. The company revealed more than 100,000 creditors, the filing said.
Ray said in a statement:
“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.”
Chapter 11 bankruptcy is when a company intends or expects to reorganize its business rather than file for Chapter 7 bankruptcy, which just liquidates assets. Companies that file for Chapter 11 bankruptcy can continue their day-to-day operations and, with court approval, can borrow new money.
Bankman-Fried apologized in a Twitter post following the bankruptcy, saying that, hopefully, things can find a way to get better. He added:
“I’m piecing together all of the details, but I was shocked to see things unravel the way they did earlier this week. I will, soon, write up a more complete post on the play by play, but I want to make sure that I get it right when I do.”
The price of Bitcoin quickly dropped over $1,000 on the news of the Bankruptcy and fell to $16,500 within minutes. FTX’s token FTT fell 34% to $2.43 on Friday, marking an 89% weekly loss.
The exchange signed a non-binding agreement with rival Binance to sell its non-US business earlier this week. A day later, Binance resigned due to mismanagement of funds and regulatory issues. Since then, FTX.com has been trying to obtain a rescue fund that is no closer to being realized due to its liquidity problem. Since then, FTX.com has been struggling for rescue financing, which doesn’t seem close to happening due to its liquidity problem.