Failed crypto exchange FTX filed for bankruptcy on Friday and announced the resignation of CEO Sam Bankman-Fried, in a week where the company’s steep decline rocked digital asset markets and angered Washington.
FTX has filed for Chapter 11 bankruptcy in the United States, meaning it will attempt to restructure its business. The company, one of the world’s largest cryptocurrency trading platforms, stopped accepting clients earlier this week after launching the exchange, citing financial instability.
“Chapter 11 relief is appropriate to evaluate FTX Group’s current situation and develop a process to maximize recovery for stakeholders,” company CEO John Ray said in a press release. III.
The bankruptcy filing will deal another blow to the collapse of the crypto market and further erode the industry’s position in Washington, where FTX and political tycoons Banman-Fried have campaigned in recent months to influence emerging laws and regulations. Regulators around the world, like FTX and Bankman-Fried, say the controversy threatens to invalidate the organization’s protected binary crypto rule. FTX-related cryptocurrency startups have also suspended their operations.
It said it has more than 130 affiliates and subsidiaries, including Bahamas FTX and Bankman-Fried investment firm Alameda Research, with liabilities ranging from $10 billion to $50 billion. . The company has identified more than 100,000 donors, including customers.
Bankman-Fried “facilitates an orderly transition,” according to FTX. The 30-year-old ex-millionaire was left penniless this week.
FTX’s U.S. operations are among the companies seeking bankruptcy protection, Bankman-Fried said Thursday. “There aren’t many people left” in the company’s US operations, a source familiar with the situation said.
The senior executives of FTX’s US exchanges, Mark Weitzen, former chairman of the Commodity Futures Trading Commission, and Ryan Miller, a lawyer for Gary Gensler, who headed the SEC when he led the CFTC, removed FTX from their Twitter profiles on Thursday evening. Jane Tackett, head of institutional sales at FTX, said in a tweet late Thursday that her trading accounts had been deactivated without warning. Watzen and Miller did not respond to requests for comment.
“The FTX Group has significant assets that can only be managed effectively through an organized and collaborative process,” said Ray, who was involved in Enron’s shutdown. “I would like to assure all employees, customers, creditors, contractors, shareholders, investors, government officials and other stakeholders that we will conduct this endeavor with responsibility, quality and transparency.”
FTX did not respond to a request for comment.
The company filed for Chapter 11 protection in federal court in Delaware, hours after the Bahamas Securities and Exchange Commission, where it is headquartered, announced that it had seized the company’s assets.
“Sorry, again, we’re done here,” Bankman-Fried said on Twitter after filing for bankruptcy. “Hopefully, they can find a way to restore things. Hopefully that will bring them clarity, confidence and governance.”
Following the collapse of the FTX in Washington, the Bankman-Fried policies are under heavy pressure in the high-impact dollar campaign. This includes a bill to regulate cryptocurrencies sponsored by Senate Agriculture Chairwoman Debbie Stabenow (D-Mich.) and Sen. John Boozman (R-Ark.), the panel’s top Republican.
Bozeman said Thursday night that officials are taking a “top-down” approach to the law in light of the FTX crisis. Stabenow said the committee is “committed to advancing the Digital Goods Consumer Protection Act to provide the necessary protections for the digital goods marketplace.” The bill, which will come up for a committee vote next week, would give the CFTC oversight of cryptocurrency trading.
Other crypto companies are on the brink of bankruptcy, with lobbyists, including those representing crypto companies, saying they don’t expect the bill to gain much traction this year.
“This scandal calls for a complete overhaul of how Congress approaches this industry,” said Jim Manley, a Democratic strategist who represented Senate Majority Leader Manley on cryptocurrency. Nev.) Customers.No
FTX is the latest and greatest in a long line of cryptocurrency heavyweights that have suffered from volatile markets and lax internal controls over the past year. David Portilla, a partner at Cravath, Swain & Moore, said federal regulators should use existing powers to act because the legislative process will be too slow to address existing concerns.
“We cannot wait 24 months to make a law and apply that law to protect consumers,” he said. “Stopgap needs serious regulatory action.”
A key asset component not included in the company’s extensive bankruptcy filing is its US derivatives trading platform, which was renamed LedgerX before FTX bought it in the fall.
The CFTC, which holds LedgerX’s license, will monitor the chaos surrounding FTX to ensure that the Bahamas-based exchange’s problems do not affect US-regulated markets.
LedgerX on Friday withdrew its proposal to the CFTC to allow retail investors to use borrowed funds to trade cryptocurrencies hourly through its initial platform, the company said.
FTX’s bankruptcy threatens the launch of Bankman-Fried-linked exchanges and other digital assets.
BlockFi, a crypto-lending company that recovered from a similar contagion in the market this summer FTX, announced on Thursday evening that it would stop issuing funds.
Galaxy Digital, an investment firm led by former Fortress Investment Group CEO Mike Novogratz, announced Wednesday that it has closed a $77 million investment in FTX. Genesis, a crypto lending company owned by Digital Currency Group, said on Thursday that FTX had raised about $175 million.
Federal officials have warned for months that the highly interconnected market structure of cryptocurrencies could pose a risk to the financial system if it continues to spiral out of control.
“FTX loss cryptocurrency structural challenges caused repeated losses to investors with poor transparency and risk management,” said Mansoor Hussain, Fitch’s chief ratings officer.
Other crypto-industry heavyweights distanced themselves from FTX and Bankman-Fried in blog posts, press releases and lengthy Twitter discussions. All major cryptocurrencies are down 20% since the start of the week.
“We’ve felt that burn, too,” Alessia Haas, chief financial officer at U.S. exchange Coinbase, said in an interview. “We didn’t expect this.”
Haas said this could allow Coinbase to capture a large portion of the cryptocurrency market. Coinbase has not agreed with the Securities and Exchange Commission on how to be regulated, but now the company is trying to promote itself as a US-based powerhouse.
“This is a particularly regulated area,” Gensler, who is pushing for exchanges like Coinbase to register with the SEC, told CNBC on Thursday. He argued that many crypto tokens are considered securities under the agency’s jurisdiction.
Gensler said the best way to protect consumers is to “work with these cryptocurrency exchanges, these cryptocurrency lending platforms and register properly” with the SEC.
The SEC did not respond to requests for comment.
Victoria Guide contributed to this report.