Distressed crypto exchange FTX files for bankruptcy | Business and Economy News

The trading platform had been struggling to raise billions in funds to stave off collapse after a wave of withdrawals.

Crypto exchange FTX has initiated US bankruptcy proceedings and CEO Sam Bankman-Fried has resigned, after a liquidity crisis at the cryptocurrency group that has prompted intervention from regulators around the world.

The distressed crypto trading platform had been struggling to raise billions in funds to stave off collapse after a wave of withdrawals.

The company said in a statement on Friday, shared via a tweet, that FTX and its affiliated crypto trading fund Alameda Research and approximately 130 other companies have commenced voluntary Chapter 11 bankruptcy proceedings in Delaware.

John J Ray III has been appointed CEO of the group. Bankman-Fried will assist with an orderly transition.

The weeklong saga that began with a run on FTX and an abandoned takeover deal by rival Binance has hit an already struggling Bitcoin and other tokens.

FTX was scrambling to raise about $9.4bn from investors and rivals, Reuters news agency reported citing sources, as the exchange sought to save itself after customer withdrawals.

“The FTX group has valuable assets that can only be effectively administered in an organised joint process,” Ray said in the statement.

“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.”

Some investors, including Sequoia and SoftBank, had already marked FTX investments to zero. SkyBridge Capital is working to buy back its FTX stake, the alternative investment firm’s founder Anthony Scaramucci said in an interview with CNBC on Friday.

Regulatory scrutiny

The predicament marks a rapid reversal for Bankman-Fried, the 30-year-old crypto executive, whose wealth was estimated by Forbes at about $17bn just two months ago.

Bitcoin dropped after FTX’s announcement, trading 5.7 percent lower at $16,524. The world’s largest cryptocurrency fell to a two-year low of $15,632 on Wednesday before regaining some ground in a cross-asset rally after US inflation data released on Thursday showed prices had finally started to ease up.

FTX’s token FTT plunged 34 percent on Friday to $2.43, facing an 89 percent weekly loss.

As FTX’s troubles mounted, regulators around the world stepped in.

FTX is under investigation by the US Securities and Exchange Commission, Justice Department, and Commodity Futures Trading Commission, according to a source familiar with the investigations.

Cyprus’s Securities and Exchange Commission asked FTX EU to suspend its operations on November 9, the regulator said on Friday.

Bankman-Fried did not respond to requests for comment from Reuters.

“Once Binance walked away from buying FTX after only 24 hours of due diligence the writing was on the wall for FTX,” said Antoni Trenchev, co-founder of crypto lender Nexo.

“Now we enter the next phase of the fallout, where we witness the second order effects and discover which entities were exposed to FTX and Alameda.”