FTX Group, a collection of some 130 companies behind the cryptocurrency platform FTX, has filed for bankruptcy, and its boss, Sam Bankman-Fried, has quit.
Bankman-Fried, who has been replaced in his role as CEO by John J. Ray III, will remain to assist with an orderly transition, as will “many employees” of FTX Group in various countries.
“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,” Ray said in a statement.
The bankruptcy proceedings cover Bankman-Fried’s crypto hedge fund Alameda Research and FTX US, but exclude subsidiaries FTX Australia Pty., FTX Express Pay Ltd., and several others.
“This doesn’t necessarily have to mean the end for the companies or their ability to provide value and funds to their customers chiefly,” he wrote, apologizing for how things have developed and holding out hope for finding a way to “recover.”
“The full story here is one I’m still fleshing out every detail of, but as a very high level, I [expletive] up twice,” he wrote in a post on Twitter.
‘When It Rains, It Pours’
One mistake, Bankman-Fried said, was underestimating margin on users’ accounts. It’s a flub that snowballed when FTX users rushed to withdraw their deposits, sparking a liquidity crunch.“Because, of course, when it rains, it pours,” he said.
On Monday, Bankman-Fried was scrambling to raise money, even approaching Binance for help.
“This afternoon, FTX asked for our help. There is a significant liquidity crunch,” Zhao said in a post on Twitter.
Bankman-Fried and Zhao both later announced that Binance had reached a tentative deal to buy FTX’s businesses located outside the United States, tossing FTX a lifeline.
But after conducting due diligence, Zhao later reversed his offer.
“As a result of corporate due diligence, as well as the latest news reports regarding mishandled customer funds and alleged U.S. agency investigations, we have decided that we will not pursue the potential acquisition of FTX.com,” the Binance account on Twitter stated in a post.