Bahamian cryptocurrency exchange firm, FTX has officially filed for bankruptcy after the Bahamas-based Incorporated Company faced an unprecedented financial implosion.
That is not all. The founder and Chief Executive Officer (CEO) of the company, Sam Bankman-Fried has resigned his position after a humiliating Security and Exchanges Commission probe into the dealings of the firm became his nemesis.
The company valued around $32 billion, said in a statement on Friday, November 11, 2022 that it would be filing for a Chapter 11 bankruptcy proceedings in federal court in Delaware.
The company also announced that CEIO Bankman-Fried who left his position will remain in an advisory role to help the company in an “orderly transition”.
Bankman-Fried has come under fire in recent times after SEC beamed its investigation on him over potential securities law violations, and it now appears he has finally caved in to the scandal and resigned.
John. J. Ray II a US-based legal counsel who helped in the liquidation of Enron after suffering similar fate in 2001 will succeed Bankman Freid as the new FTX CEO. He will lead the company through bankruptcy.
FTX has over the week been embroiled in whiplash developments, especially with the face-off with Changpeng ‘CZ’ Zhao, the CEO of the world’s largest crypto exchange Binance, who angrily ordered a sell-off of FTX’s in-house token.
This led to fears from FTX customers as they panicked over their fate, leading to many attempting to withdraw $6 billion of funds in 72 hours, with the company unable to cover its obligations with depositors as a result of a ‘liquidity crunch’.
According to the Wall Street Journal, FTX may be found wanting as the crypto company was said to have allegedly engaged in a legally dubious move of using customer deposits to fund risky bets by its affiliated hedge fund, Alameda Research, with the action drawing the ire of SEC.
After the panic withdrawal attempts by many of its customers, FTX was forced to freeze customer withdrawals, with another Crypto exchange firm, Binance having to step in with an offer to bail out the firm but after noticing a $8 billion hole in FTX account, pulled a break on the deal.
It was gathered that Bankman-Freid and the FTX hierarchy tried to have other financial backers on board to aid the ailing company, it was unsuccessful as federal probe heightened into the company’s alleged mismanagement of customer funds.
Bankman Freid known in many quarters as the poster boy of crypto had his entire estimated net worth of $15.2billion wiped out by the end of this week as a result of FTX troubles.
Interim CEO of FTX, John Ray in a statement said:
“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”.
The Chicago-based lawyer further promised to with ‘diligence, thoroughness and transparency’, conduct the bankruptcy proceedings and see it to the latter.