(Kitco News) - For anyone who was still holding out hope that the FTX drama would come to a speedy resolution, Friday all but assured that would not be the case as the once popular cryptocurrency exchange filed for bankruptcy.
According to a statement on the FTX Twitter page, the embattled exchange is seeking bankruptcy protection in Delaware. Approximately 130 corporate entities that are affiliated with the exchange, including Alameda Research, are also filing for bankruptcy.
Along with the filing, CEO Sam Bankman-Fried (SBF) has submitted his resignation and John Ray III has been appointed as the new CEO of FTX Group.
"The immediate relief of Chapter 11 is appropriate to provide the FTX Group the opportunity to assist its situation and develop a process to maximize recoveries for stakeholders," Ray said. "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."
Non-stop developments
This development comes amid a torrid week of announcements related to company, including a failed buyout attempt by the leading crypto exchange Binance, the freezing of its assets by regulators in the Bahamas, and a confirmation that the exchange has liabilities worth $8.8 billion.
Regulators in the Bahamas also suspended FTX's registration and appointed an attorney as a provisional liquidator of the assets.
"The commission is aware of public statements suggesting that clients' assets were mishandled, mismanaged and/or transferred to Alameda Research. Based on the commission's information, any such actions would have been contrary to normal governance, without client consent and potentially unlawful," the commission said in its release.
The above statement is referring to the allegations that SBF used customer assets that were deposited on FTX to fund the trading activity of his trading firm Alameda Research, which led to the current $8.8 billion shortfall in the exchange's reserves.
The list of affected parties runs the gamut from retail traders to the world's largest asset manager BlackRock. Even the Ontario Teachers Pension Plan got caught up in the mix, with the organization indicating that it has $95 million worth of exposure to the firm due to a pair of investments over the past two years.
Venture capital firm Sequoia Capital released a statement to its partners on Nov. 10 informing them that it had marked down its $213.5 million investment in FTX and FTX US to $0, saying it was a complete loss.
According to SkyBridge Capital founder Anthony Scaramucci, he and many of his associates consider this the worst week in the history of cryptocurrencies. The businessman went on to explain this his firm is in the process of attempting to repurchase the 30% of his company that Sam Bankman-Fried's FTX acquired months before the crypto exchange imploded.
"My legal team and my other partners are working to buy back that stake," Scaramucci said Friday in a CNBC interview, prior to the bankruptcy announcement. "We're in a worse position because of the fact that we made the decision to have Sam join the cap table at SkyBridge. There's no question that we're in a worse position – he's hurt the industry."
|
| SEC and CFTC heads weigh in on the FTX collapse, call for greater regulation |
According to Changpeng Zhao (CZ), the CEO of Binance, the fallout from the collapse of FTX is just getting started and more platforms and companies could be next to fall.
"With FTX going down, we will see cascading effects," Zhao said. "Especially for those close to the FTX ecosystem, they will be negatively affected."
That includes the embattled crypto lender Voyager Digital. FTX was in the process of acquiring the platform's assets for $1.4 billion, but as CZ noted in a speech, it's unlikely that the firm will have the money for the acquisition now.
As its stands now, the path forward for FTX looks dire. Regulators in California have announced that they are going to investigate the downfall of the exchange, while Maxine Waters, chair of the U.S. House of Representatives Financial Services Committee, is now pusihng for additional federal oversight of crypto trading platforms and consumer protection amid FTX facing liquidity issues.
To top it off, now there are rumors circulating that SBF was arrested on the tarmac at the Bahamas airport, capping a wild week that plunged the crypto market to its lowest level in two years.
It's unlikely that this saga will come to an end anytime soon, and it has highlighted some glaring issues that the cryptocurrency ecosystem needs to address. Or as MicroStrategy founder Michael Saylor put it during an interview on CNBC, "I think the industry needs to grow up."
