FTX, a major cryptocurrency exchange, just filed for Chapter 11 bankruptcy after a turbulent week.
This is a debacle and a huge setback for the cryptocurrency industry.
FTX, one of the largest digital currency exchanges, filed for Chapter 11 bankruptcy on November 11th.
This decision is one of the biggest setbacks for the young crypto industry, which wants to disrupt the financial services sector.
“FTX Group Companies commence voluntary Chapter 11 proceedings in the United States,” the firm said in a statement posted on Twitter.
This procedure will allow the company to restructure itself without pressure from its customers and creditors.
Founding CEO Sam Bankman-Fried also resigned, FTX said in the statement.
“In order to begin an orderly process to review and monetize assets for the benefit of all global stakeholders, John J. Ray III has been appointed Chief Executive Officer of the FTX Group,” FTX said. “Sam Bankman-Fried has resigned his role as Chief Executive Officer and will remain to assist in an orderly transition.”
It continued: “Many employees of the FTX Group in various countries are expected to continue with the FTX Group and assist Mr. Ray and independent professionals in its operations during the Chapter 11 proceedings.”
The announcement caused a plunge in crypto assets. On the cryptocurrency market, bitcoin plunged more than 4%. Over the last seven days, the most popular cryptocurrency has fallen by 17%, according to data firm CoinGecko.
Investors are expecting a cascade of losses as many crypto firms have exposure to FTX. Bankman-Fried rescued and bailed out a lot of crypto businesses during the summer cash crunch.
FTX’s bankruptcy filing had been expected for a few days. Things came to a head on November 9 when rival Binance announced it was abandoning a deal to acquire FTX after discovering that the group’s problems were bigger than expected.
FTX and its sister company Alameda Research, a trading platform, were on the brink of insolvency, a Coindesk report revealed on November 2.
On November 6, Binance and its CEO Changpeng Zhao decided to sell FTT, the cryptocurrency issued by FTX, for $500 million. In doing so they triggered a panic. Many customers then rushed to FTX to request their cryptocurrencies. That day $5 billion were withdrawn from the platform, a record.