Updated Nov 11, 2022 - Economy

FTX starts bankruptcy proceedings and Bankman-Fried resigns as CEO

Illustration of a cracked coin with the FTX logo on it

Illustration: Sarah Grillo/Axios

Sam Bankman-Fried resigned as chief of FTX.com, capping the insolvent crypto exchange's 11th hour hunt for capital to stay afloat, which ended Friday morning.

  • FTX Group companies, which includes FTX Trading Ltd as well as FTX US, started Chapter 11 proceedings in the U.S., according to a statement.
  • John Ray III has been appointed CEO of FTX Group. Bankman-Fried, known as SBF, will remain to assist in an orderly transition.

Why it matters: FTX.com and associated units have officially declared bankruptcy.

Details: FTX US, which Axios on Thursday reported was in trouble in spite of FTX.com's claims that the U.S. subsidiary was separate from its operations and infrastructure, is included in the Chapter 11 proceedings.

  • In all, 134 associated FTX units jointly filed for bankruptcy protection.
  • Of note: Excluded subsidiaries LedgerX LLC, FTX Digital Markets Ltd., FTX Australia PTY Ltd. and FTX Express Pay Ltd.

What he's saying: "I'm really sorry, again, that we ended up here," SBF said via tweet announcing the bankruptcy filing.

  • "I'm going to work on giving clarity on where things are in terms of user recovery ASAP."

What they're saying: "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," new CEO Ray said in a statement.

  • Ray previously served on the board that oversaw the liquidation of Enron after it emerged from bankruptcy in 2004.

Context: FTX.com's unraveling started with a document that questioned the firm's solvency, which led to Binance chief Changpeng Zhao's now infamous tweet that set off something akin to a bank-run.

  • Zhao, known as CZ, tentatively agreed to and then walked away from an acquisition of FTX.com, claiming that issues at the company were beyond Binance's ability to rectify.
  • FTX reportedly had a $10 billion hole on its balance sheet.
  • The firm's websites went dark. Employees quit.

The bottom line: The extent to which SBF had misled investors, business associates, employees and others is still being sussed out.

This story has been updated since the initial publishing, with additional details throughout.

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