It was only a matter of time — and not much of that either. Cryptocurrency exchange FTX filed for Chapter 11 bankruptcy protection Friday morning “in order to begin an orderly process to review and monetize assets for the benefit of all global stakeholders.” This shouldn’t take long either.
Founder and CEO Sam Bankman-Fried, aka SBF, has resigned and been replaced by John J. Ray III, who said in a statement that FTX “has valuable assets that can only be effectively administered in an organized, joint process.”
Press Release pic.twitter.com/rgxq3QSBqm
— FTX (@FTX_Official) November 11, 2022
Once valued at around $32 billion, FTX was valued at $1.00 (that’s not a typo) by the Bloomberg Billionaires index, and SBF’s personal fortune of almost $16 billion on Monday has now evaporated.
Alameda Research, SBF’s trading firm, is included among the companies named in the filing. The trading firm reportedly owes FTX some $10 billion in loans secured by FTx’s FTT token to shore up Alameda’s investments in other failing crypto companies. The Wall Street Journal on Wednesday reported:
FTX extended loans to Alameda using money that customers had deposited on the exchange for trading purposes, a decision that Mr. Bankman-Fried described as a poor judgment call, according to the person. … All in all, FTX had $16 billion in customer assets, according to the person, so FTX lent more than half of its customer funds to its sister company Alameda.
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Lending funds secured by a crypto token to a related firm to make high-risk bets is virtually guaranteed to be a self-inflicted wound that ultimately will be fatal. So it was Friday morning to FTX.
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