FTX files for bankruptcy and Sam Bankman-Fried steps down as CEO after crypto exchange fails to secure bailout

After failing to secure a rescue, FTX announced Friday it filed for Chapter 11 bankruptcy and that Sam Bankman-Fried resigned as chief executive officer.

The bankruptcy includes Alameda Research and 130 additional affiliated companies, which together are called “FTX Group.”

FTX appointed John J. Ray III as the new CEO of FTX Group. He was previously brought in to clean up troubled energy firm Enron two decades ago.

“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,” Ray said in the press release. “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.”

Cryptocurrencies initially extended losses on the news but later pared them back a bit. Bitcoin was down 3.9% at $16,912.

Just a day ago, Bankman-Fried apologized on Twitter, and attributed the firm’s collapse to higher-than-expected leverage and a waterfall of withdrawals.

“The full story here is one I’m still fleshing out every detail of, but [at] a very high level, I fucked up twice,” Bankman-Fried wrote.

“A poor internal labeling of bank-related accounts meant that I was substantially off on my sense of users’ margin. I thought it was way lower,” Bankman-Fried added.

The bankruptcy announcement came after a stunning week for FTX, which was once valued at more than $30 billion.

CoinDesk first reported last week that Alameda Research held a large amount of illiquid FTT on its balance sheet, spurring speculation that the trading firm lacked sufficient liquidity.

FTX halted customer withdrawals earlier this week after about $5 billion worth of withdrawal requests came in on Sunday. The exchange then sought out potential rescuers amid a liquidity crunch. On Tuesday, Binance said it intended to acquire FTX, but backed out a day later.

FTX then reportedly approached crypto exchange Kraken for a bailout and was also in talks with Tron founder Justin Sun, among others, for a rescue.

But reports that FTX transferred client funds to trading house Alameda earlier this year added to its legal risk, with the Securities Exchange Commission, Justice Department and Commodity Futures Trading Commission all investigating.