FTX files for chapter 11 bankruptcy taking down about 130 companies with it

FTX files for chapter 11 bankruptcy taking down about 130 companies with it

FTX has filed for Chapter 11 bankruptcy in the U.S., based on a recent Twitter post. Sam Bankman-Fried stepped down as the company’s CEO and named John Ray III as his replacement. Although Bankman-Fried will be leaving his position, he will continue to help with the company’s transition.

Stakeholders assured of fast-moving proceedings

As part of the voluntary proceeding, Alameda Research, Bankman-Fried’s crypto trading firm, and approximately 130 other affiliated companies are involved. This news caps off an eventful week for one of the most prominent names in the industry.

The FTX Group’s Chapter 11 filing allows the company to assess its current situation and develop a strategy to maximize its recovery. Ray, the new chief executive officer, said that the company’s stakeholders should be assured that the organization will continue to operate efficiently.

“The FTX Group has valuable assets that can only be effectively administered in an organized, joint process. I want to assure every employee, customer, creditor, contract party, stockholder, investor, governmental authority, and stakeholder that we are going to conduct this effort with diligence, thoroughness, and transparency.”

Continued Ray.

He stated that the new team has just started its work and that stakeholders should remember that the proceedings have been fast-moving. They should also review the materials filed in the proceedings.

The price of Bitcoin immediately fell after news of the bankruptcy broke out, dropping to $16,500 shortly after. Bankman-Fried had earlier revealed that FTX had liquidity issues and was talking with Binance about acquiring the company. After Binance pulled out of the deal, Justin Sun, the founder of Tron, announced that he would be acquiring the company’s assets.

Companies going down with it

According to the bankruptcy filing, Alameda Research had between $10 billion and $50 billion in assets and liabilities. It noted that its funds would be distributed to its unsecured creditors.

According to a press release, the FTX Group, composed of the FTX.com entity and FTX US as well as “about 130 additional affiliated companies,” has filed for chapter 11 bankruptcy.

Unlike chapter 7 bankruptcy proceedings, which liquidate assets, chapter 11 bankruptcy proceedings provide a company with the opportunity to restructure its operations.

Meanwhile, LedgerX (which operates as FTX US Derivatives) is not included in the filing, nor is FTX Digital Markets, FTX Australia, FTX Express Pay, or FTX Digital Markets.

“Beyond liquidity rescue”

FTX collapsed in just a few days as its liquidity dried up and customers demanded withdrawals. Also, rival exchange Binance pulled out of its deal to buy the company. In an interview, Sam Bankman-Fried, the founder of FTX, admitted that he “f—ed up.”

Anthony Scaramucci, the founder of SkyBridge Capital, a private equity firm, flew to the Bahamas this week to assist SBF as an investor and friend. He said that he didn’t see any signs of the company’s mismanagement. 

He said that he and other investors didn’t see any signs of mishandling when they first started looking at FTX as a potential partner. He said that it appeared beyond a simple liquidity rescue.

“Duped, I guess is the right word, but I am very disappointed because I do like Sam. I don’t know what happened because I was not an insider at FTX.”

Caramucci said Friday morning.

What happens next?

When a company files for Chapter 11, a worldwide moratorium is automatically imposed, as explained in a Twitter post by Wassie Lawyer. If a company enters Chapter 11 bankruptcy, the management has 120 days to propose a reorganization plan. Chapter 11 plans need to be approved by at least one impaired class, so at least two-thirds plus half of the claimants in the class must vote for the plan.