FTX has commenced voluntary bankruptcy proceedings in the US, the Cryptocurrency exchange announced on Friday.
FTX will begin “an orderly process to review and monetize assets for the benefit of all global stakeholders,” FTX said in a statement on Twitter.
Chief Executive Sam Bankman-Fried resigned, and a new CEO, John J. Ray III, was appointed, the exchange added.
FTX and its CEO and founder Sam Bankman-Fried are under investigation by the Department of Justice and the Securities and Exchange Commission to determine whether any criminal activity or securities offenses were committed. The person could not discuss details of the investigations publicly and spoke to The Associated Press on condition of anonymity.
The announcement comes days after larger rival Binance put FTX in an impossible position and exposing the real value of the exchanges token FTT and the massive failure of Alameda the so-called “trading firm” owned by Chief Executive Sam Bankman-Fried. Binance made what many believe to be a fake offer to buy FTX and then bailed leaving the exchange with the task of raising roughly $9 billion from investors and rivals to stay afloat with a seal of disapproval on it from Binance.
Binance backed out of the deal after a due diligence examination and recent reports of mishandled customer funds, as well as alleged investigations by the US authorities into the company. Abandonment of the deal triggered a meltdown in the cryptocurrency market, with the price of Bitcoin sinking to its lowest level in two years.
It could take several weeks for the crypto turmoil to settle down, unless FTX is quickly rescued, the experts suggested. “With the crypto market cap standing at just above $1 trillion before the FTX/Alameda Research collapse, our guess is that the crypto market will find a floor above $400 billion in the current deleveraging phase,” KXCO has said.
The initiation of bankruptcy proceedings by FTX may trigger what could be one of the biggest meltdowns.