The corporation saw a startlingly quick fall prior to the most recent developments.
This week, the term “bankruptcy” has been used by a number of big digital companies, not only Twitter. Crypto exchange FTX has applied for Chapter 11 bankruptcy protection following a startlingly quick collapse, and creator Sam Bankman-Fried has resigned as CEO.
According to a news release, the bankruptcy petition includes FTX Trading, FTX US, Alameda Research, and around 130 other businesses that fall within the FTX Group. Other companies, such FTX Australia and FTX Express Pay, are not party to the bankruptcy proceedings. Chapter 11 bankruptcy permits a corporation to continue operating while it develops a strategy to pay its creditors, therefore filing for Chapter 11 bankruptcy does not necessarily mean that a company is doomed. It’s a challenging position to recover from, though.
Press Release pic.twitter.com/rgxq3QSBqm
— FTX (@FTX_Official) November 11, 2022
The FTX Group’s new CEO John J. Ray III, a former chairman of Enron who was brought in to oversee that company’s liquidation, stated in a statement that the chapter 11 bankruptcy’s immediate relief would give the FTX Group the chance to evaluate its situation and develop a process to maximize recoveries for stakeholders. “The FTX Group has important assets that can only be managed through a planned, collaborative process. I want to reassure each and every stakeholder, including employees, customers, creditors, contract parties, stockholders, investors, governmental bodies, and others, that we will handle this effort with care, thoroughness, and openness.” Ray advised stakeholders to exercise patience because “events have been fast-moving and the new team has only recently engaged.”
After the price of its native FTT token plummeted and many customers withdrew their money, the company quickly found itself in severe difficulties. In response to allegations that FTX was experiencing a liquidity issue, Changpeng Zhao, the CEO of competing crypto-giant Binance, announced that his company will sell out FTT worth approximately $529 million. That practically destroyed the token’s worth.
Then, Binance consented to rescue FTX by acquiring the business. A day later, it withdrew from the agreement, claiming issues that surfaced during the due diligence process. Bankman-Fried continued to apologize for the issue and declared on Thursday that he was making every effort to raise money and treat people “rightly.” He resigned the following day.
After the bankruptcy filing, Bankman-Fried posted on Twitter, “This doesn’t necessarily have to be the end for the companies or their capacity to deliver value and finances to their clients in particular, and can be consistent with other paths.” “I’m going to work on providing clarification on the situation as soon as possible about user recovery.” Bankman-Fried continued by saying that he will soon release a more thorough, play-by-play account of what transpired with FTX.
The Department of Justice and the Securities and Exchange Commission may be looking into FTX, according to reports. Although it’s unclear when the DOJ began investigating the company’s activities, the SEC’s inquiry is said to have been going on for a while.