In the United States, FTX has filed for Chapter 11 proceedings. This follows the recent saga in which the company failed to honour its customers’ withdrawal requests.
FTX announced in a press release just minutes ago that the company will file for Chapter 11 bankruptcy proceedings in the United States.
According to the release, FTX, Alameda Research, and 130 other affiliated companies associated with FTX have initiated voluntary proceedings under Chapter 11.
Sam Bankman-Fried has stepped down as CEO. The newly-appointed CEO of FTX Group, John J. Ray III, commented on the situation, saying:
The immediate relief of Chapter 11 is appropriate to provide the FTX Group the opportunity to assess its situation and develop a process to maxmize recoveries for stakeholders. The FTX Group has valuable assets that can only be effectively administered in an organized, joint process.”
As his financial empire was collapsing, SBF tweeted: “I f**ked up… a poor internal labeling of bank-related accounts meant that I was substantially off on my sense of users’ margin.”
Given the circumstances, we shouldn’t simply accept SBF’s word for the situation. However, the only external investigation of the matter so far supports the explanation’s atrocious bookkeeping and excessive optimism about user funds.
Binance, the largest cryptocurrency exchange in the world, initially offered to buy out FTX as it was collapsing. However, after reviewing FTX’s books, Binance determined that the problem was too large to solve.
According to a person familiar with the situation, Binance backed out, citing revelations of “mishandled customer funds” and describing “the books” as “a nightmare” and “a black hole.”
Manipulation of customer funds is strictly prohibited. The Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), and the Department of Justice (DOJ) are all looking into how FTX handled customer funds.
They are specifically looking into whether FTX followed securities laws regarding the separation of customer assets and trading against customers.
To read our blog on “Twitter is in uproar over the FTX demise,” click here
