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Crypto company that faces scrutiny from Texas regulators files for bankruptcy after competitor questioned its viability

FTX’s collapse came after customers raced to cash out their deposits when a major competitor questioned its viability and declined to buy the company in a bailout deal.

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Sam Bankman-Fried, CEO and Founder of FTX, walks near the U.S. Capitol, in Washington, D.C., on Thursday, September 15, 2022. (Graeme Sloan/Sipa USA)No Use Germany.
Sam Bankman-Fried, CEO and Founder of FTX, in Washington, D.C., on Sept. 15. The crypto company announced Friday that it’s filing for bankruptcy, and Bankman-Fried has resigned. Credit: Graeme Sloan/Sipa USA via REUTERS

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The cryptocurrency firm FTX Trading, a major digital asset exchange, has filed for bankruptcy, and its billionaire founder, Sam Bankman-Fried, has resigned as chief executive officer, the company announced Friday.

“I’m really sorry, again, that we ended up here,” Bankman-Fried said in a Tweet thread Friday. “Hopefully things can find a way to recover.”

FTX Trading and affiliate FTX US, along with Bankman-Fried himself, have been under investigation by the Texas State Securities Board since early October over whether the company is offering unregistered securities to Texans through its yield-bearing cryptocurrency accounts. The company is not registered to sell securities in Texas but has said that it believes it is operating legally because there is an “active application for a license which has been pending.”

The company’s collapse came after Changpeng Zhao, the CEO of cryptocurrency rival Binance, questioned FTX’s viability and declined to buy out the company in a bailout deal offered by Bankman-Fried. Investors raced to cash out their deposits, and the company couldn’t handle the influx of cash-outs, according to several reports.

The bankruptcy filing in Delaware — which includes FTX Trading, FTX US, Alameda Research and about 130 additional affiliated companies collectively known as the FTX Group — seeks to allow the group to “assess its situation and develop a process to maximize recoveries for stakeholders,” newly appointed FTX Group CEO John J. Ray III said in a statement.

A Bloomberg report on Friday said Bankman-Fried’s assets went “from $16 billion to zero in days” as a result of the “downfall of his crypto empire.” In March, the report said, his assets had reached $26 billion.

Bankman-Fried was a major supporter of Texas gubernatorial candidate Beto O’Rourke and donated $1 million to the Democrat’s campaign in the quarter before Tuesday’s election. O’Rourke lost his race to unseat Republican Gov. Greg Abbott.

Several FTX subsidiaries — LedgerX LLC, FTX Digital Markets Ltd., FTX Australia Pty Ltd. and FTX Express Pay Ltd. — are not included in the bankruptcy proceedings.

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