Twitter isn’t the first high-profile internet business to use the term “bankruptcy” this week. Following a breathtakingly swift fall, crypto exchange FTX has filed for Chapter 11 bankruptcy, with founder Sam Bankman-Fried resigning as CEO.
According to a news statement, the bankruptcy petition includes FTX Trading, FTX US, Alameda Research, and over 130 additional firms under the FTX Group umbrella. Others, like FTX Australia and FTX Express Pay, are not part in the bankruptcy process. Filing for Chapter 11 bankruptcy does not always imply that a corporation is doomed – it permits a company to continue operating while it works out a plan to repay creditors. However, it is a difficult position to recover from.
After the price of its native FTT token plummeted and many customers withdrew their money, the firm quickly found itself in severe difficulties. Following concerns that FTX was experiencing a liquidity issue, Changpeng Zhao, CEO of rival crypto behemoth Binance, said that his business will sell $529 million of FTT. That effectively wiped off the token’s value.
Binance then agreed to take over FTX and bail it out. However, a day later, it pulled out of the agreement, citing problems discovered during due diligence. Bankman-Fried later apologised for the shambles and said on Thursday that he was doing everything possible to acquire finances and do “right by users.” He resigned the next day.
Meanwhile, indications indicate that the Department of Justice and the Securities and Exchange Commission are looking into FTX. It is unclear when the DOJ began investigating the company’s activities, but the SEC’s inquiry has apparently been underway for some months.
