Bankman-Fried Resigns From FTX, Puts Empire in Bankruptcy

[BumRushDaShow]

Source: Bloomberg

Sam Bankman-Fried’s crypto empire filed for Chapter 11 bankruptcy in Delaware, capping a rapid downfall for his companies.

Entities tied to FTX.com, FTX US and trading firm Alameda Research Ltd. were part of the filings, according to a Twitter statement Friday. Chapter 11 bankruptcy lets a company continue operating while it works out a plan to repay creditors.

Bankman-Fried resigned as chief executive officer as part of the filings, and John J. Ray III was appointed to replace him, the statement said.

Crisis quickly befell FTX this month after prices for the exchange’s native crypto token, FTT, plummeted and users raced to withdraw their assets. Rival crypto exchange leader Changpeng “CZ” Zhao had earlier said he would sell some $529 million of FTT coins due to “recent revelations that came to light.”

Read more: https://www.bloomberg.com/news/articles/2022-11-11/ftx-com-goes-bankrupt-in-stunning-reversal-for-crypto-exchange

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Short article (so far). Article updated.

Previous article and headline -

FTX Goes Bankrupt in Stunning Reversal for Crypto Exchange

FTX.com said it filed for Chapter 11 bankruptcy in Delaware, capping a swift reversal of fortune for the crypto exchange led by Sam Bankman-Fried, who has resigned.

Crisis quickly befell FTX this month after prices for the exchange’s native crypto token, FTT, plummeted and users raced to withdraw their assets. Rival crypto exchange leader Changpeng “CZ” Zhao had earlier said he would sell some $529 million of FTT coins due to “recent revelations that came to light.”

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Oops.

[Shellback Squid]

1. wow, Im sorry if anyone here invested but crypto is a ponzi scheme

[SouthernDem4ever]

15. Why does crypto company qualify to declare bankrutpcy

they don't even use our monetary system except as an exchange.

[Ford_Prefect]

2. It was ALWAYS vaporware. From nothing you get nothing.

[FakeNoose]

20. Somebody gets something ... usually it's the original investors who make out fine

It's the later investors all get screwed. That's how ponzi/pyramid schemes work.

[Ford_Prefect]

21. Exactly. They had mystery equations to solve using someone else's computers and electricity bill.

Which when they were done counting some had morphed into a fixed value. Something from Nothing which functionally was a bet that the user would earn magic money.

We have always called THAT a con.

There was never any investment in any real property or even a derivative. The first investors made their money off of everyone who bought after them.

Vaporware does nothing at all but promises to do everything you wish. That is exactly what Crypto was from the first day.

[mahatmakanejeeves]

3. OMG!!!!! I'm ...

not ruined at all.

[William Seger]

4. No sympathy for people who get burned on crypto "currency"

Next time, invest in something that has intrinsic value, not a get-rich-quick confidence game.

[emulatorloo]

5. Oddly, I'm not 'stunned' at all. Thanks for posting!

[Orrex]

6. Not long ago you could buy Boardwalk AND Park Place with crypto

Now you can barely buy Baltic or Mediterranean!

[True Dough]

7. Poor Tommy. Seven Super Bowl rings but also some very poor financial judgement

Oh well, "you've made your bed" and all that.

Link to tweet

[jmowreader]

24. So tell me...

When does Brady turn into Tommy Chong?

[True Dough]

25. Not sure

but both might someday vie for the same Screen Actors Guild Award.

Link to tweet

[TreasonousBastard]

8. "recent revelations"? Down to search I go.

[William Seger]

12. Find anything?

[TreasonousBastard]

13. Not yet

[muriel_volestrangler]

14. One explanation for FTX's problems I've seen is that it lent customers' assets to an "investing" arm

and then took big risks with them. So when crypto started doing badly, it lost a lot of that (cryptocoin, I think, but it may have been real money too) and between them, the trading and "investing" (scare quotes because it's not really investing like an investment bank does, it's more like putting bets on the Preakness Stakes) arms between them don't have the cryptocoin or cash for the customers to cash in what they thought FTX was holding for them.

There could be other revelations, of course.

I find it interesting that this company has been playing fast and loose with people's assets, but now runs to bankruptcy protection in a proper regulated environment. I hope the end result will be the dubious characters who've been running FTX are the ones who lose all their money first.

[mathematic]

17. It's a wild story

Here's a summary for anybody that doesn't want to search it.

There are lots of crypto currencies, big ones like Bitcoin, to memes like Doge coin. These are often bought and sold on crypto exchanges. Binance is the biggest one. FTX was the second biggest one.

Last May, a bunch of crypto scams went under. Terra Luna was a ponzi and it collapsed. Lots of firms held Luna and this cascaded into more crypto defaults. Over the summer, Sam Bankman-Fried (SBF), the founder and main owner of FTX was in negotiations to bail out a lot of these failed firms via SBF's crypto trading firm Alameda Research. Nobody was particularly sure why he was doing this but people figured he was doing this because crypto industry stability is good for the long term business of FTX and Alameda. They were wrong.

On Sunday the founder of Binance, Changpeng Zhao (CZ), tweeted that he had become aware of "recent revelations" at FTX and he would be liquidating $500m worth of FTX's inhouse crypto token, FTT. (Binance had acquired the tokens as an early investor in FTX.)

Of course, this caused a bank run. SBF tweets everything is fine. (Everything was not fine.) The CEO of Alameda tweets at CZ an offer to buy all his FTT at $22. CZ declines. FTX/Alameda defends the $22 price level all Monday but Monday night, it fails. By Tuesday morning the price of FTT was in freefall. It's trading at $2.50 now.

Tuesday afternoon, Binance signs a non-binding letter of intent to acquire FTX, pending due diligence. Yes, you read that right. The #1 exchange kicks off a bank run on his biggest competitor via tweet and then offers to buy them out. This is the future cryptobros want.

Well, Wednesday rolls around and Binance pulls out of the deal because, frankly, FTX isn't just suffering from a liquidity crisis (which would mean they have the assets to cover their liabilities) but they are massively technically insolvent. They are $9 billion in the hole, somehow. SBF tries for a few days to find other ways to bail out FTX but it doesn't happen and today they threw in the towel with the bankruptcy filing.

So how did FTX fail so hard?
Anybody here remember Enron? SBF was kinda engaged in a similar scam, segregating risky trading losses in the affiliated trading firm Alameda. FTX took client money, loaned it to Alameda and held FTT (remember, that's FTX's own crypto currency) and other junk crypto as collateral. Alameda invested in garbage crypto scams like the ones that went bankrupt in May & June. THAT is why SBF was trying to bail them out. If he didn't bail them out then Alameda collapses and takes FTX's client's money with them. The bank run zero'd out all the junk collateral FTX held and they ended up with $9 billion in unmatched liabilities: their client's money.

There's a ton of hilarious fallout from this, eg the Bored Ape people held their Apes in FTX, etc. Couldn't happen to better people.

[scipan]

27. Thanks for the explanation.

[honest.abe]

9. Bankman-Fried goes from $26B to "no material weath" in a matter of weeks.

Bankman-Fried's net worth peaked at $26 billion.[9] In October 2022, he had an estimated net worth of $10.5 billion;[10] however, following FTX's liquidity crisis, on 8 November 2022, his net worth was estimated to have dropped 94% in a day to $991.5 million according to the Bloomberg Billionaires Index, the largest one-day drop in the index's history.[11][8] By 11 November 2022, the Bloomberg Billionaires Index considered Bankman-Fried to have no material wealth.[12]

https://en.wikipedia.org/wiki/Sam_Bankman-Fried#cite_note-9

[TreasonousBastard]

10. Never had any. It was all vaporware.

[TexasBushwhacker]

16. As Warren Buffett says

Don't invest in something you don't understand. I just can't wrap my 65 year old brain around the whe concept of crypto, so I stear clear.

[mahina]

11. Brother was one of our only billionaires donor aside from George Soros

I didn’t invest in crypto but he helped us and I’m sorry to read this.

https://www.washingtonpost.com/politics/interactive/2022/top-election-donors-2022/

[ancianita]

19. We've had at least 35, by my count. There are probably more who stay anonymous.

[TygrBright]

18. Oh, PLEASE let this be the beginning of the end of the Great Crypto Grift! n/t

[catsudon]

22. he's a very big donor

for our party, it's a shame he got suckered into crypto

[AggressiveCanary]

23. He didn't get "suckered" into anything.

He was the pushing the con onto other people.

He's still worth nearly a billion dollars.

[mahatmakanejeeves]

26. Bro gonna need to read at least one book

Bro gonna need to read at least one book

Link to tweet

[Jose Pendleton]

28. where are those right wing libertarians?

those who proclaimed crypto the next big thing.