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

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. (Graeme Sloan/Sipa Usa Via Reuters, Graeme Sloan/Sipa Usa Via Reuters)

Sign up for The Brief, our daily newsletter that keeps readers up to speed on the most essential Texas news.

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.

Recommended Videos

“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.

The Texas Tribune is a nonprofit statewide news organization dedicated to keeping Texans informed on politics and policy issues that impact their communities. This election season, Texans around the state will turn to The Texas Tribune for the information they need on voting, election results, analysis of key races and more. Get the latest.

Recommended Videos