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Crypto exchange FTX and many of its affiliated companies have filed for Chapter 11 bankruptcy, the company announced on Friday, with FTX founder Sam Bankman-Fried stepping down as CEO.
"I'm really sorry, again, that we ended up here," Bankman-Fried, a former crypto billionaire, said in a Twitter post that went out soon after the filing announcement.
John J. Ray III will take over as chief executive, while Bankman-Fried will assist during the transition. The filing for the affiliate, Alameda Research LLC, lists between $10 billion and $50 billion assets, between $10 billion and $50 billion in liabilities, and more than 100,000 creditors.
"The immediate relief of Chapter 11 is appropriate to provide the FTX group the opportunity to assess its situation develop a process to maximize recoveries for stakeholders," Ray, who has previous experience as a restructuring attorney and reorganization officer for companies like Enron and Fruit of the Loom, said in the statement. "The FTX group has valuable assets that can only be effectively administrated in an organized joint fashion. I want to ensure every employee, customer, creditor, contract party, stockholder, investor, government authority, and other stakeholders that we are going to conduct this effort with due diligence, thoroughness, and transparency."
The Chapter 11 filing is the latest development in what has been a catastrophic week for the troubled exchange, which has rattled the crypto universe with contagion fears.
Bitcoin sold off 4% after the release to trade below $17,000. Ether, which sold off by as much as 5%, is changing hands around $1,250. The total cryptocurrency market capitalization has dropped by 4% in the hour following the release from $880 billion to $857 billion, according to Coinmarketcap.
The filing, likely the worst since the 2014 default of Mt.Gox, which at the time was the largest crypto exchange in the world, includes FTX US (West Realm Shires Services), trading firm Alameda Research, and approximately 140 affiliated businesses, according to the release.
But it excludes LedgerX LLC, FTX Australia, FTX Pay and the company’s crypto derivatives business, FTX Digital Markets. The Bahamas Securities regulator on Thursday said it would freeze the assets of FTX Digital Markets, meaning FTX's bankruptcy could be handled by different jurisdictions, according to Greg Plotko, a partner with the law firm Crowell and Moring who specializes in restructurings.
"That could lead to differing opinions," Plotko told Yahoo Finance.
Though by no means the largest, FTX represented a fast-growing top contender crypto exchange, catching a $32 billion valuation as recently as January, thanks to funding from venture capitalists such as SoftBank, Temasek, LightSpeed Ventures, Tiger Global, Sequoia Capital, BlackRock as well as a host of crypto-specific firms.
For most of this year, FTX was cited as among the top three to four exchanges by crypto trading volume, according to Nomics.
David Hollerith is a senior reporter at Yahoo Finance covering the cryptocurrency and stock markets. Follow him on Twitter at @DsHollers