FTX Files for Bankruptcy; Sam Bankman-Fried Steps Down as CEO

John J. Ray III has been named the new CEO of FTX Group, the company said. The bankruptcy filing includes FTX Trading Ltd., the company presiding over the global trading website FTX.com, Alameda Research, a trading firm founded by Mr. Bankman-Fried, and the company over FTX US, the platform for U.S. users.

FTX is the latest in a string of crypto companies seeking bankruptcy protection this year. Months ago, Mr. Bankman-Fried served as a lender of last resort to his industry, following the failure of other crypto companies. Its fortunes reversed in the past 10 days, after a CoinDesk report showed the depth of the relationship between FTX and Alameda, triggering a loss of faith in the platform by amateur and professional investors.

In previous tweets, Mr. Bankman-Fried said the U.S. division of FTX wouldn’t be impacted by the liquidity crisis at FTX International. FTX International halted crypto and fiat withdrawals Tuesday. FTX US said Thursday that “trading may be halted on FTX US in a few days.”

Bitcoin slipped after the announcement to trade near $16,500 apiece.

FTX’s new CEO, Mr. Ray, was chairman of Enron Corp.’s successor company, Enron Creditors Recovery Corp., and oversaw the energy-trading company’s liquidation after it filed for bankruptcy in late 2001. The recovery rate for Enron creditors as of 2008 was about 52 cents on the dollar, the company said at the time. Mr. Ray’s successes included securing a $1.7 billion settlement with

Citigroup Inc.

in 2008, which he had accused of helping Enron mislead investors. Other noteworthy bankruptcy cases where Mr. Ray served in similar roles include Nortel Networks, Fruit of the Loom, and

Overseas Shipholding Group Inc.

FTX, Alameda, and other affiliates estimated in their bankruptcy filings that they have more than 100,000 creditors. FTX and its affiliates, including Alameda, estimated their assets are between $10 billion and $50 billion and reported the same range for its liabilities, which would make it the largest crypto-related bankruptcy ever filed.

The 23-page document lists more than 130 companies affiliated with Alameda and FTX. The petition was filed by Mr. Ray as well as Adam Landis, a local Delaware attorney.

In the petition, Mr. Bankman-Fried said that Stephen Neal would be appointed as the chairman of the board of the FTX Group if he is willing to serve. He also said that FTX is being advised by the law firm Paul, Weiss, Rifkind, Wharton & Garrison LLP.

Mr. Bankman-Fried wrote on Twitter roughly an hour after the bankruptcy announcement that he was “shocked to see things unravel the way they did earlier this week.”

The collapse of FTX has already affected other crypto companies in its orbit. Crypto lender BlockFi Inc., which had obtained a financial lifeline from FTX in July, paused withdrawals Thursday evening.

Earlier this week, FTX had agreed to be taken over by rival exchange Binance, which walked away from the deal following a review of the company’s finances. The crypto exchange is facing a shortfall of up to $8 billion, The Wall Street Journal reported.

The crypto exchange was previously seen as a rising star in the digital asset world. It attracted nearly $2 billion of investments from high-profile venture-capital funds, hedge funds and the Ontario Teachers’ Pension Plan. Many investors face a wipeout of their equity stakes in FTX as the exchange heads to the bankruptcy court. Venture-capital firm Sequoia Capital said on Wednesday it is writing down its $150 million investment in FTX to zero.

Bankruptcy means that it could be a long time before individual investors and others owed their funds are able to potentially recover any of them, if ever. Creditors to Mt. Gox, the Japanese crypto exchange that failed following a 2014 hack, are still waiting for their funds almost a decade later.

The collapse in digital currency prices earlier this year triggered a rash of crypto-related bankruptcy filings, including Celsius Network LLC,

Voyager Digital Ltd.

, and Three Arrows Capital Ltd.

Crypto investors may find an uphill battle to get their crypto deposits back in bankruptcy proceedings because their investments are likely to be treated as unsecured claims without collateral rights.

FTX’s bankruptcy calls into question the fate of Voyager Digital. In September, the company won the auction to buy the bankrupt lender’s assets with a purchase price of about $50 million, The Wall Street Journal has reported. Voyager has been processing customer U.S. dollar withdrawals but crypto withdrawals are still on hold until the restructuring process is complete, a Voyager spokesman said.

—Jonathan Weil contributed to this article.

Write to Caitlin Ostroff at [email protected] and Alexander Gladstone at [email protected]

John J. Ray III has been named the new CEO of FTX Group, the company said. The bankruptcy filing includes FTX Trading Ltd., the company presiding over the global trading website FTX.com, Alameda Research, a trading firm founded by Mr. Bankman-Fried, and the company over FTX US, the platform for U.S. users.

FTX is the latest in a string of crypto companies seeking bankruptcy protection this year. Months ago, Mr. Bankman-Fried served as a lender of last resort to his industry, following the failure of other crypto companies. Its fortunes reversed in the past 10 days, after a CoinDesk report showed the depth of the relationship between FTX and Alameda, triggering a loss of faith in the platform by amateur and professional investors.

In previous tweets, Mr. Bankman-Fried said the U.S. division of FTX wouldn’t be impacted by the liquidity crisis at FTX International. FTX International halted crypto and fiat withdrawals Tuesday. FTX US said Thursday that “trading may be halted on FTX US in a few days.”

Bitcoin slipped after the announcement to trade near $16,500 apiece.

FTX’s new CEO, Mr. Ray, was chairman of Enron Corp.’s successor company, Enron Creditors Recovery Corp., and oversaw the energy-trading company’s liquidation after it filed for bankruptcy in late 2001. The recovery rate for Enron creditors as of 2008 was about 52 cents on the dollar, the company said at the time. Mr. Ray’s successes included securing a $1.7 billion settlement with

Citigroup Inc.

in 2008, which he had accused of helping Enron mislead investors. Other noteworthy bankruptcy cases where Mr. Ray served in similar roles include Nortel Networks, Fruit of the Loom, and

Overseas Shipholding Group Inc.

FTX, Alameda, and other affiliates estimated in their bankruptcy filings that they have more than 100,000 creditors. FTX and its affiliates, including Alameda, estimated their assets are between $10 billion and $50 billion and reported the same range for its liabilities, which would make it the largest crypto-related bankruptcy ever filed.

The 23-page document lists more than 130 companies affiliated with Alameda and FTX. The petition was filed by Mr. Ray as well as Adam Landis, a local Delaware attorney.

In the petition, Mr. Bankman-Fried said that Stephen Neal would be appointed as the chairman of the board of the FTX Group if he is willing to serve. He also said that FTX is being advised by the law firm Paul, Weiss, Rifkind, Wharton & Garrison LLP.

Mr. Bankman-Fried wrote on Twitter roughly an hour after the bankruptcy announcement that he was “shocked to see things unravel the way they did earlier this week.”

The collapse of FTX has already affected other crypto companies in its orbit. Crypto lender BlockFi Inc., which had obtained a financial lifeline from FTX in July, paused withdrawals Thursday evening.

Earlier this week, FTX had agreed to be taken over by rival exchange Binance, which walked away from the deal following a review of the company’s finances. The crypto exchange is facing a shortfall of up to $8 billion, The Wall Street Journal reported.

The crypto exchange was previously seen as a rising star in the digital asset world. It attracted nearly $2 billion of investments from high-profile venture-capital funds, hedge funds and the Ontario Teachers’ Pension Plan. Many investors face a wipeout of their equity stakes in FTX as the exchange heads to the bankruptcy court. Venture-capital firm Sequoia Capital said on Wednesday it is writing down its $150 million investment in FTX to zero.

Bankruptcy means that it could be a long time before individual investors and others owed their funds are able to potentially recover any of them, if ever. Creditors to Mt. Gox, the Japanese crypto exchange that failed following a 2014 hack, are still waiting for their funds almost a decade later.

The collapse in digital currency prices earlier this year triggered a rash of crypto-related bankruptcy filings, including Celsius Network LLC,

Voyager Digital Ltd.

, and Three Arrows Capital Ltd.

Crypto investors may find an uphill battle to get their crypto deposits back in bankruptcy proceedings because their investments are likely to be treated as unsecured claims without collateral rights.

FTX’s bankruptcy calls into question the fate of Voyager Digital. In September, the company won the auction to buy the bankrupt lender’s assets with a purchase price of about $50 million, The Wall Street Journal has reported. Voyager has been processing customer U.S. dollar withdrawals but crypto withdrawals are still on hold until the restructuring process is complete, a Voyager spokesman said.

—Jonathan Weil contributed to this article.

Write to Caitlin Ostroff at [email protected] and Alexander Gladstone at [email protected]