blockworks.co
FTX is now putting its trust in new CEO John J. Ray III — brought in years ago to oversee the liquidation of collapsed energy company Enron following its accounting scandal — as it seeks next steps following bankruptcy.
The bankruptcy process could take several months, one bankruptcy lawyer said, as the exchange and its affiliates formulate recovery plans. FTX founder Sam Bankman-Fried — who resigned as FTX’s CEO Friday morning — tweeted Friday he would seek to give a user recovery update “ASAP.”
5) I'm piecing together all of the details, but I was shocked to see things unravel the way they did earlier this week.
— SBF (@SBF_FTX) November 11, 2022
I will, soon, write up a more complete post on the play by play, but I want to make sure that I get it right when I do.
About an hour after crypto exchange FTX said it — and roughly 130 affiliated companies — had commenced Chapter 11 bankruptcy proceedings, Bankman-Fried apologized in a series of tweets, putting faith behind Ray.
“This doesn’t necessarily have to mean the end for the companies or their ability to provide value and funds to their customers chiefly, and can be consistent with other routes,” he said. “Ultimately I’m optimistic that Mr. Ray and others can help provide whatever is best.”
The 134 companies filing for bankruptcy — included in this filing — exclude subsidiaries Ledger X, FTX Digital Markets, FTX Australia Pty and FTX Express Pay, the company said.
A spokesperson at FTX’s public relations agency told Blockworks it was seeking to get in touch with the company’s new leadership.
Ray was making $1.2 million a year as a full-time Enron director in 2007, the Chicago Tribune reported. At the time, he was “seeking to wipe out the bankruptcy claims of institutions that bought Enron debt from banks that engaged in the alleged misconduct,” according to the publication.
The Chicago Tribune story notes that Ray started working at Chicago law firm Mayer Brown in 1984 before landing at Fruit of the Loom. He was general counsel for the apparel company when it filed for bankruptcy in 1999 and later took post-bankruptcy roles at Burlington Industries and Hayes Lemmerz International.
Bankman-Fried promises FTX ‘user recovery’ update post-bankruptcy
Bankman-Fried tweeted Friday morning that he hoped the bankruptcy process could bring transparency, trust and governance.
FTX users — some of whom said their entire net worth was tied up on the platform — will be watching the bankruptcy process closely.
“I’m going to work on giving clarity on where things are in terms of user recovery ASAP,” Bankman-Fried tweeted Friday.
Daniel Besikof, a partner at Loeb & Loeb, told Blockworks that FTX’s bankruptcy means, in the short-term, that its customers likely will continue to be unable to withdraw from their accounts. The exchange halted withdrawals for most users Tuesday.
“Longer term, it will depend on a number of things — most importantly, who owns or has claims against the coins, what coins are missing, and can those missing coins be recovered?” he said.
Pablo Bonjour, a managing partner at restructuring firm Macco, said in an email that some of FTX’s subunits — such as FTX US — appear to be healthy and could have significant value coming out of restructuring,
“Crypto prices will continue to go lower with another wave of selling, but this opens the opportunity for other big exchanges to swoop in and pick up FTX US and other entities at discounted prices,” he added.
Bonjour said that following the bankruptcy filing, FTX is set to enter survival mode by cutting costs, negotiating extensions, cutting all new projects and getting a handle on their assets.
Besikof called FTX’s collapse “breathtakingly fast,” but noted that the bankruptcy process could take at least several months as the company formulates a plan that maximizes recoveries for its creditors.
FTX’s bankruptcy proceedings are not unique for the industry this year. Voyager Digital filed for bankruptcy in early July, while crypto lender Celsius initiated bankruptcy proceedings about a week later in the aftermath of the collapse of Terra’s algorithmic stablecoin.
“Because of the strain FTX’s bankruptcy will have on a huge number of people, I assume FTX will seek to push the case forward as quickly as possible,” Besikof said. “But as customers have seen from Celsius, which filed in July and is not near conclusion, bankruptcy takes time.”