- The moves cap a week of turmoil for the world's second largest crypto exchange.
- Just months ago, the 30-year-old billionaire was being compared to the investment magnate Warren Buffett.
Embattled cryptocurrency exchange FTX has filed for bankruptcy in the US, seeking court protection as it looks for a way to return money to users.
The company said that former boss Sam Bankman-Fried had also stepped down as chief executive.
It said the goal was to "begin an orderly process to review and monetize assets for the benefit of all global stakeholders".
The moves cap a week of turmoil for the world's second largest crypto exchange.
Earlier this week, customers rushed to withdraw their funds as rumours swirled that FTX and other firms headed by Mr Bankman-Fried were on shaky financial ground.
Mr Bankman-Fried tried to organize a bailout, hoping to be bought by Binance, a rival, and one of the world's biggest cryptocurrency exchanges.
But Binance walked away from the deal, leaving FTX, an exchange used to buy and sell digital tokens, scrambling to raise billions of dollars and many customers unable to access their money.
"I'm sorry," Mr Bankman-Fried wrote on Twitter on Thursday. "I... should have done better."
The bankruptcy proceeding will involve FTX as well as Alameda Research, a trading firm founded by Mr Bankman-Fried, and roughly 130 affiliates, according to the statement FTX shared on Twitter.
John J Ray III, a lawyer who previously worked at a venture capital firm and has experience with bankruptcy, was named chief executive in Mr Bankman-Fried's place.
"The FTX Group has valuable assets that can only be effectively administered in an organised, joint process," Mr Ray said in the statement.
For now, Thomas Culham, from Kingston, said he has been unable to withdraw the £2,000 he had invested in FTX - a "big blow" as his funds in FTX were "decent chunk" of his investment portfolio.
"It's probably gone," the 22-year-old said. "Maybe in a few years' time I might get some sort of recovery - they do have assets [and] they should be able to liquidate them."
Prior to the meltdown, Mr Bankman-Fried had been one of the stars of the crypto scene, with a net worth estimated at more than $15bn (£12.8bn) as recently as Tuesday.
He frequently spoke on behalf of the industry before regulators and had gone on an advertising blitz in the United States, enlisting celebrities such as Tom Brady and Gisele Bundchen to convince the public that crypto was a worthy investment.
The troubles at his firm has shaken confidence in the rest of the crypto market, with currencies such as Bitcoin dropping 20% this week.
Regulators have long warned of risks to crypto investors and raised concern about the threat of wider financial turmoil, as traditional financial companies expand their investments in the market.
But Dan Ives, analyst at Wedbush Securities, said he thought FTX's troubles would not spark wider problems.
"It's a black swan event. There's really no bleed over into the overall market, there's containment," he said. "That's extremely important and another positive signal in terms of the walls between systematic risk and not."
Despite potentially losing his money, Mr Culham said it wouldn't put him off investing in more cryptocurrencies in the future.
"I think there's a lot of opportunity," he said, adding that he was not investing more than he could afford to lose, and also not investing in only one type of crypto.
They say fortunes can be made and lost in "cryptoland" in the blink of an eye. But there's not been a downfall quite like that of Sam Bankman-Fried.
Just months ago, the 30-year-old billionaire was being compared to the investment magnate Warren Buffett.
He was nicknamed the "King of Crypto" and not just surviving the tough crypto climate of 2022 but thriving.
In little over a week, his FTX empire has collapsed, plunging the wider cryptocurrency market into the doldrums once more with the value of coins tanking.
Mr Bankman-Fried admits that the downfall is "on me" but that will be scant consolation to the potentially 1.2 million FTX customers who could now lose their crypto savings.
All eyes will turn now to the other major cryptocurrency exchanges. With FTX, the second largest going under, pressure will be on the remaining companies to prove they have the financial strength to stay afloat.