Restructure This! Podcast Ep. 17
Tech Company Bankruptcies in a High-Tech World with Heath Gray
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Listen to the original podcast released November 16, 2022 here:
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Sheppard Mullin's Restructure THIS! podcast explores the latest trends and controversies in chapter 11 bankruptcy, commercial insolvency and distressed investing. In this episode, FTI Consulting Senior Managing Director Heath Gray joins host Justin Bernbrock to discuss current trends in the tech world. Their enlightening conversation touches on a wide range of topics, including Covid's long-term effects on the industry, the future of crypto and how the state of the economy might impact social media companies.
Guest:
About Heath Gray
Heath Gray is a senior managing director at FTI Consulting, where he specializes in advising public and private companies on large-scale transformations, turnarounds and transactions. Mr. Gray regularly serves in interim executive roles and as a senior advisor to management teams, boards of directors, special committees and private equity investors. He has extensive experience with complex international M&A and restructuring matters, crisis management and corporate governance.
About Justin Bernbrock
Justin Bernbrock is a partner in the Finance and Bankruptcy Practice Group in Sheppard Mullin's Chicago office, where he focuses on all aspects of corporate restructuring, bankruptcy and financial distress. He represents clients across a wide range of matters, including debtor and creditor representations. He has substantial experience in out-of-court and in-court restructurings, primarily in the Southern District of New York, Eastern District of Virginia, District of Delaware and Southern District of Texas.
Transcript:
Justin Bernbrock:
On this installment of Restructure This! we welcome Heath Gray, senior managing director with FTI Consulting based in their New York office. Heath is a very well-regarded restructuring professional and someone who has experience across a broad range of industries, including, of course, tech companies. My team and I have firsthand experience of working with Heath and can attest to his great reputation and skill. As always, stay tuned after the interview for a quick rundown of current restructuring news and notable stories.
All right. As I mentioned at the outset, we're joined today by Heath Gray, senior managing director at FTI. Heath, thanks so much for doing this. I really appreciate you coming on and chatting for a while. I think you and I have known each other for five years, five or six years? And I'm excited to hear about your experience recently, particularly in tech companies. Before we dive into that though, I think it'd be great to just hear about how you came to be where you are now.
Heath Gray:
Yeah, sure. Pleasure to be here. Long time listener, big fan of the show. Just want to say, I think you guys, you and your producers have done an excellent job on the show to date, and I hope your decision to slot me in here doesn't hurt your ratings going forward.
Justin Bernbrock:
I think well be good. We get a mulligan every once in a while. So all good, all good.
Heath Gray:
Perfect. So yeah, quick background. I'm a senior managing director at FTI and a member of our TMT industry practice. I sit in New York City and spend most of my time advising companies and boards during periods of distress and transformation, and sometimes also serve in interim management roles where we take a very hands on approach to helping companies work through restructurings and other transformational events that you're accustomed to working with as well. Just quickly on my broader team, outside of me and our restructuring focused people, as an industry practice we do a lot more than just restructuring and we have specialists and experts. We serve tech and media and telecom companies in a wide range of transformational situations where they need expert advice and support.
Our team includes people who focus on strategy, business transformation, transaction diligence, merger integration, you name it. And even some really interesting and more industry-specific services such as helping wireless telecom companies develop auction strategies when they bid for spectrum, which is really fascinating stuff. And I'm surrounded by a lot of really smart people who I try and learn from every day.
Justin Bernbrock:
And having worked with them and with you, I certainly endorse that wholeheartedly. You guys are terrific in what you do. So let's jump into all things tech. Maybe we'll start with today and then we'll kind of work backwards a bit. Obviously, early November, day after some elections. What are you currently seeing? Are things picking up from a restructuring perspective? Are there any interesting things in particular in the tech world that folks from a restructuring perspective are talking about? I mean, this news out of Facebook and Meta with, I think it was, and you'll have to keep me honest, but I think it was 11,000 layoffs were just announced. So what's going on? Yeah, what's going on in tech?
Heath Gray:
Yeah. Big news as of late, and obviously Meta's in a much different position than a lot of others.
Justin Bernbrock:
I thought you were about to just say they're in another world. Because that would've just blown my mind.
Heath Gray:
Yeah, that would be right on. Big news. I think it's all a sign of the same sentiments, which is that capital is becoming increasingly discerning right now, whether it's Meta, whether it's other recent de-SPACs or early stage tech companies who are still figuring out the path to revenue and profitability. Everyone's having to reassess their bets and try and make sure that the cash they have is going to take them further out to a period where they've got a better case for raising more capital. And so you see everyone's retrenching and trying to extend the runway. And it's been keeping us busy, increasingly so, I think, as we get toward the end of the year and everyone's building their plans for next year. There've been a lot of calls for folks like us to come and help them with those business plans and help with the retrenching strategies here.
Justin Bernbrock:
Are you, and maybe it's too early in whatever cycle we currently are in, or I guess whatever station within the cycle, but is there a trend, is there a through line, is there anything in particular that you all are seeing that is potentially repeat cause? I mean, obviously access to capital. Okay, check. And that's a thing that's I think very difficult for a distressed company to change. As the company, you have very limited power over your ability to access capital, of course. But I guess, are there things for the companies themselves that you could point to say, well, if you're doing this, give us a call because we can help, or something along those lines?
Heath Gray:
Yeah, sure. The access to capital is definitely tied to a number of things, but including what seems to be increasingly looking like a recession coming our way. And companies who've been promising big growth, they're now seeing those rates slow and they're having to rationalize the things they're doing. I think over the last several years, not just now, we've spent an increasing amount of time in the tech sector, and we can talk about the different pockets of that and some of the differences. But if I were to highlight a few of the things that we see on the operational side that shows up again and again and again and detracts from value and consumes a lot of cash, I'll give you a few of them. So the first thing that we've seen repeatedly is that hardware is difficult.
And focused on the consumer tech space we've seen this multiple times where a company's primary offering or value to its customers is a software or service offering of some kind. And yet they've decided to design and manufacture their own attendant hardware, for a variety of understandable and justifiable reasons, no doubt. But in not doing that at scale and using contract manufacturers and consultants, it's caused their cost structures to balloon and it adds significant amounts of complexity to the business and points of failure that really blow up their balance sheets. That's one that we've seen a lot. And that dovetails into a second common thing we've seen, which is that companies, especially early stage companies, they often try and take on too much at one time rather than focusing on the most important aspect of their value prop for customers and their key point of differentiation. And these companies who have too many disparate teams operating silos, trying to vertically integrate and be all things to all people without the organizational maturity to do so successfully.
And so based on those couple of things, I think the lesson's if you're extending too far, trying to do too much, this is not the environment to be doing that in, and you need to refocus on what it is that makes your company unique and gives you a right to win long term. The other thing that we see a lot of is just that many, many tech companies, and especially the growth end of the spectrum, they just have upside down customer economics. And it's the product of companies being rewarded for growth and trying to drive revenue as high and fast as possible with the promise that profitability is going to come whenever they get to scale or have an established customer base that they can monetize over time. And that has worked.
There's plenty of success stories where that happened, like META that you mentioned or other FANG or MATANA companies. But there's countless others still chasing that profitability and the long list who've failed whenever they realize that their customer lifetime values were consistently negative, or they could maybe service their existing customers on the margin and make a profit, but their customer acquisition costs were just too high to break even quickly enough to justify the cost of capital. So that's something else where we come in and really try and help these companies figure out the true lifetime value of their customers and get to customer economics that make sense and that are supportable by investors. There's a few of them.
Justin Bernbrock:
When you were talking about a move away from hardware, I could not stop thinking about Pied Piper making the box and then the box two.
Heath Gray:
People love the box.
Justin Bernbrock:
I mean, it's one of the greatest shows from the last 10 years, Silicon Valley. It's such a good show. But back to some of the points you're making, which are super fascinating. And I should have also just brought this up in connection with the "current news," but obviously the Elon Musk takeover at Twitter. Do you have thoughts on what Twitter's future looks like? There's obviously a lot, and the purpose of this show is certainly not to map the contours of Elon Musk's decision making and how he runs and operates businesses, but I'm curious to just hear your take on that move and the future. I mean, I think that Twitter's had some challenges recently.
Heath Gray:
Well, we might not have even talked about this name a year ago, but now as a result of the last six months and this transaction, Twitter actually has the kind of debt where you and I might get a phone call soon, so maybe we should be careful about what we do say. But it's been really interesting to watch the news unfold on a daily basis or an hourly basis and see Musk constantly trending on his own platform that he just bought. But it's going to be an interesting one to see play out.
Justin Bernbrock:
All right, so we'll watch to see what happens with Twitter. And I'm sure it's at this point, anyone's guess. So let's look backwards a bit and talk about how COVID, the pandemic era put focus on technology. And I mean, everyone of course, those who could transition to a remote work environment, there was tons of slowdown in businesses that rely upon active engagement by in-person patrons; restaurants, travel, retail. But what were some of the pandemic effects, Heath, from your experience on the tech world?
Because I have to imagine, and maybe you'll say that none, they were all tremendous, they were all great. I don't think that's the answer because I think I'm at least aware of some that had some struggles through COVID. But I think that the struggles that plagued technology companies during the pandemic I think were different in kind and character than some of the struggles that were just facially apparent and that affected other types of businesses. So what was your experience from that period?
Heath Gray:
Yeah, I think within tech, the companies that we were exposed to, they had a pretty good run through that period. New customers were flowing in, especially if you think Zoom and the other collaboration, communication platforms obviously really took off. And we've seen some of that settle down, but they accelerated their customer acquisition timeline horizon far beyond what they could have even imagined, is my guess. And so that was excellent for companies like them, I think. For others selling, especially in the maybe let's say B2B software or on-premise hardware related businesses, I think those slowed down just because there was a lot of question about COVID, how long it was going to last and what the long-term effects were going to be. A number of customers in certain industries were struggling more than them and maybe not looking to make big investments in new tech products or even the future of the office.
And so I think we're, depending on where you sit within that industry, there were some fairly wide-ranging effects on these companies. I think the ongoing impact is that for the ones who did well, they really had to ramp up really quickly and chase that growth or at least support it as best as they could. And I think that that was probably done in a suboptimal way for many companies compared to if they had been able to plan and do it in a more measured way. And so now they're cleaning up those org structures and processes and they're having to go back and rationalize some of the things that were put into place last minute and as a necessity rather than being perfectly planned. And it's also just changed their whole growth horizon and I think complicated different... Their planning for long-term funding and how they go public or not. So that's still being worked through right now for a lot of these companies. But for the most part, it seems like tech fared very well compared to a lot of the other industries that you and I see in a restructuring context.
Justin Bernbrock:
Can you shed any light, I mean, if nothing else, it will help me tremendously manage my own stress about why I can't order certain things online that I just need. And of course, I'm being very facetious, but I feel like that I have heard more times than I care to count that, "Well, it is a supply chain problem with the chips and coming out of XYZ," and it's like, how could that possibly be? And I guess how could it possibly be there isn’t a meaningful solution to the problems that have been plaguing apparently the chip manufacturing supply chain for a while? What was going on? Or is it still going on? Are computer chips, is there still a meaningful shortage in that? Have you crossed paths with that issue at any engagement, or just general knowledge?
Heath Gray:
I must say it's probably impacted me more as a consumer than it has in a business context. We've been spending a lot more time working with software and tech services companies as of late than traditional hardware companies who are dealing with the chip issues. But I do share your frustration with not being able to get all those very important products that we need in our day-to-day lives. But yeah, my understanding is it's still ongoing. Certain companies have made a lot of investments to insulate themselves. I think Apple's investments in their own chips has really paid off. And others who have a lot of volume are probably doing better than those who have limited volumes and haven't been able to make the same commitments to suppliers to be on the priority list.
I've listened to some talks and read a little bit about this and it's a multi-year process to get back online. And it's received a lot of attention in Congress. There's the CHIPS Act which focuses on trying to insulate US from these types of disruptions in the future as best they can. And it's going to take some time, but it's definitely critically important to the continued health and growth of the tech sector. And at this point, given how important tech is to everything else, it's, I think, general business activity in the US.
Justin Bernbrock:
That makes a lot of sense. So I want to get back to this discussion of some of the headwinds for the social media companies, because I just feel like there's, even in the last week or so, just been a ton of news, ton of activity in that world. From your perspective, is distress even likely or plausible in that world? And I guess what would be a second or third tier social site that potentially would make use of the bankruptcy process to deal with issues it was having? Can you even-
Heath Gray:
I don't know if I can even think of one, honestly. I feel like whenever the whole Web 2.0 generation kicked off and Facebook started to expand, MySpace, I guess, was the other one at the time, who has come and gone. But there were probably a lot of little ones who tried to make a go of it and realized that they couldn't. And now it's really just a few big platforms between Twitter and Meta. And Snap is still independent, I believe. And Google always has its own projects in the space, but I think that they're fairly insulated. And Twitter now with the post-deal leverage, they're going to be arguably more susceptible to distress as a result of that, given how, I think, how tight the financing was, the amount of debt that was needed to fund the acquisition, and the fact that we're going into a recessionary environment and starting to see advertising spending coming down significantly, I think.
When you adjust out the impact of political in Q4, we're going to see a big pullback in spend and that should be expected to continue next year. And that'll definitely put some pressure on Twitter and others that they'll have to work through. And we've already seen cost savings actions being taken in these big companies. It's unbelievable how many people are being impacted by that. And you always hope to see companies move quickly, take the actions they need to and then be finished with it. But we'll see how long a recession might last and what the impact would be on the top line and how much further companies might have to go in order to maintain the cash flows that they need.
Justin Bernbrock:
So correct me if I have this wrong, and I know the Twitter deal is a huge outlier and in a category of its own. Okay. Period, full stop. But the use of massive debt financing, as was the case in that transaction, is pretty uncommon in this space, right? And it doesn't have to be specific examples, but my perception has always been that tech companies, almost as a rule, tend not to carry much funded debt.
Heath Gray:
Yeah, you're exactly right. I think that's for a long, long time been pretty consistent across the industry. And I don't know at what point in time that shifted, but it's been within the last few years that private equity really made a strong move into the industry and where some had shied away from tech after the dotcom boom and bust, and they saw a few funds who were specifically focusing on the space, who were just showing phenomenal returns.
And I think it caused a lot more firms to get into the business. And at the same time, lenders have become increasingly interested in lending into these industries, just given the growth and the size of the checks being written. And so while that was true, it's becoming a little bit less so. And when you look across the different subsectors within tech, it's not uncommon to see a couple of the bigger names who've been through an LBO and have a meaningful amount of debt at this point in time.
So that's one of the things that is a driver of the stress, or at least ongoing competitiveness within the industry, is when you have one of these companies who may have been the legacy leader in the space and now may have a debt load. It's, look, I'll compare it to some of the other traditional industries first, that a number of industries where private equity's first to move in and where they saw companies with big competitive moats, high startup costs, big barriers to entry. And they said, we can put a lot of leverage on these companies. They can support that while also making the investments that they need to maintain competitiveness and their leadership in the industry. In tech, that's not as often true, I think. The ability for someone who's sitting in their garage with a computer and could potentially on a nickel just launch the next killer app that disrupts an entire industry, that's actually a real threat.
And in order to protect yourself from those threats, tech companies need to be spending a fair amount of money on R&D and other investments to continue to grow and protect their moat. And when you have some of the key legacy competitors or legacy companies who are now diverting a big portion of their cash flow to servicing debt, that obviously puts them in a weaker position competitively and they're not going to be investing as much in their future growth. And so it creates an interesting dynamic and a much higher risk, I think, for being disrupted by upstarts, which we see new ones every day.
Justin Bernbrock:
It's fascinating. I wonder also whether the current environment, as we head into a very likely recession, if we see private credit lenders, particularly those who are affiliated with sponsor side funds who see opportunities to deploy funded debt as almost a change of control strategy. If ad buying is down and if companies in the tech world come into a cash crisis or cash shortage and take a loan to bridge that, whether that lender or maybe small club of lenders is eyeing potential conversion of that facility into pro forma ownership at some point in the future.
Heath Gray:
Yeah. I mean, we've seen it in other industries, right? So I definitely wouldn't say that that won't happen at all. One thing that I think is uniquely challenging about tech, though, that will make those situations somewhat less prevalent is just how mobile the workforces are at these companies these days. And so if you think about your average manufacturing employee who lives and works in the town with this company and maybe one other manufacturer, somewhere outside of the big cities in the United States. So for them to make a career move is a big decision. There's a higher likelihood that they have pensions that they don't necessarily want to walk away from and they're less mobile. Tech is the opposite. There's no pensions. People are disproportionately sitting in big city centers where they can walk across the street and into the office of five or 10 other tech companies very easily who would love to hire them.
So those people are incredibly mobile and if they don't like what's going on with the company or they've lost alignment with management's vision or ownership or see that their stock options may not be worth as much in the future as they thought they were going to be, then I think they're a flight risk. And so anyone coming in to try and take over a business that way would need to feel confident that they could retain the workforce and they wouldn't be losing the most valuable assets who walk out the door every day. So that would be one key difference that might limit the number of situations you see where that happens.
Justin Bernbrock:
Got it. So shifting gears a little bit here, obviously there've been in the last, call it nine months or so, a handful of cryptocurrency Chapter 11s, other distress in that world. What's going on there? What are you seeing? What are the takeaways from the cases that we've seen already? What's your perspective on all of that? And I do think you guys are involved in some, and obviously only looking for public observations.
Heath Gray:
Yeah, we are. And I won't speak too specifically about those cases given that I'm on them. But it's been, I think, from an outsider's perspective, it's been pretty wild to watch. These cases have featured a lot of novel issues being figured out in real time under a spotlight and with a lot of money at risk. And we're going to see how this continues to unfold, I think. As we're recording this, there are things happening in the news and there's going to be some more distress showing up publicly very soon. But when these crypto lenders filed, everyone was asking questions like, what cryptocurrency assets are there? How many? Where are they stored and how? And who has access to the keys and spending authority?
Are there smart contracts that are continuing to allow for transactions to take place in an automated way even post-filing? There were so many questions and then when you add in the number of just individual creditors who, like you and me, it's obviously garnered a lot of attention from the DOJ and then the government and prompted a lot of probably good discussions in Washington about whether and how this industry should be regulated differently.
So a pretty stressful situation for a lot of people. Our team is involved in those cases and around crypto as an industry doing a lot of work. Just so you know, we have a sizable crypto team, who's not just restructuring focused, but they've developed our own in-house digital assets lab that contains a war chest of cutting edge crypto and blockchain forensic tools so they can track more than 1,500 digital assets across 30 blockchains. And they do work on M&A transactions and diligence and investigations and track and trace engagements. So it's become a big area of focus for the firm and one that we expect to continue both through this period of distress and then beyond to hopefully a more stable era for crypto.
Justin Bernbrock:
Yeah, it's a really interesting world. It's one of these things where for some reasons I really want it to take off, but for other reasons, if you take the concept to its logical conclusion, then I'm out of a job fairly quickly. I guess it's a long way off logical conclusion, but it could lead to societal breakdown potentially. But that may also just be the weird stuff that I read sometimes.
Heath Gray:
I'm curious how you get all the way there. I mean, you definitely read things like that, but...
Justin Bernbrock:
Yeah. It's like, so the notions of smart contracts and just reducing the administrative tax on transacting, which I mean, in some respects and perhaps a lot of respects, the role of lawyer, legal advisor is an administrative process oriented one. And if that role could somehow be automatized, is that a word, automatized? Can you automatize something?
Heath Gray:
I think we just did. I've not seen you do much of just as much as the routine contract work.
Justin Bernbrock:
No. Yeah, that's fair.
Heath Gray:
In a sophisticated-
Justin Bernbrock:
Automate. Yeah, it's automated.
Heath Gray:
Automated contract, they're still going to want you reviewing the code, right?
Justin Bernbrock:
Yeah. So obviously the white paper regarding Bitcoin came out, I think in response to the 08/09 financial crisis and viewed the interim meddling in the financial system by trusted third parties as a stain or a malignancy on the pure transaction. And in a lot of respects, I do think that lawyers and other advisors and-
Heath Gray:
Financial advisors, that's what you were going to say, right?
Justin Bernbrock:
Yeah. Consultants. I guess in a world where you don't have the sort of trusted third parties, you don't really need advisors, but hopefully that's a long way off.
Heath Gray:
I hope so. Past when you and I retire.
Justin Bernbrock:
Yeah, I mean, there are some interesting thought experiments in that world. I mean, fiat currencies generally do depend on significant trust from the population, and if the population can transact directly and no longer need to put their trust in a fiat currency, then you have sort of a different landscape. So something to think about.
Heath Gray:
Yeah.
Justin Bernbrock:
Let's shift gears again. So, as you know, our firm, given our deep and abiding roots and ties to my home state, the great state of California, we advise and represent a host of entertainment companies and folks in Los Angeles and Century City, do a ton of work in the entertainment industry generally. But I guess I'm focused on just questions for you in particular about the impact of tech on some of these streaming platforms, streaming services. Everyone has a plus app now or plus service now. And surely some of them are going to struggle. Of course, I suppose that they're going to be under the broader umbrella of a largely successful enterprise. But is there anything from your perspective that might be interesting in the world of streaming or entertainment as things become increasingly more technology based?
Heath Gray:
Yeah, well, my honest perspective on this is that we've seen this boom happen over the last several years. And as you mentioned, anyone who has their own content library has probably experimented with or launched their own platform to distribute that. And so overall, it's definitely changed the way that we're consuming video entertainment. And we're seeing that manifest itself in some current and probably pending bankruptcy filings for traditional movie theaters because people like to view these things at home.
And I think in the current economic environment, or what we expect to have happen in the coming months with increasing unemployment and inflation and the like, it's going to put a little bit of pressure on those subscriber trends. And some of these business plans that launched with subscriber targets, they're probably going to underperform a little bit. And for companies who are experimenting with the advertising monetization model, like Netflix now, it's going to be a little bit choppy over the coming months.
But I think that overall, once you get these things built, the cost of maintaining the tech side is probably not that great to create any issues in and of itself. And it's a fairly efficient way of distributing your content. And it takes the third party distribution agreements out of play. And so it really gives the content creators a better opportunity to have that direct interaction with their customers and the people who want to watch their products, and ultimately more control over their destiny. So I think it's probably good for a large number of those entertainment companies that you work with.
Justin Bernbrock:
Got it. That's good to hear and interesting. As I said, Heath, really, really appreciate your time here, and it's been good to catch up if nothing else. We do always ask a final question, which is, if you were not doing what you're currently doing at FTI and you can assume that there are no limitations, what would you be doing?
Heath Gray:
So you mean besides being an influencer or professional lottery winner or golfer?
Justin Bernbrock:
Yeah, yeah, yeah.
Heath Gray:
Something else?
Justin Bernbrock:
Yeah. I mean, you could. Just look straight in the camera and say, "Click, like, hit subscribe, get the latest stuff." Then, I don't know, maybe you'll go viral.
Heath Gray:
Don't worry, I'm taking notes from you every day. But I think the serious answer would be that I would be a basketball coach. And I would've said that more confidently last year before I missed out on the Duke job when Coach K retired. But I still think that might be the next career. We will see.
Justin Bernbrock:
I didn't even know you had an interest in basketball. Should I have known that? Should I know that, or that's just totally random?
Heath Gray:
It's not random. I grew up with a few different family members who were high school and college basketball coaches. So I spent a lot of time in the gym. I'm a big fan and I was a player as well.
Justin Bernbrock:
I'm sure
Heath Gray:
I think to be a pro basketball player at this stage is probably... It's not going to happen for me, but I think I can pull off the coaching role.
Justin Bernbrock:
I do feel like I am at that stage in my life where I'm continually crossing off the things that I'll just never be, like I'm never going to be an astronaut. It's just not going to happen at this point in my life. But that's okay because it seems like a lot.
Heath Gray:
It doesn't sound that fun anyway. It seems a little lonely up there in space. So I think that's a good move for you.
Justin Bernbrock:
Yeah, but that seven and a half minutes to get there has got to be amazing. You're sitting on a Roman candle and 10 trillion tons of thrust.
Heath Gray:
When you were in the military, did you fly a plane?
Justin Bernbrock:
I operated electronics in the back of the plane.
Heath Gray:
Okay, but you got some of that.
Justin Bernbrock:
Yeah. But not enough to exceed or to reach exit velocity to get out of low earth gravitational forces.
Heath Gray:
Well, maybe you can reserve a trip soon.
Justin Bernbrock:
Yeah, yeah. Maybe on Priceline. I don't know where that'll be available. If Priceline's still around.
Heath Gray:
Yeah, that's right.
Justin Bernbrock:
All right, buddy. Well, thank you so much. I really, really appreciate it, and hopefully we'll see you soon.
Heath Gray:
Yeah, certainly. Thanks a lot.
Justin Bernbrock:
Take care.
Robert McLellarn:
Well, hello again, everyone. This is Robbie McLellarn with Sheppard Mullin with this week's current restructuring news. Clearly the elephant in the room here is the recent filing by crypto exchange FTX. Founded in 2018 by Sam Bankman-Fried, FTX had risen to become one of the world's leading cryptocurrency exchanges, accruing more than one million users by 2022. Mr. Bankman-Fried's net worth rose to over 20 billion during the rise of FTX, with reports now suggesting almost the entirety of his fortune has evaporated.
Despite reports early last week of a possible transaction being put in place to solve FTX's liquidity issues, that deal never materialized and FTX filed for Chapter 11 in Delaware on November 11th. Further reports suggest the filing was precipitated by a run by investors to withdraw more than $6 billion from FTX following the announcement by Binance, which is another crypto lender, of its intention to unwind its own position in FTX. The FTX filing also creates complications in the Voyager Chapter 11 cases, as FTX was poised to purchase assets in that case, though the Voyager bankruptcy court had not yet approved the sale.
It will be interesting to see how that plays out now that both parties are in Chapter 11. A recent article from the Wall Street Journal has announced that Voyager intends to seek an alternative buyer in the meantime. To add even more intrigue to the recent filing by FTX, as of this morning only the Chapter 11 petition has been filed. I'm sure, like me, that the rest of the restructuring world is anxiously awaiting the filing of the first day declaration to better understand what's happening with FTX, and relatedly, what will the new name of the Miami Heat Arena be? Well, that's it for current restructuring news. This has been Robbie McLellarn with Sheppard Mullin for Restructure This! Until next time, thank you for listening.
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