November 27, 2022

La Ronge Northerner

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FTX's assets are still missing as the company begins the bankruptcy process

FTX’s assets are still missing as the company begins the bankruptcy process

Lawyers for collapsed cryptocurrency exchange FTX on Tuesday painted a bleak picture of the company’s financial condition and prospects for recovering assets lost by clients.

“A significant amount of assets have been stolen or lost,” said James Bromley, a partner at the law firm Sullivan & Cromwell representing FTX, at a bankruptcy hearing in federal court in Delaware.

FTX filed for bankruptcy in early November After whacking the deposit left the company owed $8 billion. The company’s failure sparked investigations by the Securities and Exchange Commission and the Department of Justice, focused on whether FTX improperly provided customer deposits to Alameda Research, a cryptocurrency hedge fund. Both companies were owned by Sam Bankman-Fried, a one-time crypto billionaire who relinquished control of both companies at the time of filing for bankruptcy.

the master. Bankman-Fried’s weak management of FTX attorneys has left limited information about the company’s finances, Mr. Bromley said at the hearing.

He said the company had faced “cyberattacks” and assets were still missing. He appeared to refer to the sudden movement of hundreds of millions of dollars in FTX assets in unauthorized transactions on the day the company filed for bankruptcy.

At the hearing, A.J. Bromley gave a detailed account of the history of FTX and its sudden collapse this month. the master. Bankman Fried created a sprawling corporate empire, which was run as his “personal fiefdom,” he said. Bromley said.

But in the end he said: “The emperor had no clothes.”

the master. Bromley was echoing Mr. Bankman-Fried management articulated last week in a stunning court filing by John Jay Ray III, who took over from Mr. Bankman-Fried as CEO of FTX.

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A veteran of managing corporate collapse, Mr. Ray previously oversaw the break-up of energy trading company Enron. But in last week’s filing, he wrote that the chaos at FTX was the worst he’d seen in his career.

Most of Tuesday’s hearing focused on a series of legal cases that surfaced in the early stages of the bankruptcy.

Over the weekend, FTX unveiled a revised list of its 50 largest creditors, revealing that those entities or individuals owed a combined total of $3.1 billion. However, the company kept the names of these creditors confidential.

One of the main issues at the hearing was whether FTX should publicly disclose the names of its creditors, including the hundreds of thousands of private people who have deposited money on the exchange. Lawyers for FTX and some creditors have argued that disclosing this information would jeopardize users’ privacy and make them vulnerable to hacking.

US Bankruptcy Judge John Dorsey ruled that the information could remain classified, at least for now. “Everyone in this room knows that the Internet is full of potential dangers,” he said.

The hearing drew an unusual level of interest for the bankruptcy proceedings, with more than 500 people watching the Zoom broadcast. During the break, someone on the call started blasting Justin Bieber’s “Sorry.”

“I heard we had some fun while we were on a break,” Judge Dorsey said upon his return to the courtroom.

This is a developing story. Check back for updates.