Topline
Billionaire Sam Bankman-Fried’s embattled FTX is missing a “substantial amount” of assets, the company’s lawyer said in a Delaware bankruptcy court hearing Tuesday, saying it may have been stolen as the crypto exchange collapsed in recent weeks.
Sam Bankman-Fried testifies during a hearing before the House Financial Services Committee at … [+]
Key Facts
FTX’s new management counsel James Bromley said the company had been in the control of “inexperienced and unsophisticated individuals” like Bankman-Fried, whom he said ran the $40 billion-valued firm like “a personal fiefdom,” according to the Wall Street Journal.
New CEO John J. Ray III has hired former Securities and Exchange Commission and the Justice Department cybersecurity investigators to track down assets that may have been taken without authorization.
The company has located about $1.4 billion it says belongs to FTX, but new leadership says it may take until January to figure out the company’s total assets and liabilities.
Unlike banks and brokerage firms, crypto exchanges’ customers do not have protections like deposit insurance to shield their investments, and crypto fallout has largely been dealt with in U.S. bankruptcy court. (FTX’s Chapter 11 filing sparked the largest bankruptcy case in crypto history.)
Big Number
$3.1 billion. That’s how much FTX’s top 50 creditors alone are owed, the company disclosed this week. Two are each owed $200 million. There could be as many as one million creditors across FTX’s various arms, the company’s lawyers said.
Key Background
Bankman-Fried’s crypto companies FTX and trading firm Alameda Research had been losing billions since at least 2021, but the crisis was largely flying under the radar until earlier this month when Binance CEO Chanpeng Zao announced on Twitter his company would sell its FTX tokens (FTT) over “recent revelations that have come to light.” The tokens’ price fell dramatically and appears to have created a run on assets held on the crypto exchange that FTX could not meet. Zao offered to buy the embattled company but withdrew the offer less than a day later, leading FTX to file for bankruptcy. The sudden collapse of FTX comes as the crypto market faces a downturn spurred by the worst inflation in decades and fears of a recession.
Further Reading
FTX Lawyer Says ‘Substantial Amount’ of Crypto Firm’s Assets Stolen or Missing (Wall Street Journal)
FTX Bankruptcy To Stay In Delaware As Bahamian Liquidators Cede Location (Forbes)
Despite Boasting Of Big Profits, FTX And Alameda Lost $3.7 Billion Before 2022 (Forbes)
Source: https://www.forbes.com/sites/carlieporterfield/2022/11/22/ftx-collapse-a-substantial-amount-of-assets-are-missing-and-may-have-been-stolen/