November 29, 2022

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FTX can owe more than 1 million creditors

FTX can owe more than 1 million creditors

Collapsing cryptocurrency exchange FTX and related companies could owe money to more than 1 million people and organizations, according to documents filed in bankruptcy court Monday, illustrating the scope of the company’s collapse that drained traders’ accounts and plunged the cryptocurrency industry into crisis.

In FTX’s first substantive court filing since then I filed for bankruptcy on FridayThe company’s attorneys provided few details about the employment situation. But they said FTX is in contact with “dozens” of federal, state and international regulators and law enforcement officials, including the Securities and Exchange Commission, the Department of Justice and the CFTC.

Those investigations began last week after a run on deposits left FTX with a shortfall of $8 billion. In a stunning corporate drama, a company once considered among the safest and most reliable corners of the free cryptocurrency industry collapsed overnight.

Company founder and CEO, Sam Bankman FriedHe announced his resignation when bankruptcy papers were filed Friday in federal bankruptcy court in Delaware. Mr. Bankman-Fried agreed to step down around 4:30 that morning, the new filing says, after consulting with his legal team.

He handed control over to John J. Ray III, a veteran of corporate crises. Since then, Mr. Ray and other FTX officials have worked “around the clock” to get the company in order, according to the bankruptcy filing. The filing said the company halted trading and responded to a “cyberattack” reported late Friday.

Until last week, Mr. Bankman Fred was considered a pioneer in the cryptocurrency industry. He was a frequent presence in the halls of Congress, as he attempted to craft legislation governing new and largely unregulated technology. He was also a notable donor, contributing more than $5 million to President Biden’s election effort.

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But his fall was fast. A run on deposits last week left FTX unable to meet customer demand. Mr. Bankman-Fried struck a deal to sell his company to its biggest competitor, Binance, a modest surrender after a drawn-out online skirmish between Mr. Bankman-Fried and Binance CEO Changpeng Zhao. But a review of FTX’s finances gave rise to several issues, and Binance pulled out of the deal.

Mr. Bankman Freed hastened to offer new financing, but, unable to find a solution, filed for bankruptcy. Now the Securities and Exchange Commission and the Department of Justice are investigating his administration of FTX. They are focused on whether FTX improperly transferred customer funds to Alameda Research, a trading firm that Mr. Bankman-Fried also founded.

Alameda is among more than 100 related companies that joined FTX in filing for bankruptcy on Friday.