FTX Assets Still Missing as Firm Begins Bankruptcy Process

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Lawyers for the collapsed cryptocurrency exchange FTX on Tuesday painted a grim picture of the company’s finances and the likelihood of recovering assets lost by customers.

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

FTX filed for bankruptcy in early November after a run on deposits owed the company $8 billion. The company’s failure has led to investigations by the Securities and Exchange Commission and the Department of Justice focusing on whether FTX improperly lent client deposits to Alameda Research, a crypto hedge fund. Both companies were owned by Sam Bankman-Fried, a former crypto billionaire who relinquished control of the companies at the time of the bankruptcy filing.

Mr Bankman-Fried’s poor management of FTX means lawyers have limited information about the company’s finances, Mr Bromley said at the hearing.

He said the company had suffered “cyber attacks” and assets were still missing. He appeared to be referring to the sudden movement of hundreds of millions of dollars worth of FTX assets in unauthorized transactions the day the company filed for bankruptcy.

At the hearing, Mr. Bromley presented a detailed account of FTX’s corporate history and its abrupt collapse this month. Mr Bankman-Fried had established a sprawling business empire, which was run as his ‘personal fief’, Mr Bromley said.

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

Mr. Bromley repeated the criticism of Mr. Bankman-Fried’s management brought forward last week in a stunning lawsuit by John Jay Ray III, who took over from Mr. Bankman-Fried as CEO of FTX.

Mr. Ray, a veteran of managing corporate bankruptcies, previously oversaw the dissolution of energy trading firm Enron. But in last week’s filing, he wrote that the mess at FTX was the worst he’d seen in his career.

Much of Tuesday’s hearing focused on a range of legal issues raised in the early stages of the bankruptcy.

Over the weekend, FTX released a redacted list of its top 50 creditors, showing that those entities or individuals owed a total of about $3.1 billion. But the company kept the names of those creditors secret.

A key issue at the hearing was whether FTX should disclose the names of its creditors, including hundreds of thousands of ordinary people who have deposited money on the exchange. Lawyers for FTX and some creditors argued that releasing that information would compromise users’ privacy and leave them vulnerable to hacking.

US bankruptcy judge John Dorsey ruled that the information may remain private for the time being. “Everyone in this room knows that the internet is full of potential dangers,” he said.

The hearing drew an unusual level of attention for bankruptcy proceedings, with more than 500 people watching a Zoom broadcast. During an intermission, a person on the call began blasting the Justin Bieber song “Sorry.”

“I heard we had some entertainment during our intermission,” Judge Dorsey said as he returned to the courtroom.

This is an evolving story. Check back later for updates.

The Valley Voice
The Valley Voicehttp://thevalleyvoice.org
Christopher Brito is a social media producer and trending writer for The Valley Voice, with a focus on sports and stories related to race and culture.

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