The FTX booth at the Blockchain Week Summit in Paris, France, on Wednesday, April 13, 2022. The three-day conference brings together the brightest minds, business professionals and leading investors to help you navigate the blockchain industry, according to the event's organisers. Photo: Benjamin Girette/Bloomberg FTX Wrangles a Million Creditors Amid Chaotic Collapse
FTX and its trading arm, Alameda Research, plunged into bankruptcy after facing "a severe liquidity crisis," according to bankruptcy court filings.
November 15, 2022 at 11:26 AM
3 minute read
The team of restructuring experts that took control of Sam Bankman-Fried's failed crypto empire are engaged with "dozens" of regulatory authorities around the world as they rush to secure customer accounts and begin to engage with creditors that are likely to exceed a million people, according to bankruptcy court filings.
The documents, while still sparse in detail, offer the first official glimpse into what's been happening inside FTX and its trading arm, Alameda Research, in the four days since a restructuring lawyer took charge and ushered the companies into bankruptcy court.
John J. Ray III, who replaced Bankman-Fried in the early morning hours of Nov. 11, appointed five men, including a former federal judge, as independent directors of FTX, Alameda and three other main entities.
"Questions arose about Mr. Bankman-Fried's leadership and the handling of FTX's complex array of assets and businesses under his direction," lawyers for the crypto company wrote in the filings, adding that Bankman-Fried agreed to step aside from the company at 4:30 a.m. local time on Nov. 11.
The companies plunged into bankruptcy court hours later after facing "a severe liquidity crisis," according to the filing.
A team of external advisers that include lawyers and restructuring experts at law firm Sullivan & Cromwell and Alvarez & Marsal began moving customer accounts into so-called cold wallets and responding to a Nov. 11 hack that the company has said led to unauthorized withdrawals, the lawyers wrote.
Ray, who oversaw the liquidation of Enron, appointed former U.S. District Judge Joseph J. Farnan Jr. as lead independent director, overseeing FTX Trading Ltd.
Given the volume of creditors in the case, FTX lawyers are asking U.S. Bankruptcy Judge John Dorsey for flexibility on bankruptcy rules that usually require contact via physical addresses. Instead, they are seeking permission to use customer email addresses. The lawyers said they plan to file a list of FTX's 50 largest creditors by Nov. 18.
In the last three days, FTX representatives have been in contact with authorities that also include the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission, according to the filing.
Other independent directors appointed include: Matthew A. Doheny at FTX Trading Ltd.; Mitchell I. Sonkin at West Realm Shires Inc.; Matthew R. Rosenberg at Alameda Research LLC; and Rishi Jain at Clifton Bay Investments LLC.
Jeremy Hill reports for Bloomberg News.
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