Posted on 11/27/2022 8:17:45 AM PST by DoodleBob
Almost a full two weeks after first filing for bankruptcy on Nov. 11, the insolvent cryptocurrency exchange FTX finally held its first-day motion requests on Tuesday (Nov. 22). The hearing took place in Wilmington, Delaware, the traditional city where corporate bankruptcy cases are heard.
Presided over by Judge John T. Dorsey of the U.S. Bankruptcy Court for the District of Delaware, the Tuesday session focused on what assets FTX has, to whom they are owed, and where the overall bankruptcy case for FTX and its affiliates should be held.
The remaining “how” of the once-popular crypto exchange’s implosion has been widely covered; while the “why” will have to wait, or be speculatively guessed at, as Sam Bankman-Fried (SBF)’s now-infamous claims of being motivated by the Effective Altruism movement have been largely debunked by the industry-wide fallout from his group of companies’ failures.
James “Jim” Bromley, co-head of white shoe law firm Sullivan & Cromwell’s Global Finance and Restructuring practice, is acting counsel to FTX’s newly installed leadership team. He called the bankruptcy case “unprecedented” during his opening remarks. “We have probably witnessed one of the most abrupt and difficult corporate collapses in the history of corporate America,” he went on to say, as reported by Bloomberg.
What Assets FTX Has
Bromley walked the court through each key moment in the FTX collapse, from the leak of sister trading firm Alameda Research’s balance sheet to the announcement by Changpeng Zhao (CZ), the CEO of rival cryptocurrency exchange Binance, that he planned to liquidate his FTT holdings, the crypto token minted by FTX, and the subsequent new-age bank run on FTX that CZ’s reveal caused.
The Sullivan & Cromwell partner, widely considered a first-rate bankruptcy lawyer with decades of experience working on behalf of both governments and private enterprises, outlined the main business entities of SBF’s family of affiliated companies: FTX.com, FTX US, FTX’s venture arm, and trading firm Alameda Research, which holds the largest cash balance among the core four listed. The corporate governance in place for each of the main business verticals was minimal, consisting primarily of SBF and a close coterie of intermingled deputies.
The court has been told FTX has 36 banks and more than 200 bank accounts, and the enterprise group of companies employed a little over 500 people, the majority of whom were based in the U.S., followed by Japan, then Turkey. SBF and other key leaders lived in a shared penthouse in the Bahamas.
As reported by PYMNTS, with the help of turnaround firm Alvarez & Marsal, $1.24 billion in cash was uncovered at the FTX group of companies leading up to the first-day motions, a much higher tally than was able to be confirmed by FTX.
It is not all good news, however, as Bromley indicated to the court that a “substantial amount” of FTX Group’s assets “have either been stolen or are missing.”
It is unclear whether the “substantial amounts” that were stolen or mishandled include the several billion in combined loans that Alameda Research reportedly made to SBF, two of his deputies, and a company majority-owned by him; or are separate from them.
In October of last year, SBF also raised $420 million from investors on behalf of FTX — only he paid himself $300 million of that amount, claiming it as a personal reimbursement for re-purchasing the 15% stake in the exchange held by rival company Binance.
Actions like these are presumably what led FTX attorney Bromley to tell the judge today that the company was being “run as a personal fiefdom of Sam Bankman-Fried.”
Who FTX Owes Money To
FTX is bringing on investment banking advisory firm Perella Weinberg to help maximize the value of its remaining viable assets either through reorganization or strategic sales.
Who FTX owes money to is a double-edged sword, as revealing their names could imperil the rest of the industry and send unintended shockwaves that leave millions of users exposed to the fallout. Certain industry actors, as reported by PYMNTS, such as BlockFi and Genesis have already disclosed their FTX exposure.
FTX owes its top 50 creditors a staggering $3.1 billion, with the top 10 all due over $100 million each, as PYMNTS reported. The court was told that top locations for FTX’s customers include the Cayman Islands and the U.S. Virgin Islands.
The U.S. Trustee, a unit of the Justice Department responsible for overseeing bankruptcies, indicated that they oppose the redaction of the names of corporate and non-individual FTX customers, but Dorsey, the judge overseeing the case, has ruled that the creditor list will remain redacted on an interim basis as more information is provided to the court.
Along with FTX’s customer and creditor list, lawyers for the exchange have also asked Dorsey for an indemnification and exculpation motion keeping secret the details of those firms which the company has engaged to track down FTX’s remaining assets, as well as to protect the bankrupt platform from bad actors attempting to hack into these assets.
Such a motion is meant to prevent the advisors engaged by FTX, who are just doing their jobs, from being sued by creditors if the case does not turn out the way they hoped, giving them protection from entanglement in subsequent lawsuits.
Where The Chapter 15 Bankruptcy Case Will Be Held
A key takeaway from the first-day motions held earlier was that court officials in the Bahamas have officially agreed to let the U.S. court in Delaware handle part of the FTX restructuring case, acquiescing to a request to move a case filed in New York to join the remaining cases in Delaware.
Had the Bahamas officials dissented, it would have set up the potential for two different U.S. judges, each handling separate pieces of the FTX bankruptcy case, to deliver two court rulings that may have contradicted each other. Now, Dorsey will oversee the bulk of the FTX bankruptcy case.
Hmmm....
Ping
What Assets FTX Has
I expect an equal number to go to jail over this as the 2008 housing debacle.
I also expect another housing bubble burst next year.
P.S. Thank you for the ping.
Or henchpeople...or... well, you get it...
$1.24 billion in cash was uncovered at the FTX group of companies leading up to the first-day motions, a much higher tally than was able to be confirmed by FTX.
It is not all good news, however, as Bromley indicated to the court that a “substantial amount” of FTX Group’s assets “have either been stolen or are missing.”
Maybe I missed it, but I didn’t see it mentioning this Bankman-Fraud being extradited. Is he still free in the Bahamas?
Too big to fail !
In October of last year, SBF also raised $420 million from investors on behalf of FTX — only he paid himself $300 million of that amount, claiming it as a personal reimbursement for re-purchasing the 15% stake in the exchange held by rival company Binance.
—
Effective Altruism at its finest!
Would agree with you.
Most are in 30-to-40 age group, and never had serious consequences/stress in their life. Several will commit suicide prior to arrival in the US. This GF of SBF (Caroline Ellison) has zero knowledge on stocks and trades....but somehow was thrust into the profession.
But I think there is absolute fear that digging around will bring up serious money laundering (probably fentanyl profits), and serious contributions to political folks....with consequences on them to pay the money back.
He pretends to still be in the Bahamas but I seriously doubt it.
Gosh, how tender of them.
You won’t know that your allegedly solvent investment company is actually part of a Casino gangster operation. Guess thats why they call them confidence games....
I am still waiting for an in-depth forensic audit of FTX.
“Or henchpeople...or... well, you get it... “
Persons of Hench.
Re: where the overall bankruptcy case for FTX and its affiliates should be held
On a leaky yacht, in the middle of the Gulf Stream.
“Wilmington, Delaware, the traditional city where corporate bankruptcy cases are heard.”
Another example of the cluelesness of so called “journalists”.
The venue for corporate bankruptcy cases (ALWAYS Federal Court) is defined by statute. There is no such thing as a “traditional city where corporate bankruptcy cases are heard.”
There are historical and legal reasons why Wilmington might hear an outsized proportion of corporate bankrutpcy cases, but that would be largely based on the fact that so many corporations incorporate in Delaware, and the venue statutes for bankruptcy cases allow venue in the state of incorporation.
I read that this latest $600 million “hack” could only have been done by himself because the “hacker” knew all the passwords and was likely to pay off the Bahamas government.
And these "investors" were fine with the SBF just pocketing the money? I know nothing about venture capital but I would think investors would mandate their funds be used for the company's benefit not to line the pockets of the owner. There had to be something else going. Everything about SBF and FTX has been a grift
Interesting story about his MOTHER (for whom he purchased property in the Bahamas):
.
What is also unusual is that Mind the Gap is led not by highly experienced political hands, but by academics with no professional backgrounds as fundraisers. The group’s leaders are a pair of Stanford law professors: Barbara Fried, who has no apparent campaign experience, and Paul Brest, the former president of the William and Flora Hewlett Foundation. Graham Gottlieb, a Stanford fellow who served in junior roles for former President Barack Obama’s 2012 reelection campaign and in his White House, is its executive director.
Fried declined to answer specific questions from Recode about Mind the Gap’s efforts, past or present. But in a statement, she downplayed the organization as merely a “pro-bono donor advisor to people who are interested in evidence-driven decision making.”
“Most people have no idea whether their political contributions will actually make a difference,” Fried said. “Our aim is to evaluate the efficacy of different forms of political and civic engagement, and provide our conclusions free to individual, interested donors so they can make more educated decisions about where their money would be most effectively spent.”
https://www.vox.com/recode/2020/1/6/21046631/mind-the-gap-silicon-valley-democratic-donors-stanford
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