Has former Enron advisor Paul Krugman been asked to help?
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.
Questions are being asked
<><> how FTX got federal approval to buy its stake in the Farmington mini bank.
<><>it’s hard to believe regulators would have knowingly allowed the crypto firm to do so.
Is the wigged mad Maxine, FTX campaign funds taker, House banking committee chair.....in on it?
***********************************************
Here’s where it gets interesting. The bank, which had posted net income routinely with small quarterly losses over the years, started cranking out quarterly losses of $22k, $44k, then losses shot up to $558k, $576k, $1,085k, and finally a whopping $2.6MM loss in the most recent quarter. Meanwhile, there are equity injections commingled with the losses.
Pretty hefty losses.
<><>who was borrowing money that created the losses?
<><>were the losses in the bank’s securities trading account??
We demand a full accounting.
Contact Congress
U.S. House of Representatives:
* Telephone: 202-225-3121
* Website: http://www.house.gov/
U.S. Senate:
* Telephone: 202-224-3121
* Website: http://www.senate.gov/
FTX founder Sam Bankman-Fried donated thousands
to House committee members who will investigate him
FOX Business ^ | November 19, 2022 | Timothy Nerozzi
Posted on 11/20/2022, 7:01:35 PM by george76
Nine members of House Financial Services Committee received donations from Bankman-Fried, other FTX employees
...
Members of the House Financial Services Committee have received hundreds of thousands of dollars from Sam Bankman-Fried and others at his now-bankrupt cryptocurrency company FTX.
...
Bankman-Fried was a major contributor to Democratic candidates during the midterm election cycle, funneling most of his donations through a political action committee called Protect Our Future PAC.
...
Bankman-Fried funneled an estimated $262,200 to Republicans throughout the 2021-2022 election cycle, according to FEC records. His contributions to Republicans paled in comparison to the nearly $40 million he contributed to Democratic campaigns but still represented a significant sum
...
When asked whether Democrats who received campaign cash from FTX should give it back, committee chairwoman Rep. Maxine Waters said, “Well, I don’t want to get into that. As a matter of fact, both sides, Democrats and Republicans, have received donations. So thank you.”
...
On Wednesday, Bankman-Fried was hit with a class action lawsuit filed by investors alleging that he and other high-profile celebrities – such as legendary NFL quarterback Tom Brady and NBA star Stephen Curry – violated Florida law and made consumers suffer more than $11 billion in damages.
(Excerpt) Read more at foxbusiness.com ...
He needs to go to jail — unless the democrats who received money from him decide they don’t want that made public and implement their own form of justice.
Secret deals, sounds like insider trading with political cover to me. And political cover ain’t free. Time may tell my friend.
Has former Enron advisor Paul Krugman been asked to help?
Crypto, all of it, is a fraudulent money laundering machine… period
An LLC is not a corporation.
Instead of giving info/help you just correct, Flash.
It's a limited liability company, EEGator.
Flash is just nitpicking, though he/she is right.
You’re correct. It’s even a higher percentage of Fortune 500 companies than LLCs.
I knew all, or near all, CC companies have a PO Box “main office” here in DE.
https://www.sundocumentfilings.com/article/llc-vs-corporation-what-are-differences
https://www.legalzoom.com/articles/incorporating-in-delaware-advantages-and-disadvantages
Thanks, I posted a couple links after your post to me.
Why, exactly, is SBF (and Ellison) not in jail yet?
Because the post said “for a reason”, but did not bother to give a reason. I figured I’d answer a post that sounds knowing, but fails to demonstrate any actual knowledge, with an argumentative response.
There is more than one reason I can think of off the top of my head. Delaware has the most business-friendly corporate laws. Delaware has the most highly developed corporate law. Meaning that when you read the applicable statutes, and ask yourself “How will this REALLY play out if I’m dragged into court”, or “how can I play the edges on these regulations”, there’s case history on what happened, which not only tells you the answer, but can be cited as precedent.
Also, Delaware has a sophisticated judiciary regarding corporate matters. That does not come directly into play in Bankruptcy court, which is Federal, but one might expect that the BR courts in Delaware are more knowledgeable about such matters than say, the BR court in Wyoming.
Has there ever been a bigger, more consistently wrong, overpaid idiot, anywhere?
I’m still pulling on that come-a-long. (inside story)
Somehow, that simply doesn't sound...ethical.
It's like a nasty taste in your mouth from just reading it.
JMO, YMMV
BTW, do you play the lawful or unlawful side on the edges of those regulations?
The law is the law. A judge can read the cases you spoke of earlier (case history/precedent) to help in their ruling no matter in which Federal District the case was held.
Why change from NY to DE?
My first thought is judge shopping.
But I'm betting that never came up in your mind.
Presided over by Judge John T. Dorsey of the U.S. Bankruptcy Court for the District of Delaware...
It doesn't matter how "sophisticated" Delaware is judicially.
That’s a bit off the topic of why companies incorporate in Delaware, to which I was responding, but the way Federal BR law works is that state law will come into play if and when there is what is called an “adversarial proceeding”.
Our Federal Court system is a bit complicated when it comes to what law the Federal Court will use. In a variety of circumstances, Federal Courts use state law, and are required to use state law, in deciding cases.
When a company declares bankruptcy they list their assets and creditors, and notice goes to all of the creditors. The Creditors have time to make a claim against discharge. If no one makes a claim, all debts are discharged unless they are by law not dischargeable, but most are, so it’s “Game Over”. Up to that point, it’s all federal law. However, there are various grounds by which a creditor can demand a judgment for money owed that will not discharge the debtor. Among these is FRAUD.
If someone brings an adversarial proceeding against BagMan’s gang of clowns (Yah think?) then some other law will come into play, but it will be the Federal BR judge applying it.
Which jurisdiction’s law regard fraud will be used depends on a number of things. By way of example, the parties may have a choice of law clause that the court might honor, or might refuse to honor. Choice of law is DIFFERENT from choice of forum. The forum is now Delaware, and any fraud action will be tried in Delaware, absent a successful motion for change of venue. It would be very unusual to have a first change of venue for the basic bankruptcy and then a motion to move it again for an adversariel proceeding, but the players are are after big stakes.
But assuming everything stays in Delaware, even then that does NOT mean that the Federal BR judge sitting in Delaware hearing the adversarial proceeding will use Delaware law. It could wind up being the laws of Antigua or the Bahamas.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.