FTX bankruptcy may affect a million creditors
$1 billion in customer funds are reportedly missing
Billions in cryptocurrency FTX funds reportedly vanished
Macro Mavens founder Stephanie Pomboy joined 'Fox Business Tonight' to weigh in on the collapse of cryptocurrency exchange FTX.
The fallout from FTX Trading’s bankruptcy may touch more than one million creditors. The revelation came in a court document which shows just how massive the job will be of untangling a bankruptcy that includes more than 130 affiliates.
Lawyers for the cryptocurrency exchange asked a U.S. bankruptcy court to modify normal requirements for disclosing creditors.
"The debtors submit that filing separate creditor lists for each debtor would be of limited utility because the debtors anticipate overlap among the various debtors' creditor lists."
FTX noted they know of 100,000 creditors, most of whom are customers. However, the bankruptcy proceeding may also affect former customers and others.
Liquidity crisis
Sam Bankman-Fried, founder and chief executive officer of FTX Cryptocurrency Derivatives Exchange. (Jeenah Moon/Bloomberg via Getty Images / Getty Images)
FTX FACES CRIMINAL PROBE IN BAHAMAS AFTER COMPANY COLLAPSES, LOSES $1 BILLION IN CRYPTO
The court filing also revealed that FTX faced a "severe liquidity crisis" that necessitated filing for bankruptcy on an "emergency basis" last Friday after questions arose about the leadership of former CEO Sam Bankman-Fried.
Bankman-Fried was replaced by John Ray III, an experience restructuring executive.
"Immediately upon appointment, Mr. Ray began working with FTX's external legal, turnaround, cybersecurity and forensic investigative advisors to secure customer and debtor assets around the world, including by removing trading and withdrawal functionality on the exchanges and moving as many digital assets as possible to a new cold wallet custodian while simultaneously responding to a cyberattack that occurred on the petition date," the filing said.
Representations of cryptocurrencies are seen in front of displayed FTX logo in this illustration taken Nov. 10, 2022. (Reuters/Dado Ruvic/Illustration)
Along with its U.S. bankruptcy, FTX faces a provisional liquidation proceeding in the Bahamas, where the company is registered, along with numerous criminal probes.
On Monday, the Securities Commission of The Bahamas announced the nation’s Supreme Court had approved PricewaterhouseCoopers as joint provisional liquidators.
Criminal investigations
Sam Bankman-Fried, former CEO of FTX US Derivatives, testifies during the House Agriculture Committee hearing titled Changing Market Roles: The FTX Proposal and Trends in New Clearinghouse Models, in Longworth Building on Thursday, May 12, 2022. (Tom Williams/CQ-Roll Call, Inc via Getty Images / Getty Images)
SEC CHAIRMAN GARY GENSLER MET WITH HEAD OF FTX MONTHS BEFORE COLLAPSE
Last week, the Securities Commission froze the assets of FTX Digital Markets.
"The Commission is aware of public statements suggesting that clients’ assets were mishandled, mismanaged and/or transferred to Alameda Research," the commission said it a statement.
That led to a probe by the country’s securities commission.
Reuters, citing two people familiar with the matter, reported that at least $1 billion of customer funds had disappeared, and that people told the news outlet that Bankman-Fried had secretly transferred $10 billion of customer funds from FTX to his trading company Alameda Research.
Additionally, several global regulators have removed licenses from local FTX units, and are looking into the company, and investigations by the Justice Department, the Securities and Exchange Commission and Commodity Futures Trading Commission are also underway, a source with knowledge of the investigations told Reuters.
Separately, Binance co-founder and CEO Changpeng "CZ" Zhao said his company is forming an industry recovery fund, to help projects who are otherwise strong but in a liquidity crisis.
Reuters contributed to this report.