Creditors’ names have been redacted. But what is known is that in its short history, FTX had received capital from a slew of investment firms, including Sequoia Capital, BlackRock and Tiger Global, as well as entities such as the Ontario Teachers’ Pension Plan.
It also entered into a number of paid sports sponsorships with teams from the National Basketball Association and Major League Baseball, among others. And the crypto research firm Chainalysis has said it did business with FTX and owes money.
In a separate filing on Saturday, new FTX chief executive John J. Ray said the company will seek sales and other forms of capitalization to ensure that as many creditors as possible get their money. He noted that some of FTX’s subsidiaries have “solvent balances, responsible management and valuable franchises,” which could facilitate that process. Some 130 FTX sister companies are part of the bankruptcy filing.
FTX investors are suing Sam Bankman-Fried and celebrities
When FTX filed for bankruptcy protection on Nov. 11, it marked a stunning fall for a former powerhouse and its 30-year-old co-founder Sam Bankman-Fried. Once valued at $32 billion, FTX had become a public symbol of crypto, the ubiquitous commercials and sports sponsorships signaling to everyday people that cryptocurrency was a safe and accessible investment. Bankman-Fried’s frequent appearances at global conferences and on Capitol Hill sought to do the same with lawmakers and opinion leaders.
The filing shows the effect those efforts had, as a large number of parties have placed their money with FTX – money they will now fight to recover in bankruptcy court.
Dozens of private clients will join creditors awaiting the court’s distribution of assets; many have now seen their accounts frozen. In a filing last week, FTX revised the number of potential creditors from 100,000 to 1 million.
However, disentangling the company’s obligations can be tricky. In a separate Delaware court filing Thursday, Ray became a longtime insolvency expert who outlined a pattern of inadequate documentation.
“The principal companies in the Alameda Silo and the Ventures Silo did not keep complete books and records of their investments and operations,” Ray wrote, referring to some of Bankman-Fried’s entities, adding: “One of the most pervasive failures of the FTX .com business in particular is the absence of persistent records of decision making.”
Ray also noticed that Bankman-Fried and many of his employees used software that would automatically delete much of their internal communications.
Even where the procedure will take place is a question. The court’s jurisdiction in Delaware is being challenged by regulators in the Bahamas, where FTX was based. Those authorities want the proceedings to continue under another form of bankruptcy in New York.
In his filing on Thursday, Ray described a system of “procedural errors in cash management” that resulted in FTX not having an “accurate list of bank accounts and account signatories” with whom the company did business.
Sam Bankman-Fried charmed Washington. Then his crypto empire imploded.
And he noted a “potential mingling” of assets between Bankman-Fried firms, which may include its trading arm Alameda Research and FTX.com, which is supposed to function as a neutral platform for consumers to buy and sell crypto assets. Alameda personally lent $1 billion to Bankman-Fried, Ray said.
That mixing is expected to be one of the main focuses for investigators and regulators as they investigate possible wrongdoings by the former CEO. Congress is also stepping up the fire. The House Financial Services Committee is holding a hearing next month on the company’s collapse.
Crypto free-running businesses lured millions. FTX revealed the dangers.
Ray, who has decades of experience guiding corporate restructurings, including Enron’s, said Thursday there’s a lot for everyone to explore.
“Never in my career have I seen such a complete failure of corporate controls and such a complete absence of reliable financial information as here,” he wrote.
He said that FTX seemed to be run by a “very small group of inexperienced, unsophisticated and possibly compromised individuals.”
“This situation is unprecedented,” he wrote.