Global investigators pounce as FTX collapse leaves potentially 1mn creditors


The collapse of Sam Bankman-Fried’s crypto empire has sparked an unlimited global investigation, with dozens of authorities circling the corporate as lawyers warn there may very well be 1mn creditors in its bankruptcy proceeding.

FTX said in court filings it was involved with US federal prosecutors, the Securities and Exchange Commission, the Commodity Futures Trading Commission and “dozens of federal, state and international regulatory agencies” within the three days because the cryptocurrency exchange and greater than 100 affiliated corporations filed for Chapter 11 bankruptcy in Delaware.

The businesses face no less than 100,000 creditors, but that number could expand to greater than 1mn, in line with the filing.

“There’s substantial interest in these events amongst regulatory authorities world wide,” the filing said.

The statements provide fresh details on the sprawling scale and complexity of the multibillion-dollar bankruptcy of Bankman-Fried’s digital asset group, and the extreme legal and regulatory scrutiny of the 30-year-old former billionaire’s businesses.

“The events which have befallen FTX over the past week are unprecedented,” the court filing said. “Barely greater than per week ago, FTX, led by its co-founder Sam Bankman-Fried, was thought to be one of the vital respected and revolutionary corporations within the crypto industry.”

Bankman-Fried had agreed to step down as chief executive at 4.30am on Friday after late-night meetings together with his lawyers, the filing said.

Restructuring specialist John Ray, known for his work on Enron, has taken over the corporate. Five independent directors have been appointed to oversee different linked corporations, led by former US federal judge Joseph J Farnan Jr, after lawyer Stephen Neal backed out of a board position.

The US filing comes after financial regulators within the Bahamas appointed liquidators to run a key FTX entity because the country’s authorities seek to “protect the interests of clients, creditors and other stakeholders globally”.

The Securities Commission of the Bahamas said on Monday it had won court approval to appoint two partners from PwC, one based within the Bahamas office and the second in Hong Kong, to oversee the unwinding of FTX Digital Markets, an entity on the centre of the crypto group’s vast trading platform.

Authorities within the Caribbean nation, where Bankman-Fried lived, are investigating FTX, which used its Nassau base to construct a crypto derivatives trading operation that accepted money from hundreds of consumers world wide.

The US filing confirms FTX suffered a “cyber attack” on Friday. Blockchain research firm Elliptic estimated $477mn had been stolen in a hack of the exchange.

The corporate has also hired “investigative, forensic and cyber security experts” to work with lawyers from Sullivan & Cromwell, FTX’s longtime legal counsel, which has been advising the corporate on the bankruptcy process and dealing with FTX general counsel Ryne Miller, who formerly worked for the firm.

Alvarez & Marsal has been hired as financial adviser. A team from the advisory firm was “on the bottom [and] is reviewing the [companies’] books and records and assisting with the preparation of bankruptcy disclosure” it said.

The US Securities and Exchange Commission has recently widened an investigation into FTX, which incorporates a probe of its crypto lending products in addition to its management of customer funds, in line with an individual acquainted with the matter.

FTX said within the filing that the swift move out of business was needed to “secure and marshal its assets, and . . . to reorganise or sell FTX’s complex array of companies, investments and property world wide for the advantage of its stakeholders”.

Video: Cryptocurrencies: how regulators lost control

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