Home » FTX lawyer says in first bankruptcy hearing this is different ‘animal’

FTX lawyer says in first bankruptcy hearing this is different ‘animal’

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lawyer Collapsed crypto exchange FTX At the company’s first bankruptcy hearing on Tuesday, regulators in the Bahamas, where FTX is headquartered, said they had agreed to consolidate the proceedings in Delaware.

FTX lawyers brought in by new leadership to handle restructuring filed emergency motion last week to secure move to US

“We’re dealing with a different kind of animal,” said FTX Counsel James Bromley. “Unfortunately, FTX’s debtors haven’t run particularly well. That’s an understatement.”

Regarding FTX’s founders, this was an organization that “effectively operated as the personal estate of Sam Bankman Freed,” an attorney for FTX told the court.

FTX’s attorneys have confirmed earlier reports that the Southern District of New York’s Cybercrime Division has launched an investigation into the matter. FTX’s lawyer also mentioned cyberattacks, suggesting there were multiple attacks besides the $477 million hack that occurred shortly after the company filed for bankruptcy on Nov. 11. .

Bromley told the court that the new team’s central task is to “bring order to chaos”. After introducing his fellow attorneys, Bromley dived into what FTX has been doing to understand the complex morass of data and finance that FTX and his Bankman-Fried have left behind. Restructuring Expert John Ray III.

Bankman-Fried has taken a level of business management “none of us have ever seen,” Bromley said, referring to bankruptcy experts and lawyers the company has hired as part of its turnaround process.

FTX was valued at $32 billion by retail investors earlier this year, and Bankman-Fried billed itself as the industry’s savior during the crypto winter.

“The FTX situation is the latest and biggest failure in the space,” said Bromley. “In effect, there was a bank run on international exchange. […] American exchanges.There was a leadership crisis at the same time that the bank run was happening […] The FTX company was run by a very small group of people led by Sam-Bankman-Fried. Freed lost his leadership in the bank’s election campaign, which led to his resignation.”

He said FTX has just started implementing “standard” risk and data management practices. As part of the process, the attorney previously had to approve approximately $1 million in payroll costs for his existing FTX employees.

Bromley said the process is designed to give creditors as much as possible.

“Whether that means selling assets, selling businesses or restructuring businesses, it is imperative that we first maximize the value of the assets we have,” he said. “It’s all on the table.”

FTX’s clients had a global presence, but many were based in tax havens. The largest geographic areas represented are:

  1. Cayman Islands — 22% of registered customers.
  2. US Virgin Islands — 11% of registered customers.
  3. China — 8% of registered customers.

“We will be in front of you very quickly to sell certain businesses that we understand. […] Self-sufficient and robust [with] Interest from others,” Bromley added.

FTX lawyers say they have established four silos for the company’s assets and various entities. they are:

  • The WRS (West Realm Shires) silo manages and contains US holdings.
  • Alameda Silo, which includes Alameda Research, Bankman-Fried’s now-defunct hedge fund;
  • A venture silo that invests in cryptocurrency companies and startups.
  • A dot-com silo that encompasses the international business that makes up the bulk of FTX’s deposits.

Bromley said efforts to recover and protect assets include not only crypto assets and currencies, but also “information.” The company also hired independent directors for the first time in its history.

“A significant amount of property has been stolen or gone missing,” Bromley said. “Additionally, ‘significant funds appear to have been transferred to Alameda from other silos.'”

A key aspect of the FTX crisis relates to Alameda and the FTT token, the coin issued by FTX. The attorney has traced the history of FTX and its affiliates, pointing to his creation of the FTT token in April 2019 and his establishment of the Alameda entity in November 2017.

Investments were made in the cryptocurrency and tech venture space, but about $300 million was also spent on real estate in the Bahamas, according to Bromley. That number is higher than previously reported, and Bromley said most of those purchases were residential and vacation properties for senior executives.

Employees left the company in droves. As of October 2022, the primary FTX parent company has 330 employees worldwide, 127 employees in the United States, an Australian operation and 190 employee FTX Digital Markets. Including, there were 520 employees worldwide.

According to FTX’s lawyers, the current best guess for headcount is “around 260.”

This is a developing story. Please check the latest information.

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