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FTX may have more than 1 million creditors, according to a court filing that finally began to explain the company's descent into bankruptcy.

The document, filed to the federal court database system PACER late Monday, provided the first true glimpse of the crypto exchange's last day prior to filing for bankruptcy and its first few days going through the process. FTX's new CEO, veteran insolvency overseer John J. Ray III, is working with legal, cybersecurity and forensic advisers on the company's myriad subsidiaries and their respective bankruptcy processes, the filing said.

FTX filed over 100 dockets for its various related companies, including Alameda Research, the quant trading shop that held a lot of FTT tokens, West Realm Shires, a business entity in the U.S. that operates as FTX in some jurisdictions, and Clifton Bay Investments.

As part of these dockets, FTX filed motions to jointly administer the overall umbrella group of entities rather than treat each as its own individual case. As part of this effort, FTX is also asking if, rather than create a list of the top 20 creditors for each individual company, it can instead create a top 50 list for the overall structure. Moreover, FTX believes it may have over 1 million creditors overall.

"As set forth in the Debtors' petitions, there are over one hundred thousand creditors in these Chapter 11 Cases. In fact, there could be more than one million creditors in these Chapter 11 Cases. As such, the Debtors submit that cause exists to modify that requirement such that the Debtors will file a consolidated list of their top 50 creditors," the filing said.

The exchange's operators are also asking the court to allow it to email the notice of bankruptcy to FTX's creditors, rather than serve them with notices at their homes.

FTX's customers primarily interacted with the exchange online, so their emails are already on file, the document said.
The filing touched on Friday's hack, which saw hundreds of millions of dollars worth of crypto flow out of FTX's wallets, and confirmed that FTX has been in touch with "dozens" of state and federal regulators worldwide, including the U.S. Attorney's Office, the Securities and Exchange Commission, the Commodity Futures Trading Commission and others.

FTX has also appointed new directors, including former District Judge Joseph Farnan at FTX Trading; Matthew Doheny at FTX Trading; Mitchell Sonkin at West Realm Shires Inc.; Matthew Rosenberg at Alameda Research and Rishi Jain at Clifton Bay Investments.

FTX filed for bankruptcy on Friday morning, saying it had between $10 and $50 billion in assets and liabilities and over 100,000 creditors. Monday's filing did not address the questions of what assets or liabilities the exchange can currently lay claim to, but said the new leadership team is working to "secure and marshal" its assets. This includes having multiple lawyers and experts to review FTX and its subsidiaries' books.

The filing also provided a glimpse of how FTX got to the point of filing its first substantive documents several days after first filing for bankruptcy, saying the bankruptcy was declared on an emergency basis.

"FTX faced a severe liquidity crisis that necessitated the filing of these cases on an emergency basis last Friday. Questions arose about Mr. Bankman-Fried's leadership and the handling of FTX's complex array of assets and businesses under his direction," the filing said.

Bankman-Fried stepped down from his role at 4:30 a.m. on the day FTX filed for bankruptcy (a time zone was not given, but presumably it was ET, the time zone in the the Bahamas, where Bankman-Fried resides.

Since stepping down, Bankman-Fried has continued tweeting various thoughts and statements, which should concern his lawyers, legal experts told CoinDesk.

On November 16 2022 07:58 TheLordofAwesome wrote:
Apparently SBF played over 1000 LoL games and never made it out of Bronze Tier II. Amazing.

https://twitter.com/Dexerto/status/1592470873373802496

Tom Brady, Stephen Curry, Shohei Ohtani and other star athletes who were involved with FTX are among the defendants in a class-action lawsuit against the company filed in the U.S. District Court's Southern District of Florida, which alleges that the athletes and Bankman-Fried violated state law and made consumers suffer more than $11 billion in damages. According to Fox Business, the suit describes the athletes as parties "who either controlled, promoted, assisted in, and actively participated in FTX Trading and FTX US (collectively, the "FTX Entities"), offer and sale of unregistered securities in the form of yield-bearing accounts (YBAs) to residents of the United States."

The lawsuit seeks to hold FTX's celebrity parties among others responsible "for the many billions of dollars in damages they caused Plaintiff and the Classes and to force Defendants to make them whole."

Brady and his now ex-wife Gisele Bundchen are among the celebrity investors in FTX, as the two were announced as having taken major equity stakes in the company in 2021. The Tampa Bay Buccaneers quarterback has served as a brand ambassador for the company and starred in its commercials, receiving cryptocurrency in return, while Bundchen was named the company's environmental and social initiatives adviser.


Brady and FTX's other major investors have now likely lost most if not all of their stake in the company, particularly after a deal for cryptocurrency giant Binance to rescue FTX fell through after a review of the company's finances.


Brady is far from the only athlete and sports figure that is likely to take a major financial hit from FTX's downfall.

Stephen Curry, an NBA icon and star for the Golden State Warriors, for instance, inked a partnership with FTX last September that gave him an equity stake in the company.
Tennis star Naomi Osaka made a move similar to the one Curry did this past spring.
Los Angeles Angels star Shohei Ohtani was also an FTX ambassador, and he was set to receive all compensation in company equity and cryptocurrency as part of his deal.
Those three are part of a group of prominent athletes with FTX ties that also includes NBA legend Shaquille O'Neal, Jacksonville Jaguars quarterback Trevor Lawrence and Boston Red Sox great David Ortiz.


FTX's downfall has also had a major impact elsewhere in the crypto space, which is impacting athletes who have invested in other forms of crypto. After it was reported that FTX-owned BlockFi now faces bankruptcy, it was noted that Detroit Pistons star Cade Cunningham is set to lose significant money due to a deal with BlockFi that entailed him receiving 100% of his signing bonus in Bitcoin.

FTX has major sponsorship and business deals with teams and leagues as well. Last December, FTX entered a $10 million international sponsorship with the Warriors, giving the brand a major presence throughout Chase Center and the franchise's G League and NBA 2K teams. FTX also held the naming rights to the Miami Heat's home arena and was a sponsor of Mercedes' Formula 1 team.

On Nov. 11, the Heat, along with Miami-Dade County, released a statement saying they are terminating their relationship with FTX and are now looking for a new naming rights partner for their arena.

NEW YORK (AP) — The man who had to clean up the mess at Enron says the situation at FTX is even worse, describing what he calls a “complete failure” of corporate control.

The filing by John Ray III, the new CEO of the bankrupt cryptocurrency firm, lays out a damning description of FTX’s operations under its founder Sam Bankman-Fried, from a lack of security controls to business funds being used to buy employees homes and luxuries.

“Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here,” Ray said. “From compromised systems integrity and faulty regulatory oversight abroad, to the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals, this situation is unprecedented.”

Ray was appointed CEO on November 11, after the company was near collapse and its previous management sought legal counsel on what to do next. Bankman-Fried was persuaded to give up control of the company by his lawyers as well as his father, Joseph Bankman, a professor at Stanford Law School, according to Thursday’s filing.

Since his resignation, Bankman-Fried has sought out news outlets for interviews and has been active on Twitter trying to explain himself and the firm’s failure.

In an interview with the online news outlet Vox, Bankman-Fried admitted that his previous calls for regulation of cryptocurrencies were mostly for public relations.

“Regulators, they make everything worse,” Bankman-Fried said, using an expletive for emphasis.

In a terse statement, Ray said that Bankman-Fried’s statements have been “erratic and misleading” and “Bankman-Fried is not employed by the Debtors and does not speak for them.”

Ray noted that many of the companies in the FTX Group, particularly those in Antigua and the Bahamas, didn’t have appropriate corporate governance and many had never held a board meeting. Ray also addressed the use of corporate funds to pay for homes and other items for employees.

“In the Bahamas, I understand that corporate funds of the FTX Group were used to purchase homes and other personal items for employees and advisors. I understand that there does not appear to be documentation for certain of these transactions as loans, and that certain real estate was recorded in the personal name of these employees and advisors on the records of the Bahamas,” he said.

So far, debtors have found and secured “only a fraction” of the group’s digital assets that they hope to recover, with about $740 million of cryptocurrency secured in new cold wallets, which is a way of holding cryptocurrency tokens offline, said Ray.

Ray was named CEO of FTX less than a week ago when the company filed for bankruptcy protection and its CEO and founder Bankman-Fried resigned. The embattled cryptocurrency exchange, short billions of dollars, sought bankruptcy protection after the exchange experienced the crypto equivalent of a bank run.

In its bankruptcy filing, FTX listed more than 130 affiliated companies around the globe. The company valued its assets between $10 billion to $50 billion, with a similar estimate for its liabilities.

Bankman-Fried was recently estimated to be worth $23 billion. His net worth has all but evaporated, according to Forbes and Bloomberg, which closely track the net worth of the world’s richest people.

FTX’s failure goes beyond finance. The company had major sports sponsorships as well, including Formula One racing and a sponsorship deal with Major League Baseball. Miami-Dade County decided Friday to terminate its relationship with FTX, meaning the venue where the Miami Heat play will no longer be known as FTX Arena. Mercedes was planning to remove FTX from its race cars starting last weekend.

NEW YORK (AP) — The company tasked with locking down the assets of the failed cryptocurrency exchange FTX says it has managed to recover and secure $740 million in assets so far, a fraction of the potentially billions of dollars likely missing from the company’s coffers.

The numbers were disclosed on Wednesday in court filings by FTX, which hired the cryptocurrency custodial company BitGo hours after FTX filed for bankruptcy on Nov. 11.

The biggest worry for many of FTX’s customers is they’ll never see their money again. FTX failed because its founder and former CEO Sam Bankman-Fried and his lieutenants used customer assets to make bets in FTX’s closely related trading firm, Alameda Research. Bankman-Fried was reportedly looking for upwards of $8 billion from new investors to repair the company’s balance sheet.

Bankman-Fried “proved that there is no such thing as a ‘safe’ conflict of interest,” BitGo CEO Mike Belshe said in an email.

The $740 million figure is from Nov. 16. BitGo estimates that the amount of recovered and secured assets has likely risen above $1 billion since that date.

The assets recovered by BitGo are now locked in South Dakota in what is known as “cold storage,” which means they’re cryptocurrencies stored on hard drives not connected to the internet. BitGo provides what is known as “qualified custodian” services under South Dakota law. It’s basically the crypto equivalent of financial fiduciary, offering segregated accounts and other security services to lock down digital assets.

Several crypto companies have failed this year a s bitcoin and other digital currencies have collapsed in value. FTX failed when it experienced the crypto equivalent of a bank run, and early investigations have found that FTX employees intermingled assets held for customers with assets they were investing.

“Trading, financing, and custody need to be different,” Belshe said.

The assets recovered include not only bitcoin and ethereum, but also a collection of minor cryptocurrencies that vary in popularity and value, such as the shiba inu coin.

California-based BitGo has a history of recovering and securing assets. The company was tasked with securing assets after the cryptocurrency exchange Mt. Gox failed in 2014. It is also the custodian for the assets held by the government of El Salvador as part of that country’s experiment in using bitcoin as legal tender.

FTX is paying Bitgo a $5 million retainer and $100,000 a month for its services.