The collapse of Sam Bankman-Fried’s crypto empire has sparked a sweeping global probe with dozens of regulators circling the company as lawyers warn there could be 1 million creditors in its bankruptcy case.
FTX said in court filings that in the three days since the cryptocurrency exchange and more than 100 affiliated U.S. federal attorneys, the Securities and Exchange Commission, the Commodity Futures Trading Commission, and “dozens of federal, state, and international regulators,” it has been in contact with companies filed for Chapter 11 bankruptcy in Delaware.
The companies face at least 100,000 creditors, but that number could increase to more than 1 million, according to the filing.
“There is significant interest in these events from regulators around the world,” the filing said.
The statements provide new details about the vast scope and complexity of Bankman Fried’s multibillion-dollar digital asset group bankruptcy and the intense legal and regulatory scrutiny of the 30-year-old former billionaire’s businesses.
“The events that have befallen FTX over the past week are unprecedented,” the court filings said. “Just over a week ago, under the leadership of its co-founder Sam Bankman-Fried, FTX was considered one of the most respected and innovative companies in the crypto industry.”
Bankman-Fried had agreed to step down as chief executive at 4:30 a.m. Friday after late-night meetings with his attorneys, the filing said.
The restructuring specialist John Ray, known for his work on Enron, has taken over the company. Five independent directors were appointed to oversee various affiliated companies, led by former US federal judge Joseph J. Farnan Jr. after attorney Stephen Neal resigned from a board position.
The US filing comes after financial regulators in the Bahamas appointed liquidators to run a key FTX entity as the country’s authorities seek to “protect the interests of clients, creditors and other stakeholders worldwide.”
The Securities Commission of the Bahamas said Monday it has received court approval to appoint two partners from PwC, one in the Bahamas office and the second in Hong Kong, to handle the settlement of FTX Digital Markets, an entity in the heart of the Bahamas USA, to monitor the Crypto Group’s huge trading platform.
Authorities in the Caribbean nation where Bankman-Fried lived are investigating FTX, which used its Nassau base to set up a crypto derivatives trading business that accepted money from thousands of customers around the world.
The US filing confirms that FTX suffered a “cyber attack” on Friday. Blockchain research firm Elliptic estimates that $477 million was stolen in an exchange hack.
The company has also hired “investigative, forensics and cybersecurity professionals” to work with attorneys from Sullivan & Cromwell, FTX’s longtime legal counsel, who advised the company in the bankruptcy proceedings, and worked with former FTX general counsel Ryne Miller has for the company.
Alvarez & Marsal has been hired as financial advisors. A team from the consulting firm is “on site [and] checked the [companies’] Books and records and assistance in preparing bankruptcy disclosures,” it said.
According to a person familiar with the matter, the U.S. Securities and Exchange Commission recently expanded an investigation into FTX to include an investigation into its crypto lending products and client money management.
FTX said in the filing that the rapid move to bankruptcy was necessary to “secure and order its assets, and . . . reorganize or sell FTX’s complex array of businesses, investments and properties around the world for the benefit of its stakeholders.”
https://www.ft.com/content/6a0ea717-b57e-44de-abf3-054523855172 Global investigators pounce as FTX collapse leaves potentially 1m creditors in its wake