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‘Substantial amount’ of assets stolen or lost, says FTX lawyer

The full extent of FTX’s financial disarray is becoming clearer as the failed cryptocurrency exchange’s new management seeks cash as part of the bankruptcy process.

At the company’s first Chapter 11 hearing in Delaware on Tuesday, restructuring attorney James Bromley said a “substantial amount” of assets were stolen or missing.

FTX, formerly one of the most trusted brands in crypto, filed for bankruptcy earlier this month. Its CEO and founder, Sam Bankman-Fried, has resigned, marking the implosion of his multibillion-dollar cryptocurrency empire.

The rapid decline of the company and Bankman-Fried has shaken investor confidence in the sector and sparked liquidity crises at other crypto companies.

Bromley called the failure of FTX “one of the most abrupt and difficult corporate meltdowns in the history of corporate America”. He described the company’s network of entities as an international organization “effectively run as a personal fiefdom of Sam Bankman-Fried.”

Before the hearing, FTX lawyers produced documents showing that the company and its affiliates had a total of $1.2 billion in cash – more than double the amount estimated in a previous court case.

The updated figure underscores what FTX’s new chief executive described last week as a complete lack of centralized cash controls under Bankman-Fried’s management.

In a statement last week, CEO John J. Ray III said the new management team was only able to approximate the amount of cash on hand at around $564 million.

Financial troubles spread

It’s been a chaotic month for the crypto industry as the failure of FTX sparked a contagion that left several other companies in financial jeopardy.

One such company, a crypto exchange called Genesis, suspended withdrawals last week, citing an “abnormal” number of requests that exceeded its current liquidity.

On Monday, Bloomberg reported that the exchange was struggling to raise an additional $1 billion in cash for its lending arm and that the company is warning potential investors that it may need to file for bankruptcy.

The report cited unnamed sources; Genesis did not immediately respond to CNN Business’s request for comment.

Another prominent cryptocurrency lender, BlockFi, halted withdrawals when FTX fell apart and appeared to be facing its own bankruptcy, according to the Wall Street Journal.

When asked for comment, a BlockFi representative referred CNN Business to the company’s earlier statement on its blog, reiterating that there were “a number of scenarios” under consideration.

“We are doing the work now to determine the best path forward for our customers,” the company said.

Source: CNN Brasil

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