The ongoing investigations into FTX’s collapse are showing large amounts of assets have gone missing.
- James Bromley, the new counsel to FTX’s management team that has taken over facilitating the company’s bankruptcy proceedings, spoke in the Delaware bankruptcy court on Tuesday.
- He is reporting that a “substantial amount” of the bankrupt exchange’s financial assets, potentially including at least $1 billion in client funds according to Reuters, are either missing or stolen following the exchange’s collapse.
- FTX is struggling to account for all of the company’s remaining assets—with billions tied up in the Bahamas and the company has lost liquidity two weeks ago, although it has located $1.4 billion so far that it may be able to salvage.
- The exchange was once one of the largest names in cryptocurrency but began a precipitous collapse on November 8, filing for bankruptcy as its founder Sam Bankman-Fried (SBF) resigned.
- Former Enron restructuring lawyer John J. Ray III took over the company and is calling it one of the largest failures of a financial institution he’s ever seen.
Why it’s Important
The fall of FTX has represented the largest bankruptcy in the history of cryptocurrency and its repercussions caused a weeklong collapse in the crypto economy as users attempted to pull billions of dollars out of the market. The longer bankruptcy lawyers dig into the company, the more complex the mismanagement of the firm is revealed to be.
“FTX was in the control of inexperienced and unsophisticated individuals, and some or all of them were compromised individuals … What we have here is a worldwide, international organization, but which was run as a personal fiefdom of Sam Bankman-Fried … [FTX is] one of the most abrupt and difficult collapses in the history of corporate America and the history of corporate entities around the world,” says Bromley.
“The firm’s managers have begun taking steps under new Chief Executive John J. Ray III to secure customer funds and other assets. The management has hired investigators formerly employed by the Securities and Exchange Commission and the Justice Department specializing in cybersecurity to track assets belonging to FTX that may have been taken without authorization,” says The Wall Street Journal.
The past weekend has seen the FTX exchange hit with numerous cyberattacks that have further hurt ongoing bankruptcy efforts. At the same time, a deep-fake scammer posing at SBF on Twitter managed to scam $1,340 worth of Ethereum by offering to compensate users who lost crypto in the collapse.