The 3 most important things learned during FTX’s first day in bankruptcy court

Lawyers and executives representing the collapsed cryptocurrency platform FTX appeared in court on Tuesday where they announced the continuation of the investigation into the company’s assets controlled by founder and former CEO Sam Bankman-Fried.

They also asked that the names of the company’s customers not be made public.

The two-hour hearing is a traditional measure designed to authorize FTX’s request to pay its advisers, employees and vendors, as well as to resolve disputes about how the case proceeded in the first instance.

But the events of the first hearing have fueled speculation that FTX’s Chapter 11 reorganization could be one of the most unusual cases ever to come before a US bankruptcy court – “unprecedented.” “, said the lawyer of FTX.

Here are the three biggest ones available.

FTX CEO Sam Bankman-Fried attends a press conference at the FTX Arena in downtown Miami on Friday, June 4, 2021. (Matias J. Ocner/Miami Herald/Tribune News Service via Getty Images)

FTX CEO Sam Bankman-Fried attends a press conference at the FTX Arena in downtown Miami on Friday, June 4, 2021. (Matias J. Ocner/Miami Herald/Tribune News Service via Getty Images)

‘Absence’ of property information

As expected, US Bankruptcy Judge John Dorsey, who is presiding over the case, has authorized FTX to pay its current business expenses. Bankman-Fried and her former top deputies who stepped down from their roles on the platform were expressly denied compensation.

However, in a presentation before the court, James Bromley, FTX’s lawyer, from Sullivan & Cromwell, pointed out the unique situation that keeps the new managers and crypto scientific investigators. not to identify their assets.

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“There has been great progress, but we stand here today, your honor, with a lack of information,” Bromley said Judge Dorsey. “We don’t have the usual amount of information that a debtor has. But every day we produce more and more. “

Bromley went on to challenge Bankman-Fried for operating FTX due to inadequate corporate and accounting controls.

“My Lord, what we have is a global organization, but an organization that has been successfully managed as Sam Bankman-Fried’s own province,” he said.

However, the possibility of more assets is a good sign for consumers and other lenders who hope to recover their lost investment. Bromley said in court that “a great deal of the debtor’s property has been stolen or is missing.”

To determine whether the $400 million in stolen crypto assets can be recovered, FTX enlisted Nikki Friedlaender, former head of the Complex Fraud and Cybercrime Unit in the Southern District of New York, and Steve Pekin , former director of Securities and Exchange enforcement. Commission, as well as blockchain analytics firm Chainalysis and investigative firm Nardello.

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On Tuesday, the exchange disclosed an estimated $9 billion in debt and $1.24 billion in cash and cash equivalents. According to FTX management, net income for the week ending December 23, after adjusting for ongoing expenses, was $459 million.

The name of the FTX client will remain under seal – for now

Disputes over the identity of more than 1 million FTX customers whose accounts are currently tied up in bankruptcy also arose during Tuesday’s hearing.

The US Trustee, the government’s appointed representative in the US bankruptcy case, challenged FTX’s position that its client’s name should remain under seal.

“We submit that the over-the-road release does not provide transparency in these cases,” said Ben Hackman, who argued on behalf of the US Trustee, noting that names should be made public unless foreign laws such as the European Union’s GDPR prohibits their publication.

Judge Dorsey ultimately granted FTX’s request to withhold the individual’s name and address on a temporary basis, pending the outcome of the case at the next hearing.

Changing the names of creditors for crypto companies is still an open question in the US Federal Bankruptcy court. In September, Celsius Network lost its bid to retain its own lender name in the Southern District of New York.

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“The court took the safe route today and raised the issue of privacy and consumer protection,” Jason DiBattista, head of legal research with Levfin, told Yahoo! Finance about today’s decisions.


In anticipation of a dispute over which country has jurisdiction over FTX’s assets — the United States or the Bahamas where FTX is headquartered — FTX noted two factors that may weigh on the US Bankruptcy Court.

FTX Global Employee Base until October 31, 2022

FTX Global Employee Base until October 31, 2022

As of October 31, 2022, the debt company in the United States had 330 employees worldwide, with the largest number -127 – working in the United States.

For international customers, he added, most are in the Cayman Islands and Virgin Islands, followed by customers from China, Great Britain and Singapore. Of FTX’s international subsidiaries, 94% of its clients are clients of the US debtor, FTX Trading Ltd. About 6% are customers of FTX Digital Markets Ltd., a Bahamian company.

Through, the company also received $300 million in Bahamian real estate purchases.

Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on Twitter @alexiskweed. David Hollerith is a senior reporter at Yahoo Finance covering crypto markets and stocks. Follow him on Twitter at @DsHollers.

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