FTX says it could have over 1 million creditors in new bankruptcy filing

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  • Last week, when it filed for Chapter 11 bankruptcy protection, FTX indicated it had more than 100,000 creditors.
  • But in an updated filing Tuesday, lawyers for the company said: “In fact, there could be more than a million creditors in these Chapter 11 cases.”
  • Over the past 72 hours, FTX has been in contact with “dozens” of regulators in the US and abroad, the lawyers wrote.

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Troubled cryptocurrency exchange FTX may have over 1 million creditors, according to a new bankruptcy filing, pointing to the huge impact its collapse had on crypto traders.

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Last week, when it filed for Chapter 11 bankruptcy protection, FTX indicated that it had more than 100,000 creditors with claims in the case.

but in one Update Filing TuesdayThe company’s lawyers said: “In fact, there may be more than a million creditors in these Chapter 11 cases.”

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The lawyers said that usually in such cases, the debtors are required to provide a list of the names and addresses of the top 20 unsecured creditors. However, given the scale of its debt, the group instead intends to file a list of the 50 largest creditors on or before Friday.

According to the filing, five new independent directors have been appointed to each of FTX’s main parent companies, including former Delaware District Judge, Joseph J. Farnan, who will serve as the lead independent director.

Over the past 72 hours, FTX has been in contact with “dozens” of regulators in the US and abroad, the company’s lawyers wrote. These include the US Attorney’s Office, the Securities and Exchange Commission and the Commodity Futures Trading Commission.

This year, a slew of crypto firms, including Celsius and Voyager Digital, have failed, as they face plunging digital asset prices and liquidity issues.

In earlier bankruptcy cases, merchants on these platforms have been designated as “unsecured creditors,” meaning they will be at the back of a long line of entities, from suppliers to employees, seeking repayment.

Prior to its collapse, FTX offered crypto investments to amateur and professional traders as well as more complex derivatives trades. At its peak, the platform was valued by investors at $32 billion and had over 1 million users. The company’s failure has had a chilling effect on the industry, with investors selling their positions and withdrawing funds from exchanges.

On Monday, the CEOs of Binance and Crypto.com sought to reassure investors about the financial health of their businesses. Binance’s Changpeng Zhao said his exchange has only seen a modest increase in withdrawals, while Chris Marszalek, head of Crypto.com, said his firm has an “extremely strong balance sheet.”

receiving customer funds

FTX entered bankruptcy on Friday as concerns about its financial health led to an increase in withdrawals and a decline in the value of its native FTT token. FTX founder Sam Bankman-Fried stepped down as CEO and was replaced by John J. Ray III took over.

FTX initially turned to Binance for a hedge deal, but it broke down when Binance wrongly cited reports of client funds and alleged a US government investigation into FTX. Over the weekend, FTX suffered an apparent cyberattack that resulted in the theft of over $400 million worth of tokens.

“FTX faced a serious liquidity crisis that necessitated the filing of these cases on an emergency basis last Friday,” the lawyers wrote in the filing on Tuesday. “Questions arose regarding the conduct of FTX’s complex assets and businesses under the leadership and direction of Mr. Bankman-Fried.”

CNBC reported Sunday that FTX affiliate Alameda Research had borrowed billions in client funds from the exchange to ensure it had sufficient liquidity to process withdrawals.

In general, according to US securities law, it is illegal to mix client funds with counterparties and trade them without explicit consent. It also violates FTX’s Terms of Service.

Bankman-Fried declined to comment on the allegations, but said the company’s recent bankruptcy filing was the result of issues with leveraged trading positions.

“I think it is increasingly clear, even at a fundamental level, that this kind of interplay of interests between a market maker and an exchange is highly unethical,” said Jamie Burke, CEO and CEO of Web3-focused venture capital firm Outlier Ventures. The founder told CNBC.

one in secret twitter thread This week, Bankman-Fried replaced the letter “H,” “A,” “P,” “P,” “E,” “N,” “E,” “D,” after the word “what.” Write. Tweets

He ended the thread on Tuesday with this sentence: “10) [NOT LEGAL ADVICE. NOT FINANCIAL ADVICE. THIS IS ALL AS I REMEMBER IT, BUT MY MEMORY MIGHT BE FAULTY IN PARTS.],



Credit: www.cnbc.com /

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