FTX Group’s first bankruptcy hearing was held in the United States. Hearings are also planned in the U.S. Senate to examine the situation, and some senators are demanding the Department of Justice and Attorney General investigate the case carefully.
In a letter, Sam Bankman-Fried told the FTX team that he felt “deeply sorry” for the company’s collapse. He said deleveraging, massive client withdrawals, poor margin management, and risk controls led to the crisis. SBF repeated the point about the wrong decision to file for bankruptcy because “potential interest in billions of dollars of funding came in roughly eight minutes after” the filing. The Block cited the text of the letter.
The former CEO of FTX also announced plans to speak at The New York Times’ DealBook Summit. This provoked outrage among the crypto community on Twitter because the same publication had previously released an article completely ignoring the facts of misuse of client funds and presenting SBF as a victim.
The letter didn’t mention anything about the misuse of client funds either, though some evidence keeps popping up to prove it. According to a report by Reuters, Sam Bankman-Fried, his parents, and FTX’s senior executives purchased real estate worth more than $121 million in the Bahamas. All properties were bought by a unit of FTX.
Meanwhile, the company’s representatives succeeded in transferring FTX Digital Markets’ liquidation case from the Southern District of New York, where the suit was filed by provisional liquidators appointed by the Supreme Court of the Bahamas. The case will next be heard in the U.S. District Court for the District of Delaware, where the FTX Group filed for bankruptcy. CoinDesk reports about it.
The first bankruptcy hearing has already been held. Details aren’t yet disclosed, but it’s been reported that FTX has hired former employees of the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) to represent its interests. This is reported by The Wall Street Journal. Investigative firm Nardello & Co., employees of Chainalysis, and partners in Sullivan & Cromwell LLP were also involved in the proceedings.
The Supreme Court of the Bahamas issued a ruling in favor of the SEC, requiring FTX to compensate the regulator for holding digital assets after filing for bankruptcy. Cointelegraph reports this.
Moreover, officials from the Securities Commission of The Bahamas said that taking control of the exchange’s assets was right. The reasoning is that FTX’s accounts have been compromised, so attacks on them still continue. James Bromley, a partner in Sullivan & Cromwell, confirmed it. The lawyer said the first hearing found that “a substantial amount of assets have either been stolen or are missing.” The company’s accounts continue to be subject to cyberattacks.
In the U.S., two Democratic senators wrote an open letter to the Attorney General urging the Department of Justice to thoroughly investigate the FTX’s collapse. A Senate hearing on FTX’s bankruptcy is scheduled for December 1. Rostin Behnam, Chairman of the Commodity Futures Trading Commission (CFTC), will testify at the hearing. The U.S. House Financial Services Committee plans to hold a similar hearing to examine the broad implications of FTX’s collapse on the digital asset ecosystem.
Several U.S. senators have also issued an open letter to Abigail Johnson, CEO of Fidelity Investments, urging her to reconsider the decision allowing 401(k) plan sponsors to offer participants access to Bitcoin. Senators strongly recommend restricting citizens’ retirement savings from crypto manipulation because “the recent implosion of FTX, a cryptocurrency exchange, has made it abundantly clear the digital asset industry has serious problems.”
FTX’s crisis led to a record fund inflow into short-term investment products, by the way. This was reported by CoinShares analysts. According to their data, 75% of the total inflow of institutional crypto investors’ funds during November 14-18 were placed in short-term investment products. In short, big investors believe that the crypto market will fall.
Changpeng Zhao, CEO of Binance, intends to take advantage of the situation going on in the cryptocurrency sector. The exchange set up a $1 billion fund to buy struggling crypto companies. The amount of money managed by the fund could increase to $2 billion. Justin Sun, Founder of Tron, already applied to contribute capital to the fund.
Tellingly, Sam Bankman-Fried, Changpeng Zhao, and Justin Sun had previously planned to “save” the industry in a similar way. The head of Binance in an interview with Bloomberg admitted the possibility of buying FTX’s assets because some of them can still be saved. Changpeng Zhao played a significant role in FTX’s crisis, one of the turning points of which was Binance’s refusal to acquire the company’s assets.
