FTX Confirms Justice, SEC Probes in Bankruptcy Filing
FTX Appoints Independent Directors to Ensure 'Proper Governance'
By: Edward RobinsonFTX Crisis
In the first significant filing of its bankruptcy, FTX confirmed that the U.S. Department of Justice and other federal and state agencies are probing the exchange in connection with its failure last week.
FTX, the No. 2 cryptocurrency exchange, also appointed five independent directors at each of the companies comprising the FTX group “to ensure proper governance through the Chapter 11 process.”
In addition to federal prosecutors, the U.S. Securities and Exchange Commission, the Commodity Futures Trading Commission, and “dozens” of federal and state agencies have been in contact with FTX, the company said in the nine-page filing, which was submitted to the U.S. Bankruptcy Court in Delaware on Monday.
The company, which filed an emergency petition for bankruptcy on Nov. 11 after suffering a severe liquidity crunch, named Joseph Farnan Jr. as lead independent director. Farnan, a patent law litigator based in Wilmington, Delaware, served as a U.S. District Court judge from 1985 to 2010.
Under new CEO John. J. Ray, a corporate turnaround specialist, FTX is moving as many digital assets as possible to a new cold wallet custodian, according to the filing. FTX suffered a hack on Nov. 11 that reportedly stole $685M worth of cryptocurrencies.
The next steps will be establishing the pool of creditors entitled to relief. In the filing, FTX said there are more than 100,000 creditors, primarily customers, in such cases, but the number could exceed 1M. The company also said that it will submit a list of the top 50 creditors by Friday, Nov. 18.
FTX collapsed last week after information emerged that its sister company, the hedge fund Alameda Research, was dependent on FTT, a token manufactured by FTX. Both firms suffered a crisis of confidence. On Nov. 6, FTX was hit with $5B in withdrawals, Sam Bankman-Fried, its CEO and co-founder, confirmed last week.
Ray replaced Bankman-Fried on Friday after questions arose about his leadership “and the handling of FTX’s complex array of assets and businesses under his direction,” the filing said.
In January, FTX was valued at $32B after a fundraising round; Sequoia Capital, Tiger Global, Temasek, and other whiteshoe institutions invested $2B in the exchange, according to Crunchbase.