FTX has had its first hearing in Delaware’s bankruptcy court since the cryptocurrency exchange FTX declared bankruptcy earlier this month after crypto news came to light that Alameda Research, an FTX-founded hedge fund, used the FTX-issued FTT token to leverage positions while not having the liquidity to back it. The cryptocurrency exchange now faces allegations of defrauding investors.
In the hearing, lawyers for FTX revealed that a “substantial amount” of assets were robbed from the accounts of the defunct cryptocurrency exchange, reducing the likelihood that its millions of investors will receive their money back.
Sam-Bankman Freid’s “Personal Feifdom”
James Bromley, a partner for the law firm hired to represent FTX stated, “This company was run by inexperienced, unsophisticated, and potentially personally compromised individuals.” When referring to Bankman-Fried, FTX’s old leadership, he added, “What we have here is a worldwide, international organization, but which was run as a personal fiefdom of Sam Bankman-Fried.”
Bromley further went on to say that “It is one of the most abrupt and difficult company collapses in the history of corporate America.” At the hearing, Bromley added that the bankruptcy proceedings “allowed everyone for the first time to see under the covers and recognize the emperor had no clothes.”
The exchange had disclosed an estimated $9 billion in liabilities and $1.24 billion in cash and cash equivalents as of Tuesday. According to FTX management, the indebted companies expect to have $459 million in cash on hand by the end of the week on December 23, after paying for ongoing expenses.
FTX Clients’ Identities To Be Revealed
During Tuesday’s hearing, a dispute arose over the identity of more than 1 million FTX customers whose funds are now entangled in the bankruptcy.
Judge Dorsey granted FTX a temporary order that sparked some debate, which was redacting the names and addresses on FTX’s client list. In most cases, all claims against a bankrupt company are made public under bankruptcy law. However, FTX’s lawyers argued that guarding the identities of FTX’s clients was necessary, at least temporarily, to prevent further thefts of FTX’s accounts.
Judge Dorsey eventually granted FTX’s request to keep the identifying names and addresses hidden from the public for the time being until the matter is heard again at a later date.
Redacting the names of crypto company investors and users remains an open question in U.S. Federal Bankruptcy courts, as the Celsius Network lost its appeal to keep creditor names private in the Southern District of New York in September.
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