The collapsed crypto exchange FTX and its related companies could owe money to more than a million people and organizations, according to documents filed with bankruptcy court on Monday. crisis.
In FTX’s first substantive lawsuit since it filed for bankruptcy Friday, the company’s lawyers gave few details about the state of affairs. But they said FTX was in contact with “dozens” of federal, state and international regulators and law enforcement, including the Securities and Exchange Commission, the Justice Department and the Commodity Futures Trading Commission.
Those investigations began last week after a run on deposits left FTX with an $8 billion deficit. In a stunning corporate drama, a company once considered one of the safest and most reliable corners of the freewheeling crypto industry collapsed practically overnight.
The company’s founder and CEO, Sam Bankman-Fried, announced his resignation when bankruptcy papers were filed Friday in federal bankruptcy court in Delaware. Mr Bankman-Fried had agreed to step aside at around 4:30am that day, the new filing said, after consulting with his own legal team.
He turned control over to John J. Ray III, a veteran of corporate crises. Since then, Mr. Ray and other FTX officials have been working “around the clock” to get the company in order, according to the bankruptcy filing. The company halted trading and was responding to a “cyber attack” reported late Friday, the filing said.
Until last week, Mr. Bankman-Fried was considered a leader of the crypto industry. He was a frequent presence in the halls of Congress trying to shape legislation regulating the new and largely unregulated technology. He was also a prominent donor, contributing more than $5 million to President Biden’s election efforts.
But his downfall came quickly. A run on deposits last week prevented FTX from meeting customer demand. Mr. Bankman-Fried struck a deal to sell his company to his biggest rival, Binance, a humble capitulation after a protracted online skirmish between Mr. Bankman-Fried and Binance’s CEO, Changpeng Zhao. But a review of FTX’s finances revealed numerous issues and Binance pulled out of the deal.
Mr. Bankman-Fried hurried to arrange new financing, but unable to find a solution, he filed for bankruptcy. Now the SEC and the Justice Department are investigating his management of FTX. They are focused on whether FTX improperly transferred client funds to Alameda Research, a trading firm that Mr. Bankman-Fried also founded.
Alameda is one of more than 100 related corporate entities that joined FTX in its bankruptcy filing Friday.