FTX lawyer calls this case 'a different sort of animal' in first bankruptcy hearing

Lawyers for collapsed crypto speech FTX said connected Tuesday, successful the company's archetypal bankruptcy hearing, that regulators from the Bahamas, wherever FTX was headquartered, person agreed to consolidate proceedings successful Delaware.

FTX's lawyers, who were brought successful by caller enactment to grip restructuring, filed an exigency question past week to unafraid the determination to the U.S. The proceeding connected Tuesday was the archetypal measurement successful the solution of the largest cryptocurrency bankruptcy connected record.

"What we are dealing with is simply a antithetic benignant of animal," said FTX counsel James Bromley. "Unfortunately, the FTX debtors were not peculiarly good run, and that is an understatement."

Regarding FTX's founder, this was an enactment that was "effectively tally arsenic a idiosyncratic fiefdom of Sam Bankman-Fried," an FTX lawyer told the court.

FTX lawyers confirmed earlier reports that the Southern District of New York's Cyber Crimes portion has begun an probe into the matter. FTX lawyers person besides made notation to cyberattacks, suggesting determination were aggregate attacks beyond the $477 cardinal hack that occurred soon aft the institution entered bankruptcy connected Nov. 11. In that attack, hackers extracted ether retired of FTX wallets.

The cardinal situation for the caller squad is "working to bring bid to disorder," Bromley told the court. After introducing his chap counsel, Bromley dove into what FTX has been doing to recognize the analyzable morass of information and finances near down by FTX and Bankman-Fried, who was replaced by restructuring adept John Ray III.

Bankman-Fried exercised a level of power implicit the concern that "none of america person ever seen," Bromley said, referring to the bankruptcy experts and attorneys the institution has employed arsenic portion of the restucturing process.

FTX had been valued by backstage investors astatine $32 cardinal earlier this year, and Bankman-Fried was making himself retired to beryllium an manufacture savior during the crypto winter.

"The FTX concern is the latest and the largest nonaccomplishment successful this space," Bromley said. "There was efficaciously a tally connected the bank, some with respect to the planetary speech [...] arsenic good arsenic the U.S. exchange. At the aforesaid clip that the tally connected the slope was occurring, determination was a enactment situation [...] The FTX companies were controlled by a precise tiny radical of people, led by Mr. Sam-Bankman-Fried. During the tally connected the bank, Mr. Fried's enactment frayed, and that led to resignations."

FTX has conscionable begun to instrumentality "standard" hazard and information absorption practices, helium said. As portion of the process, lawyers had earlier to o.k. astir $1 cardinal successful wage expenses for existing FTX employees.

The process is designed to get arsenic overmuch arsenic imaginable for creditors, Bromley said.

"It is indispensable that we archetypal maximize the worth of the assets we have, whether that means selling assets, selling businesses oregon restructuring businesses," helium said. "All of that is connected the table."

FTX customers had a planetary presence, but galore were based successful taxation havens. The largest geographic areas represented included:

1. Cayman Islands — 22% of registered customers.
2. U.S. Virgin Islands — 11% of registered customers.
3. China — 8% of registered customers.

"We volition beryllium earlier you rather rapidly with an effort to merchantability definite of the concern that we recognize [...] are self-sufficient and robust [with] involvement from others," Bromley added.

FTX lawyers said they've established 4 silos for the company's assets and assorted entities. They are:

• The WRS (West Realm Shires) silo, which controls and encompasses U.S. holdings.
• The Alameda silo, which includes Alameda Research, Bankman Fried's present defunct hedge fund.
• The task silo, which invested successful crypto companies and startups.
• The dot-com silo, which encompasses the planetary business, the bulk of FTX's deposits.

Bromley said the plus betterment and extortion efforts encompass not conscionable crypto assets and currency, but "information." The institution has besides brought connected autarkic directors for the archetypal clip ever.

"A important magnitude of assets person either been stolen oregon missing," Bromley said. "Additionally, "substantial funds look to person been transfered from different silos to Alameda."

A cardinal facet of the FTX situation is astir Alameda and the FTT token, a coin issued by FTX. Lawyers person walked done the past of FTX and affiliated companies, pointing astatine the instauration of the FTT token successful April 2019 and the instauration of the Alameda entities successful November 2017.

Investments were made successful the crypto and exertion task space, Bromley said, but astir $300 cardinal was besides spent connected existent property successful the Bahamas. That fig is higher than antecedently reported, and Bromley said astir of those purchases were location and abrogation properties for elder executives.

Employees person near the institution successful droves. As of October 2022, the main FTX genitor institution had 330 employees astir the world, with 127 successful the U.S. Including the Australian businesses and FTX Digital Markets which had 190 employees, the planetary headcount was 520.

The champion conjecture for the headcount now, according to FTX attorneys, is "around 260."

This is simply a processing story. Please cheque backmost for updates.