FTX's New Leadership Is in Touch With Regulators, May Have Over 1M Creditors, New Filings Say

FTX filed its first substantive look at the exchange's bankruptcy process days after declaring bank

AccessTimeIconNov 15, 2022 at 6:58 a.m. UTC
Updated Nov 15, 2022 at 4:35 p.m. UTC

FTX may have more than 1 million creditors, according to a court filing that finally began to explain the company's descent into bankruptcy.

The document, filed to the federal court database system PACER late Monday, provided the first true glimpse of the crypto exchange's last day prior to filing for bankruptcy and its first few days going through the process. FTX's new CEO, veteran insolvency overseer John J. Ray III, is working with legal, cybersecurity and forensic advisers on the company's myriad subsidiaries and their respective bankruptcy processes, the filing said.

FTX filed over 100 dockets for its various related companies, including Alameda Research, the quant trading shop that held a lot of FTT tokens, West Realm Shires, a business entity in the U.S. that operates as FTX in some jurisdictions, and Clifton Bay Investments.

As part of these dockets, FTX filed motions to jointly administer the overall umbrella group of entities rather than treat each as its own individual case. As part of this effort, FTX is also asking if, rather than create a list of the top 20 creditors for each individual company, it can instead create a top 50 list for the overall structure. Moreover, FTX believes it may have over 1 million creditors overall.

"As set forth in the Debtors' petitions, there are over one hundred thousand creditors in these Chapter 11 Cases. In fact, there could be more than one million creditors in these Chapter 11 Cases. As such, the Debtors submit that cause exists to modify that requirement such that the Debtors will file a consolidated list of their top 50 creditors," the filing said.

The exchange's operators are also asking the court to allow it to email the notice of bankruptcy to FTX's creditors, rather than serve them with notices at their homes.

FTX's customers primarily interacted with the exchange online, so their emails are already on file, the document said.

The filing touched on Friday's hack, which saw hundreds of millions of dollars worth of crypto flow out of FTX's wallets, and confirmed that FTX has been in touch with "dozens" of state and federal regulators worldwide, including the U.S. Attorney's Office, the Securities and Exchange Commission, the Commodity Futures Trading Commission and others.

FTX has also appointed new directors, including former District Judge Joseph Farnan at FTX Trading; Matthew Doheny at FTX Trading; Mitchell Sonkin at West Realm Shires Inc.; Matthew Rosenberg at Alameda Research and Rishi Jain at Clifton Bay Investments.

FTX filed for bankruptcy on Friday morning, saying it had between $10 and $50 billion in assets and liabilities and over 100,000 creditors. Monday's filing did not address the questions of what assets or liabilities the exchange can currently lay claim to, but said the new leadership team is working to "secure and marshal" its assets. This includes having multiple lawyers and experts to review FTX and its subsidiaries' books.

The filing also provided a glimpse of how FTX got to the point of filing its first substantive documents several days after first filing for bankruptcy, saying the bankruptcy was declared on an emergency basis.

"FTX faced a severe liquidity crisis that necessitated the filing of these cases on an emergency basis last Friday. Questions arose about Mr. Bankman-Fried's leadership and the handling of FTX's complex array of assets and businesses under his direction," the filing said.

Bankman-Fried stepped down from his role at 4:30 a.m. on the day FTX filed for bankruptcy (a time zone was not given, but presumably it was ET, the time zone in the the Bahamas, where Bankman-Fried resides.

Since stepping down, Bankman-Fried has continued tweeting various thoughts and statements, which should concern his lawyers, legal experts told CoinDesk.


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Nikhilesh De

Nikhilesh De is CoinDesk's managing editor for global policy and regulation. He owns marginal amounts of bitcoin and ether.