TechFishNews on LinkedIn: FTX Sues SBF, Former Execs to Recover Over $1 Billion (2024)

I was reading this FT article (https://lnkd.in/devycait) stating how SBF was 'surprised' by seeing 8bn USD missing from FTX's balance-sheet. I suppose this is what happens when you keep 8 balance sheets (1 for the public, 1 for the regulator, 1 for your VC investors, the list goes on).The question that arose in my mind is how, after the FTX fiasco, is the crypto industry still steaming ahead without any guardrails protecting the small investors who usually constitute a big chunk of those affected when such companies go belly up? One hears about celebrities and sportspersons losing millions and billions, but nothing about the retail investors, say a family of 4 who might have mortgaged their house after hearing the insane amount of returns these companies usually promise (an example may be Celsius promising 18% returns). Maybe we should start thinking about these people as well while framing the regulations, shouldn't we?

17

FTX: Family Transactions?Bloomberg reports:"The managers of bankrupt crypto exchange FTX sued the parents of co-founder and former Chief Executive Officer Sam Bankman-Fried to “recover millions of dollars in fraudulently transferred and misappropriated funds.”Allan Joseph Bankman and Barbara Fried allegedly exploited their access and influence within FTX to “enrich themselves, directly and indirectly, by millions of dollars,” at the expense of the debtors and creditors, the company said in a Monday court filing."The allegations are damning:"Despite “knowing or blatantly ignoring” that FTX was insolvent or on the brink of insolvency, Bankman and Fried discussed with Bankman-Fried the transfer to them of a $10 million cash gift and a $16.4 million luxury property in the Bahamas, the filing said...Bankman seemed keenly aware of the company’s risk of downfall, according to the filing. He started conversations about how to ensure that assets — including primary residences — were safe from bankruptcy a year before FTX collapsed into Chapter 11."A CoinDesk report (https://lnkd.in/gdDHj7PR) is even more damning:"“Just wait until mom hears about this.”For any kid, this might not be an appealing set of words for a father to utter.Some version of that warning, though, allegedly played a behind-the-scenes role in how Sam Bankman-Fried’s once-$32 billion crypto giant was run, according to a new court filing in the company’s bankrupty case."Yikes, talk about fraught relations with your dad! Their lawyers claim:""This is a dangerous attempt to intimidate Joe and Barbara and undermine the jury process just days before their child's trial begins. These claims are completely false. [John J. Ray III, FTX’s bankruptcy-era CEO] and his massive team of lawyers, who are collectively running up countless millions of dollars in fees while returning relatively little to FTX clients, know better.""It is true that, so far, Ray has spent much and reclaimed little unless you count Sam coins and hard to sell (and still not sold) crypto. But surely the emails are not made up?Stanford University has promised to return all donations from FTX: https://lnkd.in/gGiFsi3D. But not Bankman or Fried (https://lnkd.in/guFE9yDx):"Just before the bankruptcy filing, Bankman urged regulators and creditors to avoid rushing to judgment... They’d give the money back, he explained, and then everyone would be able to move on with their lives.Bankman and Fried didn’t, however, try to return the cash gift. They haven’t explained why, but Ray’s lawsuit, filed on behalf of FTX’s creditors, suggests a reason: They need the money to fund their son’s criminal defense."And perhaps their own. https://lnkd.in/gqDX-N2d

116

40 Comments

Crypto delusions revealed in FTX clawback suit.Bloomberg reports:"Bankrupt FTX Trading Ltd.’s latest lawsuit against co-founder Sam Bankman-Fried and his former top executives revealed new details about the allegations of massive fraud at the fallen crypto conglomerate."Perhaps the most eye-catching new revelation?"FTX Foundation — FTX’s nonprofit arm — pursued projects that were “frequently misguided and sometimes dystopian.” It alleged that a memo exchanged between a foundation officer and Bankman-Fried’s brother, Gabriel Bankman-Fried, laid out a plan to purchase the tiny island nation of Nauru and build a bunker there.In the event that half or more of the global population perished, the island would then be used to ensure the survival of members of the effective altruism movement — a philosophy that Sam Bankman-Fried publicly ascribed to. The memo noted that “probably there are other things it’s useful to do with a sovereign country, too,” according to the complaint."🤔 Effective altruism is looking increasingly more loony than altruistic. Apart from the nuttiness, there are the expected disturbing instances of lapses of governance. For example:"Ellison gave herself a $22.5 million bonus around the time in March 2022 when she estimated a more than $10 billion cash shortfall at FTX.com, according to the lawsuit. Through a series of convoluted transfers, Ellison allegedly deposited the money from Alameda into her FTX account, with $10 million of the funds making their way to her personal bank account.She used the money for a $10 million investment in an artificial intelligence company in her own name."Wow, that's some excellent governance. Oops, I found a $10 billion shortfall in my company, what should I do? Well, reward myself with a $22.5 million bonus, of course!Or:"On one occasion, Nishad Singh, FTX’s former director of engineering, allegedly received a fraudulent transfer of about $477 million worth of FTX common shares without having to pay anything in return. Sam Bankman-Fried allegedly granted himself rights to more than $6 million in equity without paying anything in return in February 2020. Ellison also allegedly received 2.75 million valuable FTX call options without providing anything in return between December 2020 and March 2021."Methinks EA is more effective avarice than effective altruism. https://lnkd.in/ggbhPyr5

55

12 Comments

Remember the plan by 3AC founders to set up an exchange called GTX to trade claims in FTX? Maybe it ain't such a bad name after all? After all, gamblers gotta gamble.Bloomberg reports:"The administrators of bankrupt crypto exchange FTX criticized traders and market makers on a key creditor panel, accusing them of seeking control of assets regardless of the impact on other stakeholders.The dispute flared in the wake of last month’s draft reorganization plan from FTX’s new management team under Chief Restructuring Officer John J. Ray III. The official committee of unsecured creditors alleged a lack of consultation and said FTX is missing out on better returns from its vast cash and token holdings.In a rebuttal filed on Wednesday, lawyers for FTX’s administrators said there had been extensive discussions between representatives of both sides and added that the creditor panel’s objections are “heavy with the weight of an unstated agenda specific to the individual members of the committee.”"What might this agenda be?"The creditor panel’s stance “foreshadows an inclination to pursue an unrepresentative plan that vests control of the debtors’ billions of dollars in liquid assets in the hands of unrestricted crypto traders and market makers,” the lawyers for FTX wrote in the filing."More specifically:"[I]t had urged the debtors to adopt a “proper staking, hedging and monetization process” for FTX’s coin holdings. Staking involves earning rewards by pledging tokens to help run a blockchain.FTX’s advisers retorted in their filing that the members of the creditor panel had “resisted asset sales which would provide liquidity to the estate at a substantial premium to par and have delayed prudent token monetization in favor of going ‘long’ on large crypto holdings.”"Cos gamblers gotta gamble. GTX indeed. Well, maybe the T is redundant.

13

2 Comments

S&C Caught in the Crypto Crossfire: FTX Creditors Cry FoulFTX's creditors are throwing down the legal gauntlet at Sullivan & Cromwell (S&C), a law firm that's been in the mix with the now-bankrupt crypto exchange. They're not just pointing fingers; they're slamming down a lawsuit claiming S&C was knee-deep in the FTX mess, helping to facilitate a multi-billion dollar fraud. These creditors argue that S&C turned a blind eye to some pretty shady dealings because they were making bank off of FTX's schemes.S&C has been the brains behind the bankruptcy proceedings but has a history with FTX that goes way back, including some hefty paychecks for advising on big deals before the crash. There's a bit of a plot twist with Ryne Miller, a former S&C partner who jumped ship to FTX and apparently kept the business flowing back to his old pals at S&C. Amidst all this, FTX's ex-CEO, Sam Bankman-Fried, was practically part of the furniture at S&C's New York office, showing just how cozy they all were.S&C, for their part, insists they're clean, claiming their relationship with FTX was all above board and just business. But with accusations flying of conflicts of interest and calls for an independent investigation, this legal drama's just heating up.

1

Following a hearing on June 15, 2023, the court overseeing the Genesis bankruptcy proceedings will decide whether to let FTX pursue claims against bankrupt crypto lender Genesis Global Capital (“GGC”). FTX is seeking to clawback nearly $4 billion from GGC. Before the FTX bankruptcy commenced, GGC had over $8 billion in outstanding loans to FTX Debtor Alameda Research Ltd.; however, unlike FTX’s creditors and customers, GGC was largely repaid. FTX believes that $4 billion of the nearly $8 billion received by GGC are avoidable transfers that occurred within 90 days of FTX’s bankruptcy filing. These funds are said to be comprised of FTX customer funds and direct withdrawals by GGC and its subsidiaries prior to FTX’s bankruptcy filing.BAST AMRON LLP attorney Hunter Grasso weighs in on the recent article by WIRED. https://lnkd.in/e22m7xjr.#insolvencylitigators#insolvencyandbankruptcy#insolvencyandrestructuring

5

📉 FTX's Bankruptcy Saga: A Costly Affair at $53K per HourFTX's bankruptcy proceedings are costing the exchange a staggering $53,000 every hour in legal and advisory fees.Between August and October, the total bill amounted to over $118 million, averaging $1.3 million per day.The largest bill was from Alvarez and Marshall, amounting to $35.8 million for three months.🔗 Read the Full Report: https://lnkd.in/gWkkaiKx💬 Discussion: What are the implications of these high costs for FTX's creditors and the broader crypto industry?#FTX #Bankruptcy #CryptoExchange #LegalFees #FinancialNews

3

"FTX and FTX Digital Markets have agreed to pool their assets and harmonize their approach to valuing customer claims to ensure equal treatment for customers in either country's insolvency process. The settlement will allow most customers of FTX.com's international crypto exchange to choose whether toseek repaymentfrom either the U.S. bankruptcy or the Bahamian liquidation, according to FTX."https://lnkd.in/eDPMTpdE

1

It's disheartening to read about the alleged fraudulent activities and lapses in governance at FTX Trading Ltd. The revelations regarding the FTX Foundation's misguided pursuits and their plan to purchase Nauru for a dystopian bunker are truly eye-opening. It's unfortunate that effective altruism, a philosophy that aims to do good, seems to have taken a bizarre turn.Additionally, the instances of self-reward and fraudulent transfers within the company raise serious concerns about its leadership. It's astonishing how individuals can justify rewarding themselves with multi-million dollar bonuses amidst a significant cash shortfall. These actions certainly don't reflect good governance or ethical behavior.It's essential for companies in the crypto industry, or any industry for that matter, to uphold transparency, integrity, and accountability. As investors and users of these platforms, we rely on them to act responsibly and prioritize the best interests of their customers.

In the cryptoverse, hope springs eternal and fools don't learn.Bloomberg reports:"FTX Trading Ltd. is considering proposals from three bidders to restart trading on what had been one of the world’s biggest crypto exchanges before the company sank into bankruptcy amid fraud allegations."Yup, you read that right. Not one, not two, but three bidders want to restart FTX! How this will be profitable in a new, more hostile regulatory environment, is a mystery, especially given how almost all surviving exchanges seem to be cost cutting at every opportunity. Even if it were profitable to run a crypto exchange today, how will it be advantageous to carry the baggage of scandal ridden FTX is yet another mystery."The company will make a decision about how to proceed by mid-December, the company’s investment banker, Kevin M. Cofsky of Perella Weinberg Partners, said Tuesday during a court hearing in Wilmington, Delaware. FTX is negotiating details of potentially binding offers with investors, Cofsky said."Some options?"Options include selling the entire exchange, including a valuable list of more than 9 million customers, or bringing in a partner to help restart the exchange, Cofsky told US Bankruptcy Judge John Dorsey."About the only valuable bit of the exchange, if you ask me, is that list of 9 million customers. Judging from what some of them told CNBC in a recent documentary (https://lnkd.in/gpvwj4gg), this list must be worth more than gold. Where else will one find such a pool of serial fools willing to fall for the same trick over and over again? This list is priceless.https://lnkd.in/dgpXjP9p

27

7 Comments