The bankruptcy lawyers are stepping up their rhetoric, with one telling a Delaware court that 'some or all' of FTX's top executives were "compromised individuals."
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A bankruptcy lawyer for FTX's new management told a Delaware federal bankruptcy court that the second-largest exchange in the world was run as the "personal fiefdom of Sam Bankman-Fried."
CoinDesk reported that in a Nov. 22 hearing, James Bromley of Sullivan and Cromwell called the case "unprecedented," saying that it was "one of the most abrupt and difficult collapses in the history of corporate America."
Echoing FTX's new CEO, Enron-restructuring veteran John Ray III, Bromley told the judge that the exchange had "a lack of corporate controls that none of us in the profession … have ever seen."
Ray had noted in an earlier filing that this wasn't simple sloppiness and unsophistication but actual intent, pointing to software that allegedly hid some financial transactions — specifically the use of FTX clients funds to try to bail out Bankman-Fried's trading firm Alameda Research after bad market bets — and automatically deleted others.
With making any actual allegations, Bromley also went farther towards accusing founder and ex-CEO Bankman-Fried and his top lieutenants of actual misconduct than any restructuring team has before.
While calling top management of FTX and its 100-plus sister companies "a small group of inexperienced and unsophisticated individuals," Bromley said "unfortunately, the evidence seems to indicate that some or all of them are also compromised individuals," CoinDesk reported. "A substantial amount of [FTX's] assets have either been stolen or are missing."
That would include the $$447 million that was stolen by what security experts have suggested was a corporate insider (although not necessarily one at the top of the company.)
Those funds have been bouncing around the DeFi projects being converted from one cryptocurrency to another as the thief attempts to make them clean enough to off-ramp as much of the stolen funds into cash as possible.
As for FTX's coffers, documents filed on Monday with the court say the restructuring team more than doubled the amount of cash it has found to $1.2 billion — still well below the $3.1 billion owed to just the expansive FTX Group's 50 largest creditors.
In one piece of good news for the restructuring team, The Bahamas has agreed to move a bankruptcy case authorities filed in New York for one particular part of the Bankman-Fried empire to Delaware.
The Securities Commission of The Bahamas seized tens if not hundreds of millions of dollars from the accounts of FTX Digital Markets after the U.S. bankruptcy court froze the entire conglomerate's assets.
