FTX to Subpoena SBF and Parents, Other Insiders
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FTX to Subpoena SBF and Parents, Other Insiders

1 month ago

The bankrupt exchange's management asked for the ruling after saying information about the finances of Sam Bankman-Fried and other former top FTX executives has not been provided.

FTX to Subpoena SBF and Parents, Other Insiders


FTX's new managers have received permission to subpoena financial information from former CEO Sam Bankman-Fried and several family members, as well as other former executives of the bankrupt cryptocurrency exchange.

Both the FTX Group, as the collection of companies is now called, and the Committee of Unsecured Creditors complained last month that few if any core insiders have been willing to meet with the bankruptcy lawyers to turn over details of their assets and any funds that they or others may have received from the company.

These are needed immediately, the court was told, in order to "supplement the Debtors' limited and untrustworthy financial records, to locate and secure estate assets, and to position themselves to recover misappropriated and stolen assets."

Shortly after taking up the post of CEO, restructuring expert John Ray III told the court "never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information," even at Enron.

Among the wide variety of documents sought are details of the eight insiders' personal assets and any assets they ever received from the company, as well as communications about their and the firm's assets.

Being Unhelpful

While some insiders are cooperating, others are not even agreeing to set up meetings, FTX said.

The group to be subpoenaed includes Bankman-Fried and his mother, father and brother — all of whom were close advisors — as well as former FTX group CTO Gary Wang and Alameda Research CEO Caroline Ellison. Both have pleaded guilty and cut deals with federal prosecutors to testify against their former boss in his upcoming criminal trial.

But, the subpoena request claimed, both had said they would not turn over any information.

It also singled out two others: One is FTX group cofounder Nishad Singh, who was reported to be working on cutting a plea deal with prosecutors as well. The other is Constance Wang, who was COO of the main exchange as well as co-CEO of its subsidiary in The Bahamas, FTX Digital Markets.

The original motion requesting the subpoenas made much of Sam Bankman-Fried's repeated declaration in interviews and on social media that "he is 'looking to be helpful anywhere [he] can with any of the global entities that would want [his] help,' and that he wants to be 'helpful where [he] can to regulators [and] administrators . . . who are working to help FTX's customers [to] bring a lot more value to those customers.'" It said:

"Despite these statements, Mr. Samuel Bankman-Fried has not responded to or complied with the Requests on a voluntary basis."

Bankruptcy Costs Spiraling

The current FTX management and creditors committee have opposed the appointment of an independent examiner to investigate the firm's collapse and alleged theft of $10 billion in customer funds as too expensive, as cost estimates ran as high as $100 million.

But, the costs of the current bankruptcy attorneys and managers, including John Ray III, are also under scrutiny. Initial bills revealed in court filings have already topped $20 million.

That's likely to increase after the judge in another related bankruptcy case, the collapse of crypto lender Voyager Digital, agreed to appoint a fee examiner to look at the spiraling costs.

That request was made by Voyager's creditors and the U.S. Trustee's office, an arm of the DoJ tasked with ensuring the full story of major bankruptcies is investigated and revealed publically.

Whether the U.S. Trustee attorney sparring with FTX will ask for the same limited examiner — perhaps as a foot in the door — remains to be seen.

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