A “significant amount” of assets have been stolen from FTX, reducing the likelihood of users getting their money back
Lawyers for FTX Trading announced on Tuesday that a “significant amount” of assets had been stolen from accounts on the collapsed cryptocurrency exchange, reducing the chances of millions of users getting their money back.
The admission came Tuesday during FTX’s first court appearance since the company filed for bankruptcy. Such hearings usually take place days after a filing, but this was delayed because FTX’s collapse was sudden and management kept little or no records.
“This company was run by inexperienced, inept and potentially personally vulnerable individuals,” said James Bromley, a partner at Sullivan & Cromwell, the law firm hired by FTX’s debtors to guide the company through bankruptcy. “It is one of the most abrupt and difficult corporate failures in American corporate history.”
FTX, on the verge of billions of dollars, filed for bankruptcy protection after the exchange experienced the crypto equivalent of a bank run. The company estimates that there are more than 100,000 lawsuits filed against the company to date, and that number is likely to rise to over 1 million once the case is settled.
Crypto crisis unfolds after FTX files for bankruptcy 04:44
FTX was once the darling of the crypto world, raising nearly $2 billion in venture capital in three years. The company crashed in spectacular fashion this month, declaring Chapter 11 bankruptcy and sending shockwaves through the crypto industry. Former CEO Sam Bankman-Fried resigned from the company and is now under investigation in the US and abroad for possible securities violations.
Court documents filed earlier this month show detailed financial statements, some of which show FTX had $1.3 billion in assets and $102 million in customers on the day the company filed for bankruptcy owed. According to court documents, FTX owes its creditors at least $3.1 billion.
In the days after FTX collapsed, hundreds of millions of dollars in cryptocurrencies were moved from FTX accounts to other wallets. While there have been some reports that some of these funds may have been seized by the government of the Bahamas – where FTX is headquartered – as part of their own investigation, the bulk of these cryptocurrencies were being moved through various wallets into what appears to be the crypto equivalent to be money laundering.
Some experts believe that FTX users will not get their funds back anytime soon – if ever.
“We understand the concern and outrage and are working day and night to bring order to the disorder,” Bromley said.
FTX’s bankruptcy has attracted not only crypto investors but also significant interest. The company had major sports sponsorships involving Formula One racing and Major League Baseball. FTX had the naming rights to a sports arena in Miami, and several celebrities were either invested in FTX or had sponsorship deals with the company.
The case of FTX becomes the third crypto company to file for bankruptcy protection this year, after Voyager Digital and Celsius Network.