FTX Bankruptcy Trustees Can’t Find Firm’s Cryptocurrencies

The FTX scandal is growing by the hour by leaps and bounds, and a new controversy has erupted within the company. Bankruptcy advisers have still not been able to find most of the cryptocurrencies that are part of the company’s balance sheet. And the same goes for money in bank accounts.

This was reported by the lawyers in charge of the bankruptcy, who are now in a legal dispute with Sam Bankman-Fried over the jurisdiction of the proceeding. It is that the former CEO of the company wants the reorganization to take place in the Bahamas, where the firm is based, and not in the United States.

This has prompted FTX, now under the control of John J. Ray III, a restructuring attorney, to file a request with a Delaware court for all cases involving the exchange’s bankruptcy to be consolidated under one single court.

The application not only accuses Bankman-Fried of undermining bankruptcy proceedings that he himself initiated. It also includes harsh criticism from FTX’s new CEO, who is saddled with his interventions in some of the biggest bankruptcies in corporate history, including Enron’s.

“I have more than 40 years of legal and restructuring experience. I have been a restructuring director or chief executive officer in several of the largest corporate bankruptcies in history. […] Never in my career have I seen such a complete failure of the corporate controls and as complete an absence of reliable financial information as here, from compromised systems integrity and flawed regulatory oversight abroad, to the concentration of control in the hands of a very small group of inexperienced, unsophisticated people and potentially compromised, this situation is unprecedented”.

John J. Ray III, the new CEO of FTX, in charge of the bankruptcy process.

Where are the FTX funds?

The court filing exposes that bankruptcy trustees are having trouble finding the cryptocurrencies and the rest of the FTX money. So far they have only recovered the equivalent of 740 million dollars in crypto assets that were in “cold wallets”; that is, in physical devices that keep the passwords to access the funds protected, keeping them out of any contact with the web.

Cryptocurrency crack

Regarding fiduciary money, they have been able to access about 560 million dollars in bank accounts belonging to entities of the FTX Group. However, advisers still don’t know how much the company had at the time it filed for bankruptcy.

In this sense, John J. Ray III has denounced that FTX operated without any type of centralized control over its finances. It has not yet been possible to identify all the bank accounts that belonged to the companies of Sam Bankman-Fried, nor who were authorized to make withdrawals. Therefore, a request has been sent to all financial institutions to freeze withdrawals and reject any order that may come from the young entrepreneur.

Uncontrolled spending in FTX

But the story does not end there. Those in charge of the bankruptcy of the cryptocurrency exchange indicate that corporate funds were used to, for example, buy houses for its employees and managers. However, there are no formal records of the properties, which appear in the name of the subjects in question, and not of the company.

It is also mentioned that the company’s current expenses were made under no type of control. That the purchase requests of the workers were made through a messaging app, and that, almost always, they were approved with emojis.

And to all this we must add that Alameda Research, a sister company of FTX, lent $1 billion to Sam Bankman-Fried, its own owner. Although he was not the only one who benefited from this situation, since Nishad Singh, co-founder of the firm, received a loan for more than $500 million.

Lawrence Wong vows to improve the process, after FTX collapse!

Meanwhile, FTX users are still waiting for news to try to recover their funds. It is estimated that the cryptocurrency exchange would have more than 1 million creditors, including clients and investors.