Stunning Collapse Of Global Cryptocurrency Exchange FTX Leads To Bankruptcy – Fin Tech

Stunning Collapse Of Global Cryptocurrency Exchange FTX Leads To Bankruptcy – Fin Tech

In a sudden and stunning collapse, FTX, the world’s second
largest cryptocurrency exchange, run by 30-year-old Sam
Bankman-Fried along with more than 130 entities affiliated with
FTX, filed for Chapter 11 bankruptcy protection in Delaware on
Friday.1 Separately, the Securities Commission of
the Bahamas appointed a Bahamas-based provisional liquidator for
the controlling FTX entity and froze its assets along with those of
the related entities.2

In connection with the filing, John Jay Ray III, an experienced
restructuring professional who was involved in the Enron
liquidation, has taken over as FTX’s CEO following
Bankman-Fried’s recent resignation.3

To date, none of the debtor entities have filed schedules of
assets and liabilities or sought any substantive “first
day” relief from the bankruptcy court; however, in their
petitions, the FTX entities assert their assets and liabilities
each exceed $10 billion.4 That said, several
reports indicate that, as of the day prior to bankruptcy, FTX
purportedly had only $900 million in easy-to-sell assets as
compared with approximately $9 billion in liabilities.5

Adding to the company’s significant financial issues,
approximately $662 million of unauthorized withdrawals from company
accounts reportedly took place the day after the company was placed
into bankruptcy. Company officials as well as authorities are
investigating these transactions.6 Additionally, the Kraken
exchange reportedly has identified an account on its platform
associated with the “FTX hack” and is sharing relevant
information with law enforcement to assist with the

Significant additional FTX customer funds may be missing, and
multiple government agencies are reportedly investigating the
exchange, including the Bahamas Financial Crimes Investigation
Branch, U.S. Department of Justice (DOJ), U.S. Securities and
Exchange Commission (SEC) and U.S. Commodities Futures Trading

The bankruptcy filings will likely result in numerous
investigations and claims brought by the debtors and other estate
representatives as they try to recover funds for distribution to
creditors. Probable bankruptcy claims include alleged preference
and fraudulent transfer clawback claims, claims against insiders
and affiliated entities, and allegations pertaining to fraud or
other purported wrongdoing by directors, officers and other
professionals who worked for the debtors.

As part of the bankruptcy process overseen by the court, the
court will establish certain dates and deadlines of consequence. A
deadline for filing claims against the debtors will be established,
of which creditors and other interested parties should receive
notice. Many other actions will take place during the course of the
proceedings that may affect the rights of various parties,
including investors, employees, stakeholders, government entities
and other creditors (secured and unsecured).

Due to the potential impact of the bankruptcy, it is important
to seek the advice of knowledgeable counsel if you believe your
rights may be affected. The BakerHostetler Bankruptcy, White
Collar, Investigations, Securities Enforcement and Litigation and
Blockchain Technologies and Digital Assets teams are composed of
dozens of experienced individuals, including corporate bankruptcy
and cryptocurrency professionals and attorneys who have served in
the DOJ, the SEC and Congress, who are available to assist you
while the extent of the debtors’ financial collapse continues
to unfold. Please feel free to contact any of our experienced
professionals if you have questions about this alert.


1. Vicky Ge Huang, “Bankrupt Crypto Lender
Celsius Network Says It Lent Alameda Research $13 Million,”
The Wall Street Journal (Nov. 11, 2022),

2. Dan Milmo, “FTX Assets Frozen by Bahamas
Regulator as Crypto Exchange Fights for Survival,” The
Guardian (Nov. 11, 2022),

3. Elizabeth Napolitano, “From Enron to FTX: Wall
Street Turnaround Titan John Jay Ray III Takes Reins from FTX CEO
Sam Bankman-Fried,” CoinDesk (Nov. 11, 2022),

4. Jasper Ward, FTX Collapse Being Scrutinized by
Bahamas Authorities
, Reuters (Nov. 13, 2022),

6. Sunil Jagtiani and Bloomberg, “Sam
Bankman-Fried interviewed by Bahamian police and regulators a day
after declaring bankruptcy, source says,” Fortune (Nov. 12,

7. Emily Nicolle and Bloomberg, “A hacker behind
unauthorized FTX crypto withdrawals has been identified, says rival
exchange Kraken,” Fortune (Nov. 12, 2022),

8. Angus Berwick, “Exclusive: At least $1 billion
of client funds missing at failed crypto firm FTX,” Reuters
(Nov. 13, 2022),;
Jasper Ward, “FTX collapse being scrutinized by Bahamas
authorities,” Reuters (Nov. 13, 2022),

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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