• Crypto exchange FTX’s day one bankruptcy hearing comes to an end, raising questions about customer privacy.
  • Sam Bankman-Fried’s letter recounts the events leading up to the collapse and apologizes to employees.
  • The ex-CEO of the bankrupt exchange also mentions “billions of dollars of genuine interest” could “make customers whole.”

The crypto markets continue to remain volatile due to the major developments since the first week of November. Some critical events over the last three weeks include FTX’s implosion, an exploiter who stole $600 million worth of digital assets from the bankrupt exchange and the trouble plaguing the crypto lender Genesis and its parent company Digital Currency Group (DCG).

Read more: Deconstructing recent Bitcoin price crash as bankrupt FTX exchange’s assets go ‘missing’

FTX exchange’s day one bankruptcy hearing takeaways

The collapsed crypto exchange FTX had its bankruptcy hearing on November 23 in Delaware. The new leadership that’s handling the restructuring is John J. Ray III, who replaced Sam Bankman-Fried (SBF) as the new CEO of the exchange.

The new FTX executive was also the CEO of Enron and oversaw its liquidation. Ray III has brought in James Bromley, a partner at Sullivan & Cromwell LLP, to represent FTX in the bankruptcy hearing. 

The hearing is significant because billions of dollars of customer funds are stuck, and the decision regarding the bankruptcy will set the tone for the cryptocurrency ecosystem’s future.

The attorney for the exchange stated that “FTX was in the control of a small group of inexperienced and unsophisticated individuals.” He adds that some of these individuals are “compromised.”

James Bromley goes on to state that the fall of FTX is “probably one of the most abrupt and difficult collapses in the history of corporate America.”

Judge John Dorsey of the Bankruptcy Court for the District of Delaware noted that apart from money, customer privacy will also be under scrutiny. Dorsey further added,

There certainly is a pull and tug here between the right to privacy and the right to everybody involved.

Sam Bankman Fried’s letter reveals interesting details

While the bankruptcy hearing concluded, Sam Bankman-Fried continued to air his thoughts on Twitter. The latest development is that SBF sent a letter addressing FTX’s employees because he might no longer have access to the company’s communication channels.

In his letter, SBF recounts the events leading up to signing the chapter 11 bankruptcy. He mentions a few more things that he should have done. Here are key takeaways.

  • I froze up in the face of pressure and leaks and the Binance LOI and said nothing. 
  • Hyper-correlated crypto crashes led to FTX’s $60 billion collateral shrinking to $9 billion while liabilities grew from $2 billion to $8 billion.
  • The loans and secondary sales were generally used to reinvest in the business - including buying out Binance - and not for large amounts of personal consumption.
  • SBF wishes 
    • he had put more controls around margin management
    • he was skeptical of large margin positions
    • he continued monitoring the total deliverable assets, total customer positions and other core risk metrics
    • he had stress-tested scenarios involving hyper-correlated crashes and simultaneous runs on the bank

Perhaps, the most interesting takeaway from this letter is the ex-CEO’s comments on raising funds to prevent bankruptcy. He mentioned,

We likely could have raised significant funding, potential interest in billions of dollars of funding came in roughly eight minutes after I signed the Chapter 11 docs. 

Between the billions of dollars of collateral the company still held and the potential interest, Sam Bankman-Fried believes that he could have “returned large value to customers and saved business.” 

He ends his letter with “maybe there still is a chance to save the company” and make “customers whole,” referring to the “billions of dollars of genuine interest.”

 


Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended content


Recommended Content

Editors’ Picks

Is Altcoin Season here as Bitcoin reaches a new all-time high?

Is Altcoin Season here as Bitcoin reaches a new all-time high?

Bitcoin reaches a new all-time high of $98,384 on Thursday, with altcoins following the suit. Reports highlight that the recent surge in altcoins was fueled by the victory of crypto-friendly candidate Donal Trump in the US presidential election.

More Altcoin News
Shanghai court confirms legal recognition of crypto ownership

Shanghai court confirms legal recognition of crypto ownership

A Shanghai court has confirmed that owning digital assets, including Bitcoin, is legal under Chinese law. Judge Sun Jie of the Shanghai Songjiang People’s Court shared this opinion through the WeChat account of the Shanghai High People’s Court.

More Cryptocurrencies News
BTC hits an all-time high above $97,850, inches away from the $100K mark

BTC hits an all-time high above $97,850, inches away from the $100K mark

Bitcoin hit a new all-time high of $97,852 on Thursday, and the technical outlook suggests a possible continuation of the rally to $100,000. BTC futures have surged past the $100,000 price mark on Deribit, and Lookonchain data shows whales are accumulating.

More Bitcoin News
Shiba Inu holders withdraw 1.67 trillion SHIB tokens from exchange

Shiba Inu holders withdraw 1.67 trillion SHIB tokens from exchange

Shiba Inu trades slightly higher, around $0.000024, on Thursday after declining more than 5% the previous week. SHIB’s on-chain metrics project a bullish outlook as holders accumulate recent dips, and dormant wallets are on the move, all pointing to a recovery in the cards.

More Shiba Inu News
Bitcoin: New high of $100K or correction to $78K?

Bitcoin: New high of $100K or correction to $78K?

Bitcoin surged to a new all-time high of $93,265 in the first half of the week, followed by a slight decline in the latter half. Reports highlight that Bitcoin’s current level is still not overvalued and could target levels above $100,000 in the coming weeks.

Read full analysis
Best Forex Brokers with Low Spreads

Best Forex Brokers with Low Spreads

VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.

Read More

BTC

ETH

XRP