'Bankrupt' Crypto Exchange owes $3.1bn to its users
Users of the now-bankrupt Crypto Exchange FTX are fighting to get back 3.1bn in currencies 'stolen' by the company before its collapse
The once-bright future of Crypto currency had taken yet another hard knock last week when international online exchange FTX filed for bankruptcy. Worse, a class-action lawsuit is likely in the failed company's future as users calculate nearly $3.1bn of their currency is being held by the company. In their bancrupcy hearing last weekend, a representative of FTX claimed that the company owes $1.45bn alone to its top 10 creditors.
FTX was founded in 2019 by Sam Bankman-Fried and Gary Wang in Nassau, Bahamas and consisted of members with Alameda Research, a trading firm founded by Bankman-Fried and others in 2017 in Berkeley, California. Changpeng Zhao of Binance purchased a 20% stake in FTX for approximately $100 million, six months after. Perhaps the company's biggest move occurred in August of 2020, when they bought the popular Crypto-tracking app, Blockfolio for a reported $150million. FTX (short for Futures Exchange) had what appeared to be a bright future until October of 2022 when it was reported that they were selling unregistered securities, an allegation that could have landed its directors a 5-year federal prison term, if prosecuted. Shortly after, the Wall Street Journal reported that FTX was seeking emergency finance to save itself from bankruptcy, and entered negotiations with Binance in the hope they would consider a larger share of the company to offset their debts. FTX also entered discussions with Kraken, hoping for a last-+minute rescue-deal but failed to secure any funds. On 15 November, FTX sought to raise $10 billion in liquidity from its investors and other sources and creditors. Finally, FTX entered bancrupcy on November 17th with John Ray III taking over as CEO to liquidate the firm.
In court, Bankrupcy specialist, John Ray, stated:
Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here. From compromised systems integrity and faulty regulatory oversight abroad, to the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals, this situation is unprecedented
Major investors in the firm lost hundreds of millions in the bankrupcy hearing, including Sequoia Capital, who will have lost $214million. Other investors include celebrities Tom Brady and Gisele Bundchen, as well as Shaquille O’Neal, Stephen Curry, and Kevin O’Leary.
Users hope to get their assets back
little communication from FTX has been released to date. Their website shows a bright red banner at the top reading "FTX is currently unable to process withdrawals. We strongly advise against depositing. All onboarding of new clients has been suspended until further notice." whole on Twitter they announced:
(1/2) Exchanges should be aware that certain funds transferred from FTX Global and related debtors without authorization on 11/11/22 are being transferred to them through intermediate wallets.— FTX (@FTX_Official) November 20, 2022
(1/2) Exchanges should be aware that certain funds transferred from FTX Global and related debtors without authorization on 11/11/22 are being transferred to them through intermediate wallets. (2/2) Exchanges should take all measures to secure these funds to be returned to the bankruptcy estate.
Users of the platform have taken to Twitter with fears that their assets were "stolen" by the company before their bankrupcy.
While it is now unclear how or if users of the platform can secure their assets, legal professionals believe it is a matter of 'how' and 'when', not 'if'. An estimated $3.1bn im user assets are yet to be withdrawn. Arcvox is urging anyone with an FTX account to check their emails for regular updates and sign into their account for further instructions on how to retrieve their cryprocurrency or other assets.