FTX was run like a “personal fiefdom” of former leader Sam Bankman-Fried, and a substantial amount of its assets have gone missing, a lawyer for the company said in a Delaware bankruptcy court on Tuesday.
“What we have here is a worldwide, international organization, but which was run as a personal fiefdom of Sam Bankman-Fried,” said James Bromley, counsel to FTX’s new management, according to a report in the Wall Street Journal.
Bromley said that the company was controlled by “inexperienced and unsophisticated individuals,” including some who were “compromised.”
“A substantial amount of [FTX’s] assets have either been stolen or are missing,” Bromley said, according to media reports.
FTX has more than 100,000 creditors lining up in court to try to recoup funds. The bankrupt collection of crypto enterprises, including the FTX exchange and proprietary trading firm Alameda Research, owes its top 50 creditors nearly $3.1 billion, according to court filings.
Prolonged court battles are likely just starting, both in Delaware and in the Bahamas, where FTX is based. John Ray III, a lawyer with extensive restructuring experience, who managed the liquidation of Enron, has been appointed CEO of FTX and is now investigating the collapse and how to dole out remaining assets.
“What matters is doing the best I can. And doing everything I can for FTX’s customers,” Bankman-Fried said on Twitter on Nov. 16, in his latest post.
The demise of FTX is causing contagion throughout the crypto world and has pushed down prices for
and other tokens sharply. Bitcoin was around $16,100 on Tuesday, down from around $21,000 before FTX fell apart. The global crypto market has lost more than $200 billion in value since FTX imploded, falling to around $800 billion.
Investors appear to be betting on more declines. According to 21Shares Research, 75% of last week’s $44 million of inflows into crypto were invested in short products, designed to profit from falling prices. The flows paint “a vivid picture of the negative market sentiment on the back of the collapse of FTX and the repercussions that followed,” 21Shares said in a research note on Tuesday.
Stresses are being felt beyond tokens, including at Genesis, an institutional lending and trading firm that has faced a liquidity crunch and halted customer withdrawals.
Wall Street is also growing increasingly bearish on
(ticker: COIN), the largest publicly traded crypto exchange. Needham analyst John Todaro cut his target on the stock from $89 to $73 on Tuesday, citing contagion from FTX.
“Coinbase has little direct exposure to FTX,” he wrote, “but we believe the number of negative near-term catalysts for the space outweigh the positives,” he wrote. Those favorable factors include market share gains from FTX and increased activity in the USDC stablecoin, which Coinbase backs.
Todaro adds that concerns around centralized exchanges have led to large withdrawals from Gemini, Kraken, and other trading venues. More than $1 billion in user funds were withdrawn from Gemini and Kraken over the past week, according to crypto analytics firms, he noted.
Shares of the embattled exchange were up 3.9% to $42.84 in trading Tuesday afternoon.
The stresses have also hit the
Grayscale Bitcoin Trust
(GBTC), the largest publicly traded Bitcoin fund with more than $10 billion in assets. GBTC was rallying Tuesday, up 6.4% to around $8.80, but it remains around 40% below its net asset value of $14.43 in Bitcoin holdings.
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