The full extent of FTX’s financial disarray is becoming clearer as the failed crypto exchange’s new management combs for cash as part of the bankruptcy process.
In the company’s first Chapter 11 hearing in Delaware Tuesday, restructuring attorney James Bromley said that a “substantial amount” of assets have been stolen or are missing.
FTX, formerly one of the most trusted brands in crypto, filed for bankruptcy earlier this month. Its CEO and founder, Sam Bankman-Fried, resigned, marking the implosion of his multi-billion-dollar crypto empire.
The swift downfall of FTX and Bankman-Fried has shaken investors’ confidence in the industry and sparked liquidity crises at other crypto firms.
Bromley called FTX’s failure “one of the most abrupt and difficult corporate collapses in the history of Corporate America.” He described the network of FTX entities as an international organization “run effectively as a personal fiefdom of Sam Bankman-Fried.”
In sifting through the rubble of FTX and its more than 130 affiliated companies, Bromley said that Bankman-Fried’s mismanagement and unreliable record-keeping has left lawyers with an incomplete picture of the companies’ finances.
Bromley didn’t specify how much money was stolen or missing, but noted that FTX has been hit with cyber attacks since it began bankruptcy proceedings on November 11.
Ahead of the hearing, lawyers for FTX submitted filings that showed the company and its affiliates had a total of $1.2 billion in cash — more than double the amount estimated in a previous court filing.
The updated figure underscores what FTX’s new chief executive described last week as a total lack of centralized cash controls under the management of Bankman-Fried.
In a filing last week, the CEO, John J. Ray III, said the new management team had been able to only approximate the amount of cash on hand at around $564 million.
Financial trouble spreads
It’s been a chaotic month for the crypto industry as the failure of FTX has set off a contagion that has left several other firms in financial peril.
One of those firms, a crypto brokerage called Genesis, halted withdrawals last week, citing an “abnormal” number of requests that exceeded its current liquidity.
On Monday, Bloomberg reported that Genesis was struggling to raise an additional $1 billion in cash for its lending arm and that the firm is warning potential investors that it may need to file for bankruptcy. The report cited unnamed sources; Genesis didn’t immediately respond to CNN Business’ request for comment.
Another prominent crypto lender, BlockFi, halted withdrawals as FTX unraveled and appeared to be staring down bankruptcy of its own, according to the Wall Street Journal.
When asked for comment, a BlockFi representative referred CNN Business to the company’s previous statement on its blog, reiterating that there were “a number of scenarios” under consideration. “We are doing the work now to determine the best path forward for our clients,” the company said.