Comments on missing assets came from FTX attorney James Bromley of the US Bankruptcy Court for the District of Delaware, which was holding a hearing for the fallen crypto giant.
At the hearing, Bromley also described FTX as a company “run by inexperienced and inexperienced individuals,” adding that “some or all of them were also compromised individuals.” FTX, he said, “is one of the most abrupt and difficult corporate failures in American corporate history.”
The revelations sparked more questions about the implosion of what was seen as the cornerstone of the burgeoning digital asset industry. Regulators, lawyers and investors are struggling to understand exactly what happened at FTX as its demise continues to send shockwaves through the networked crypto-economy.
FTX filed for bankruptcy this month after a bank run caused a liquidity crisis. Shortly thereafter, 30-year-old CEO and company co-founder Sam Bankman-Fried resigned. “What we have is a worldwide organization, but an organization that was effectively run as the personal fiefdom of Sam Bankman-Fried,” Bromley said in court.
A message left for Bromley’s office at his New York firm, Sullivan & Cromwell, was not immediately returned. A message to Bankman-Fried was not immediately returned.
The Department of Justice, the Securities and Exchange Commission and the Commodity Futures Trading Commission have opened investigations into FTX. They are investigating whether the exchange circumvented rules protecting consumer deposits and relationships with trading partners, four people familiar with the investigations said.
The Southern District of New York’s Cybercrime Unit has also launched a criminal investigation into FTX, Bromley told court Tuesday. Bromley said he is in “constant communication” with that office, as well as with the Justice Department, SEC, CFTC and other regulators at the state and abroad.
Bromley said he is taking requests from lawmakers in the House and Senate to have John J. Ray III, FTX’s new CEO, testify in December. The Senate Banking Committee, Senate Agriculture Committee, and House Financial Services Committee all plan to hold hearings next month on the implosion of Bankman-Fried’s crypto empire.
In a filing last week, Ray, who was tasked with overseeing the company’s restructuring, described a company whose communications and records were in disarray.
“One of the most serious failures of the FTX.com business in particular is the lack of a consistent record of decision making,” Ray said.
Last week, one of the country’s most prominent attorneys filed a class-action lawsuit to extort large sums of money from Bankman-Fried and celebrities who appeared in ads or otherwise supported FTX, including NFL quarterback Tom Brady, supermodel Gisele Bundchen, comedian Larry David, NBA players Stephen Curry and tennis player Naomi Osaka.
The FTX bankruptcy has impacted a number of other crypto companies and their customers. That includes BlockFi, a lender to which FTX provided a $400 million credit facility, or ongoing loan, last summer. The credit has not been drawn in full and, because she cannot access the remaining funds, BlockFi said in a statement Nov. 10 that it was pausing payouts and “unable to continue as usual.”
Genesis, another lender, said in a tweet thread last week that “FTX has caused unprecedented market turmoil, resulting in unusual withdrawal requests that have exceeded our current liquidity.” It also said it is suspending payouts for the time being.
