FTX cryptocurrency exchange bankruptcy hearing has begun. The hearing began on Tuesday and the stock's finances are already under scrutiny. Users of this exchange have been barred from accessing billions of dollars in funds since the exchange stopped withdrawals.
FTX bankruptcy proceedings begin
The FTX exchange is represented by the law firm Sullivan & Cromwell in this hearing. The bankruptcy hearing is taking place in a Delaware federal court. James Bromley, partner at law firm Sullivan & Cromwell, said that “a substantial amount of the cryptocurrencies in the exchange have either disappeared or been stolen.”
FTX filed for Chapter 11 bankruptcy earlier this month. The exchange filed the application after a banking operation that required more than $8 billion in bailout funds. FTX failure, unlike Bitcoin system, has attracted the attention of regulators, including the Securities and Exchange Commission (SEC) and the United States Department of Justice (DoJ).
The exchange's bankruptcy proceedings are ongoing to determine the amount of client funds that can be recovered from this exchange. However, Bromley said the stock's mismanagement had led to inconclusive details about the firm's financial position.
The lawyer also added that the company was the victim of a hack that led to the theft of assets from the platform. Shortly after FTX filed for bankruptcy, a hack was reported on the platform, with hundreds of millions of assets taken off the exchange through unauthorized transactions.
Bromley also provided a comprehensive description of FTX's corporate history and the circumstances leading up to the stock crash. The lawyer said the exchange's founder and former chief executive, Sam Bankman-Fried, ran the exchange as a "personal fiefdom".
The FTX exchange has come under heavy criticism for the way it has handled client funds. One of the entities filed for bankruptcy has purchased nearly $300 million in real estate in the Bahamas. The purchases included homes and vacation properties of stock executives.
Current FTX CEO John J. Ray, who has presided over some of the most famous bankruptcies, such as that of Enron, recently said that he has never seen anything worse than what happened to FTX.
The former FTX CEO has been hesitant to file for bankruptcy
Bromley also shared details of what happened in the hours leading up to FTX's bankruptcy filing. He said Bankman-Fried filed for bankruptcy after consulting with several attorneys, including his father, Joe Bankman.
In a letter sent to employees, Bankman-Fried apologized for the stock crash, adding that he regretted filing for bankruptcy. He further added that he applied after giving in to pressure.
“The potential interest on the billions of dollars in funding came about eight minutes after I signed the Chapter 11 paperwork. Between those funds, the billions of dollars in collateral the company still held and the interest we had received from other parts, I think we probably could have returned a lot of value to customers and saved the company,” said Bankman-Fried.
