Lawyers for the collapsed cryptocurrency exchange FTX on Tuesday painted a grim picture of the firm’s finances and the odds of recovering assets that customers lost.
“A substantial amount of assets have either been stolen or are missing,” said James Bromley, a partner at the law firm Sullivan & Cromwell who is representing FTX, at a bankruptcy hearing in federal court in Delaware.
FTX filed for bankruptcy in early November after a run on deposits left the company owing $8 billion. The firm’s failure has sparked investigations by the Securities and Exchange Commission and the Justice Department, focused on whether FTX improperly lent customer deposits to Alameda Research, a crypto hedge fund. Both companies were owned by Sam Bankman-Fried, a onetime crypto billionaire who gave up control of the companies at the time of the bankruptcy filing.
Mr. Bankman-Fried’s poor management of FTX has left lawyers with limited information about the firm’s finances, Mr. Bromley said at the hearing.
He said the company had faced “cyber attacks,” and that assets were still missing. He appeared to be referring to the sudden movement of hundreds of millions of dollars in FTX assets in unauthorized transactions on the day the company filed for bankruptcy.
At the hearing, Mr. Bromley presented a detailed account of FTX’s corporate history and its abrupt collapse this month. Mr. Bankman-Fried had established a sprawling corporate empire, which was run as his “personal fiefdom,” Mr. Bromley said.
But in the end, he said, “the emperor had no clothes.”
This is a developing story. Check back for updates.
