FTX was run as a personal fiefdom and is facing hacks and missing assets: Attorneys

As lawyers for the collapsed cryptocurrency exchange detailed ongoing challenges like hacks and missing assets, they said FTX was run like a “personal fiefdom” by former CEO Sam Bankman-Fried.

After $6 billion was pulled from FTX in three days and rival exchange Binance abandoned a rescue deal, the exchange filed for protection in the United States. Millions of creditors have lost billions of dollars after the collapse.

On Tuesday, FTX’s lawyer said the company intends to sell off healthy business units, but it’s been hit by cyberattacks and has lost “substantial” assets.

A strategic review of FTX’s global assets has been launched, and some businesses are going for sale or reorganisation. On Tuesday, FTX said potential buyers had expressed interest in its assets and would reorganise or sell them.

In Wilmington, Delaware, the hearing was live streamed to around 1,500 viewers on YouTube and Zoom.

In addition, an attorney said Bankman-Fried ran the firm like a “personal fiefdom,” spending $300 million on vacation properties and homes for senior staff. FTX, led by John Ray since the bankruptcy filing, has accused Bankman-Fried of undermining the US bankruptcy and shifting assets overseas.

I emailed Bankman-Fried for comment, but she didn’t immediately respond.

Over the past two years, Bankman-Fried’s FTX, his parents and top executives of the failed cryptocurrency exchange bought at least 19 properties in the Bahamas worth nearly $121 million, property records show.

Lawyers also said Binance must be investigated for selling FTX in July 2021. 2019 was the year Binance bought a stake in FTX

As of Sunday, FTX’s cash balance was $1.24 billion, higher than previously thought, according to a filing late Monday by Ed Mosley of Alvarez & Marsal, a consultancy.

Around $400 million is at Alameda Research, Bankman-Fried’s crypto trading firm and $172 million is at FTX’s Japan subsidiary.

Bankman-Fried reportedly stole at least $1 billion from customers to prop up his trading business, according to Reuters.


FTX argued that customers’ names should be kept secret because revealing them could destabilise the crypto market and make them vulnerable to hacks. The company also argued that disclosing its customer list would hurt future sales efforts and allow rivals to poach its customers.

It’s okay to keep those names under wraps until a future hearing. FTX lawyers also spoke of an uneasy truce with court-appointed liquidators overseeing FTX’s Bahamas unit, FTX Digital Markets.

It was agreed that the US-based insolvency proceedings would be coordinated before Judge John Dorsey, avoiding conflicting rulings from two bankruptcy judges. Both sides still disagree about coordinating the recovery and preservation of assets held by various FTX affiliates.

The Bahamas liquidators, Bankman-Fried, and FTX didn’t respond immediately.


In the wake of FTX’s fall from grace, bitcoin has fallen to its lowest level in around two years, causing fears of contagion among other firms already experiencing difficulties due to this year’s collapse in the crypto market.

Genesis, a primary US crypto lender, said on Monday that it is seeking to avoid bankruptcy after being forced to suspend customer redemptions in the wake of FTX’s collapse.

In an email to Reuters, a Genesis spokesperson said, “We intend to resolve the current situation through consensual negotiations without filing for bankruptcy.” Genesis continues to talk with creditors.

According to a Bloomberg News report citing sources, Genesis had been struggling to raise new funds for its lending unit.

According to sources cited by the Wall Street Journal, Genesis approached Binance seeking investment, but the cryptocurrency exchange decided against it due to fears of a conflict of interest. According to the Wall Street Journal, Genesis has also sought capital assistance from Apollo Global Management.

Binance declined to comment on the WSJ report, and Apollo did not respond to Reuters’ request for comment.

Gemini, which operates a crypto lending product in partnership with Genesis, tweeted on Monday that it was cooperating with the company to allow its users to redeem funds from the “Earn” program.
As stated on Gemini’s blog last week, Genesis’ pause in withdrawals had no impact on the company’s other products and services.

FTX’s implosion led some crypto players to turn to decentralized exchanges, or “DEXs, “decentralised or traded peer-to-peer on the blockchain.

Data from market tracker Defi Llama show that overall daily trading volumes on DEXs jumped to their highest level since May on November 10, as FTX imploded. The gains have since been pared back.

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button