Sam Bankman-Fried hindering Bankruptcy with disruptive tweeting: FTX lawyers
Embattled cryptocurrency mogul Sam Bankman-Fried is undermining efforts to reorganize his crumbling empire with “incessant and disruptive tweeting” that appears aimed at moving assets away from the control of a US court in favor of one in the Bahamas, US lawyers for the bankrupt crypto platform FTX said in a court filing.
Embattled cryptocurrency mogul Sam Bankman-Fried is undermining efforts to reorganize his crumbling empire with “incessant and disruptive tweeting” that appears aimed at moving assets away from the control of a US court in favour of one in the Bahamas, US lawyers for the bankrupt crypto platform FTX said in a court filing.
FTX, which is now under the control of John J. Ray III - a restructuring lawyer who oversaw the liquidation of Enron - asked a federal judge in Wilmington, Delaware, to transfer a competing bankruptcy case filed in New York by Bahamian liquidators to Delaware.
Such a move would consolidate all US-based insolvency proceedings in one court. They also asked the Delaware judge to block “all persons and all governmental units” from taking action in any court around the world to seize assets or collect money from the company.
“Enormous efforts are underway to bring some semblance of order to a chaotic environment,” lawyers for FTX wrote in the bankruptcy filing. “It is critical to the efforts to end the chaos and to ensure that assets can be secured and marshalled in an orderly process.
Liquidators in the Bahamas moved earlier this week to solidify control over the insolvency of FTX Digital Ltd., a subsidiary within Bankman-Fried’s crypto enterprise, bankruptcy court papers show. They argue that account holders with assets in FTX’s custodial wallets are likely creditors of the Bahamian unit and are seeking to probe the rest of the crypto exchange’s corporate entities.
In an article published Wednesday by Vox Media, a reporter posted screen shots of a Twitter direct messages in which Bankman-Fried criticized regulators and called the decision to put FTX into bankruptcy a mistake. “Everything would be ~70% fixed right now if I hadn’t,” Bankman-Fried wrote in the DMs.
He went on to suggest that he could still fix the matter if “we can win a jurisdictional battle vs. Delaware.”
FTX’s lawyers included the comments in the bankruptcy filing Thursday morning.
Bankman-Fried “appears to be supporting efforts” by the Bahamian liquidators “to expand the scope of the FTX DM proceeding in the Bahamas, to undermine these Chapter 11 cases, and to move assets from the Debtors to accounts in the Bahamas under the control of the Bahamian government,” the lawyers wrote.
Bankman-Fried didn’t respond to messages seeking comment on the Vox article, but in his own Twitter feed, he sought to walk back the comments, which he said were not intended to be public and part of a conversation with “a friend of mine.”
FTX’s advisers have found just a fraction of company’s crypto
Advisers now overseeing the carcass of Sam Bankman-Fried’s FTX Group are struggling to locate the company’s cash and crypto, citing poor internal controls and record keeping.
“The Debtors have located and secured only a fraction of the digital assets of the FTX Group that they hope to recover in these Chapter 11 Cases,” John J. Ray III, the group’s new chief executive officer, said in a sworn declaration submitted in bankruptcy court Thursday. They’ve so far secured in cold wallets about $740 million of cryptocurrency.
In addition, FTX “did not maintain centralized control of its cash” and failed to keep an accurate list of bank accounts and account signatories, or pay sufficient attention to the creditworthiness of banking partners, according to Ray. Advisers don’t yet know how much cash FTX Group had when it filed for bankruptcy, but has found about $560 million attributable to various FTX entities so far.