Sam Bankman-Fried ran the troubled cryptocurrency exchange FTX as a “personal fiefdom,” according to the firm’s attorneys, who claimed that one of the company’s divisions expended $300 million on Bahamas property investment.
An estimate 1 million creditors are now facing damages totalling billions of dollars as a result of the failure of FTX, long one of the biggest cryptocurrency exchanges in the world.
The biggest cryptocurrency scandal to date saw FTX file for shelter in the US after users withdrew $6 billion in three days, and rival exchanger Binance ditched a rescue plan.
An attorney representing FTX stated during a bankruptcy conference on Tuesday, this was live-streamed on YouTube and watched by roughly 1,000 viewers, that Binance’s purchase of FTX in July 2021 has to be looked into. Binance invested in FTX in 2019 and then disposed of it in 2021.
According to a lawyer, the majority of the $300 million invested in real estate went toward residences and holiday homes for senior workers. The lawyer added the company plans to sell off viable business units.
Official property records stated FTX’s Bankman-Fried, his parents, and senior officials of the defunct cryptocurrency exchange purchased at least 19 homes in the Bahamas over the last two years, totalling around $121 million, as was previously reported.
An FTX attorney testified during the hearing that “significant” assets are gone and that the company is still experiencing cyberattacks as bankruptcy proceedings get underway.
As of Sunday, it had a cash position of $1.24 billion, which was “significantly larger” than anticipated, according to a filing made Monday evening by Edgar Mosley of the consulting company Alvarez & Marshal, which is FTX’s advisor.
It consists of about $400 million in accounts linked to Alameda Research, the cryptocurrency trading business controlled by Sam Bankman-Fried, the founder of FTX, and $172 million at FTX’s Japan division.
FTX has stated that it owed its 50 top creditors over $3.1 billion and that it has started a strategic evaluation of its foreign assets and is getting ready to sell or reorganise some operations.
It was claimed that Bankman-Fried utilised $10 billion in deposit accounts least $1 billion of which had vanished—in secret to support his trading operation.
The information regarding FTX’s cash levels was released before the start of a session in Delaware on FTX’s supposed first-day motions on Tuesday.
To keep operating throughout Chapter 11 bankruptcy proceedings, FTX has requested Judge John Dorsey to approve the first steps in its bankruptcy, namely paying employees and essential vendors.
In addition, the company had sought Dorsey to take over a different Chapter 15 action that liquidators authorized by a Bahamas court had filed in New York last week on account of FTX’s Bahamas unit. These procedures are used by overseas firms to ask for the aid of American courts in foreign bankruptcy cases.
Before the hearing on Tuesday, attorneys for the Bahamian liquidators, who had previously contested the legitimacy of the Chapter 11 proceedings in the United States and argued with the team overseeing them over which case would take precedence, consented to that demand.
FTX, which has been run by new CEO John Ray since the bankruptcy filing, has alleged Bankman-Fried of collaborating with Bahamian authorities to diminish the U.S. bankruptcy case and transfer assets abroad.
Requests for statements from Bankman-Fried, the company FTX, and the Bahamas liquidators did not comply.
A court document filed on Tuesday showed FTX is also attempting to hold unnamed people harmless for whatever activities they have taken or are still taking about the property that constitutes a sizable portion of the company’s inheritance.
At the beginning of a bankruptcy case, sealed indemnification claims are uncommon. While FTX claimed to be in contact with American authorities and bankruptcy court representatives, it made no mention of Bahamas regulators.