Attorneys representing FTX in the company’s Chapter 11 bankruptcy proceedings called the company’s rapid demise earlier this month “the abrupt and most difficult collapse in corporate America’s history” in comments before a bankruptcy court in the Delaware on Tuesday.
“Your Honor, what we have is a worldwide organization that has been effectively managed as Sam Bankman-Fried’s personal fiefdom,” said James Bromley, new advisor to FTX’s new management.
Substantial investments, according to Bromley and a filing presented to the court, indicate that cryptocurrencies and technology were the firm’s main focus. FTX has also made $300 million worth of real estate purchases in the Bahamas.
The cryptocurrency empire of some 130 affiliated companies, built by 30-year-old Sam Bankman-Fried, slid from the powerhouse of digital assets to bankruptcy within days earlier this month.
In the hearing, FTX’s counsel also described the transition when founder and former CEO Sam Bankman-Fried signed off corporate control of FTX on the date of the petition as an “emperor’s unclothed moment.”
In January, FTX’s international trading business alone reported a valuation of $32 billion.
Before filing for Chapter 11 protection, the company’s founder and then-CEO Bankman-Fried reported liquidity problems, ordered customer withdrawals to be suspended, and attempted to strike a deal with major exchange Binance before admitting “eventually, hopefullyBankruptcy might be better for customers.
This chain of events followed initial fears sparked by a leaked financial statement reported by Coindesk on Nov. 4, which showed that most of the assets held by FTX’s sister trading firm and market maker Alameda Research had been issued by FTX, suggesting that the Bankman-Fried empire was underpinned by a relationship between the two entities.
The four-silo structure liquidators have come to use to describe Bankman-Fried’s empire includes West Realm Shires (FTX US), Alameda, venture capital investments, and the international exchange “FTX.com.”
During the hearing, FTX’s legal team also pointed out that the company has a cash balance of $1.24 billion and said it is working with an international array of financial investigators to locate and safeguard the company’s remaining assets. .
Unveiled late Monday evening by FTX financial advisors Alvarez & Marsal, the cash amount is “substantially higher” than initially anticipated by new FTX CEO John J. Ray III and team.
An initial estimate by Ray and his team reported a total of $564 million in cash, adding that the company’s “historic cash management failures” had prompted the new team to build FTX’s cash management from zero.
A slap dash spreadsheet shared the day before its Nov. 11 bankruptcy petition showed that FTX also had a huge balance sheet gap between client deposits and liquid assets. According to that filing, the firm held about $900 million in liquid cryptocurrencies and $5.4 in illiquid venture capital investments against $9 billion in liabilities.
As if the financials couldn’t look worse, hackers siphoned off a whopping $477 million from FTX-owned crypto wallets shortly after the petition date.
Adding to some confusion, the Securities Commission of the Bahamas directed the transfer of digital asset holdings for FTX Digital Markets, a subsidiary over which the nation has claimed jurisdiction, to a custodial portfolio around the same time, the regulator afterwards She said.
Since then cryptocurrencies and other firms in the industry have spiraled into a spiral of historic proportions with total market capitalization declining 18% since Nov. 4 to $800 billion, bringing year-to-date losses for cryptocurrencies this year to 63%, according to data from Coinmarketcap.
David Hollerith is a senior reporter at Yahoo Finance covering cryptocurrencies and stock markets. Follow him on Twitter at @DsHollers
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