Collapsed crypto exchange FTX expects to have more than 1 million individual creditors, the company said in its first bankruptcy filing, scattered across more than 100 companies in the larger group.
According to filings with the bankruptcy court in the US state of Delaware, where FTX US is based, Sam Bankman-Fried, the founder and chief executive, resigned at 4:30 a.m. Friday, “after consultation with his own legal counsel. “.
“FTX faced a severe liquidity crisis that necessitated the filing of these emergency filings last Friday,” the documents say. “Questions have arisen about Mr. Bankman-Fried’s leadership and the management of FTX’s complex array of assets and businesses under his leadership.”
The company’s new management has been in contact with a slew of law enforcement organizations, the filing confirms, including “the U.S. Attorney’s Office, U.S. Securities and Exchange Commission, Commodity Futures Trading Commission and dozens of federal, state and international regulatory agencies”.
Typically, the Delaware bankruptcy court requires the company to file a list of the 20 largest unsecured debtors, but FTX requested permission to do things differently: since it has more than 100 companies filing for bankruptcy in a single block, it wants to merge all the receivables. into a single list of 50 people and organizations.
“There are over 100,000 creditors in these Chapter 11 cases. In fact, there could be over a million creditors in these Chapter 11 cases,” the lawyers say. “Debtors anticipate overlap between different lists of debtors’ creditors, and some debtors may have fewer than 20 significant unsecured creditors.” The company also requested permission to file a notice by email rather than by mail.
While depositors in a cryptocurrency exchange may feel similar to bank account holders, they have far less legal protection. In the case of a collapsed exchange such as FTX, they are simply unsecured creditors and are legally among the last creditors to recover funds, far behind bank loans and slightly ahead of shareholders.
In the past, FTX has taken advantage of this disjunction between expectations and reality, acquiring the remnants of failing crypto-pseudobank Voyager this year with an explicit promise to protect every depositor in the company by transferring their accounts to the FTX platform. Now these depositors have again become unsecured creditors.