FTX Founder Illegally Transferred Funds After Company Filed Chapter 11
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According to an emergency court filing by FTX they have evidence Bahamian regulators told former CEO Sam Bankman-Fried to gain “unauthorized access” to FTX systems to obtain digital assets belonging to the company after it filed for bankruptcy protection. The filing then says Bankman-Fried transferred those assets to the custody of the Bahamian government.
In the motion, filed in the U.S. Bankruptcy Court in Delaware, FTX said the alleged conduct puts “in serious question” a request by Bahamian regulators for recognition as liquidators in the bankruptcy.
At the 2022 Forbes Iconoclast Summit earlier this month, Sam Bankman-Fried was talking about making acquisitions — only days before FTX declared bankruptcy. Crypto Fund Research expects losses from crypto hedge funds and venture funds with direct exposure to FTX to be significantly more than $1 billion — and even as much as $5 billion.
TX in a bombshell emergency court filing Thursday said it has credible evidence that Bahamian regulators directed former CEO Sam Bankman-Fried to gain “unauthorized access” to FTX systems to obtain digital assets belonging to the company after it had filed for Chapter 11 bankruptcy protection.
The filing said Bankman-Fried transferred those assets to the custody of the Bahamian government. It cites an interview published by Vox on Wednesday, in which Bankman-Fried expresses serious disdain for regulators.
“F— regulators,” he said in the interview. “They make everything worse. They don’t protect customers at all.”
“You know what was maybe my biggest single f—up?” he asked. “Chapter 11.”
“The Debtors thus have credible evidence that the Bahamian government is responsible for directing unauthorized access to the Debtors’ systems for the purpose of obtaining digital assets of the Debtors—that took place after the commencement of these cases. The appointment of the JPLs and recognition of the Chapter 15 Case are thus in serious question,” the motion said.
Bankman-Fried was not immediately available to comment. The law firms representing FTX, Landis Rath & Cobb and Sullivan & Cromwell, did not respond to requests for comment. CNBC did not immediately receive a response to an email to the Securities Commission of the Bahamas.
Meanwhile FTX still has Tom Brady endorsing the currency on its Instagram page.
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FTX investors fear they lost everything, and wonder if there’s anything they can do.
FTX spent big money to make trading crypto popular and gain people’s trust. The company had an arena in Miami named after it and aired scores of TV commercials with superstars like Tom Brady and Steph Curry.
“I’m not an expert and I don’t need to be,” NBA champion Curry says in one ad. “With FTX I have everything I need to buy sell and trade Crypto safely.”
Trade Crypto safely? Apparently not.
Terri Smith is an architect in the Seattle area who says she may have lost about $30,000 in the FTX implosion. “I was devastated really,” she says. “That’s a huge chunk of money for me.”
Smith and a wave of other investors scrambled to try to withdraw billions of dollars from FTX after panic spread that the company was on shaky ground. But with a run on the exchange underway, FTX froze accounts, quickly filed for bankruptcy, and now many customers could lose some or all of their money.
“It feels like someone stealing your money,” Smith says. “It feels like theft.”
