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‘Likely The Fastest Corporate Failure In American History’: DOJ Watchdog Calls For Probe Of Bankman-Fried’s FTX

 The Department of Justice’s bankruptcy watchdog called for an independent investigation into former crypto billionaire Sam Bankman-Fried’s crypto exchange FTX in a Thursday court filing.

The U.S. Trustee for Regions Three and Nine said in a Delaware bankruptcy court filing “an examiner could—and should—investigate the substantial and serious allegations of fraud, dishonesty, incompetence, misconduct, and mismanagement” by FTX. The Trustee program is the component of the Justice Department tasked with overseeing the administration of bankruptcy cases, its website states.

FTX was described as “likely the fastest corporate failure in American history” in the filing because of its “unprecedented decline in value” in Nov. 2022. Over the course of eight days, FTX faced a severe liquidity crisis following a report about alleged misuse of customer funds, the filing detailed.

Bankman-Fried resigned from his role as CEO of FTX in the wake of the collapse, and in his place is experienced executive John Ray, who specializes in bankruptcy situations, Reuters reported. Ray’s first official action with FTX was to file for Chapter 11 bankruptcy Nov. 17, and the filing describes Ray’s stated concerns with how the company has been managed.

The U.S. Trustee’s office believes Ray’s work is not enough, saying, “Mr. Ray and FTX’s new management have done valuable preliminary work in untangling some of these issues. But the questions at stake here are simply too large and too important to be left to an internal investigation.”

Another reason the Trustee is calling for a public investigation is “the wider implications that FTX’s collapse may have for the crypto industry.” The investigation “must not only be legitimate and independent but also must be seen as beyond reproach by stakeholders and the public,” in order to resolve “unanswered questions” much broader than a typical Chapter 11 case, the filing stated. 

The filing compared the FTX bankruptcy case to Lehman Brothers and New Century Financial in terms of public interest and the need for transparency. There is a “substantial basis to believe that Bankman-Fried and other managers of the Debtors mismanaged the Debtors or engaged in fraudulent conduct,” the filing specified.

Bankman-Fried’s wealth peaked at $26.5 billion and was estimated to be $17.2 billion in September, according to Forbes magazine. He said in a recent interview that he has $100,000 left in his bank account because his wealth was tied to FTX.

1 comment:

  1. "Only left with $100,000 in the bank". I believe that is better than most of the people he fleeced. Take that and leave him a pauper.

    ReplyDelete