FTX collapsed after being operated as a “personal fiefdom” of Sam Bankman-Fried, a U.S. Bankruptcy Court has heard.
The Ex-FTX CEO played a crucial role in cultivating the startup. He did not know financial management, and the attorney leading the court proceeding said this ultimately contributed to the bankruptcy.
The actual state of FTX’s finances had become known only recently.
He said Mr. Bankman-Fried’s team spent roughly $300 million on holiday homes and property for senior staff.
We discover that “the Emperor had no clothes” right now, explained attorney James Bromley, referring to this as one of the “most abrupt and brutal collapses in the history of corporate business.
A cryptocurrency exchange where people could buy and sell cryptocurrencies was FTX. Many FTX clients used it as an alternative to conventional banks to manage their Bitcoin and other digital currencies.
Judge John T Dorsey presented at FTX a detailed, extensive record of its growth, launching in several countries throughout its seven-year lifetime.
It had been shown that the web-based exchange became the second-largest by a margin before it ceased doing business in eight days.
The reasons for the exchange’s collapse were publicized when proof of its lack of financial soundness was placed online.
Mr. Bankman-Fried took leave, and the company applied for, unsuccessfully, bankruptcy protection. The court will evaluate the possibility of the company paying support to the creditors as it makes recompense efforts.
Nearly one million investors had cryptocurrency stored on FTX, and the exchange, to thank, for which they might not be refunded.
FTX had customers distributed in 27 separate countries, with the Cayman Islands, Virgin Islands, Great Britain, and China home to the highest percentage of users.
A remedial appraisal of FTX has not been completed yet, but lawyers speculate that some of the firm’s cryptocurrency assets may have been pilfered by hackers.
We are continuously under cyber-attack and attempting to counter these assaults. Mr. Bromley noted that.
The bankruptcy team said FTX has control of millions of customers’ data.
Some court guests discussed how they lost their savings in a financial collapse during the late hours.
The following penalty hearing is scheduled for 11 January.
Timeline of the FTX collapse
- 2 November: Documents leaked online expressing Alameda Research, a cryptocurrency hedge fund run by Sam Bankman-Fried, had fallen on hard times and was reliant on a coin overseen by the sister company FTX.
- 6 November: Binance’s CEO, Changpeng Zhao, stated that the company sells its holdings in FTX-linked coins “due to recent revelations.” The value of FTX crypto coins plummeted, prompting clients to rush out of Binance.
- 8 November: FTX suspends withdrawals, and Changpeng Zhao announces that Binance is looking to buy FTX to “protect users.”
- 9 November: Binance withdrew from the ongoing sale, citing concerns over “mishandling of customer funds and alleged U.S. agency investigations,” SamBankman-Fried scrambled to gather emergency funding to plug its $8bn shortfall in budget funds.
- 11 November: Sam Bankman-Fried resigns and files for chapter 11 bankruptcy
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