FTX co-founder and former CEO Sam Bankman-Fried ran the bankrupt cryptocurrency exchange as his “personal fiefdom” and many of his assets are missing, an FTX attorney said at a hearing in state bankruptcy court on Tuesday United in Delaware. “A significant amount of assets have been stolen or have gone missing,” said James Bromley, a partner at Sullivan & Cromwell who represents FTX, according to a New York Times report.
“What we have here is a worldwide, international organization, but one that has been run as a personal fiefdom by Sam Bankman-Fried,” Bromley said, according to the Wall Street Journal. “FTX was under the control of inexperienced and unsophisticated individuals, and some or all of them were compromised individuals.”
Bromley also told the court that “significant sums of money” were being spent on items unrelated to the business, including vacation homes in the Bahamas, the Financial Times wrote. FTX now owes its top 50 creditors more than $3.1 billion, according to a bankruptcy court filing.
FTX moved its headquarters from Hong Kong to the Bahamas in September 2021, attributing the move to the favorable cryptocurrency regulations of the Bahamas. A Fortune report said that “FTX broke ground on a $60 million headquarters in the Bahamas” in April, but “local construction firms and people familiar with the matter” confirmed that construction is not. never started.
“We have witnessed one of the sharpest and most difficult collapses in the history of corporate America,” Bromley said at the hearing, adding that the bankruptcy proceedings “allowed everyone for the first time to see under the covers and recognize that the emperor he had no clothes.”
Bankman-Fried to staff: “I let you all down”
Bankman-Fried apologized to FTX employees in a recently reported letter shared in the company Slack. “I didn’t want this to happen, and I would give anything to be able to go back and do it all over again. You were my family,” she wrote in the letter, published by Quartz. “I lost it, and our old house is an empty warehouse of monitors. When I turn around, there’s no one left to talk to. I let you all down, and when things broke down I couldn’t communicate. “
Bankman-Fried also wrote to former employees that FTX filed for bankruptcy due to “an extreme amount of coordinated pressure,” which she said she agreed to “reluctantly.”
“I froze in the face of Binance pressure, leaks, and LOI [letter of intent] and said nothing,” Bankman-Fried wrote, referring to Binance’s abandoned plan to purchase FTX. Bankman-Fried stepped down as CEO when FTX filed for Chapter 11 bankruptcy at the Delaware court on November 11.
As noted by CoinDesk, Bankman-Fried’s letter “failed to address allegations that FTX hijacked client and corporate funds to support Bankman-Fried’s Alameda research, revelations that Alameda had an exemption from the normal liquidation process of FTX or statements that Alameda had lent funds to FTX officials including himself.” Alameda Research is a related company co-founded by Bankman-Fried that also filed for bankruptcy on Nov. 11.
As previously reported, FTX’s bankruptcy filing came “after 10 whirlwind days of Bankman-Fried desperately scrambling for billions of dollars to bail out his firm after customers scrambled to pull their assets out of business a following concerns about his financial health and the links between the exchange and Alameda.”
FTX was valued at $32 billion
FTX’s valuation soared to $32 billion in a $400 million funding round announced in January 2022. In September, FTX was reportedly in talks with investors to raise up to $1 billion in another funding round. funding that would have maintained the company’s $32 billion valuation.
At yesterday’s hearing,” Bromley said the bankruptcy team discovered that “large funds” were transferred from the exchange to Bankman-Fried’s cryptocurrency hedge fund, Alameda Research, and “large sums of money were spent for things unrelated to the business,” wrote the Financial Times. That included about $300 million in Bahamian real estate consisting of FTX’s “homes and vacation properties used by senior executives,” she said.
FTX’s new CEO, John Ray III, told bankruptcy court last week that he has never “in his career seen such a complete failure of corporate controls and a total absence of reliable financial information as has occurred here.” FTX did not have an “accurate list of bank accounts and account signatories”, did not have a complete list of employees, and used “an unsecured group email account as user root to access confidential private keys and highly sensitive data for FTX group companies around the world,” he also wrote in the court filing.
Separately, Semafor reported yesterday that Bankman-Fried has invested $100 million in Elon Musk-owned Twitter. Musk denied the report.