The formerly celebrated boss of the well-known crypto trader files for bankruptcy and leaves. In the tax haven of Delaware, a complex network of companies is now waiting for the bankruptcy trustee. Investors need to worry and definitely need patience.
The company conglomerate FTX files for bankruptcy.
In the crypto business, first quickly and spectacularly to the apparent billion-dollar fortune, now the abrupt crash: On Friday, the American Sam Bankman-Fried in the tax haven of the American state of Delaware Filed for bankruptcy of his corporate conglomerate.
Complex network of companies in a tax haven
How complex and non-transparent this was laid out is shown by the fact that that good 130 legal entities with connections to the international crypto trading platform FTX.com, the American offshoot FTX US and the “speculation division” Alameda Research.
PressRelease pic.twitter.com/rgxq3QSBqm
— FTX (@FTX_Official) November 11, 2022
It is a procedure according to Chapter 11 of the American bankruptcy law. According to this, a company can continue to operate while it develops a plan to repay existing debts to creditors. Sam Bankman-Fried himself will no longer be involved, as he resigned from his previous post as CEO of FTX at the same time. Now John J. Ray III, a restructuring expert at the Floridian, takes the lead Owl Hill Advisory with corresponding experiences even from the times of the Enron scandal.
What is called a stock exchange is far from serious
FTX, the until recently popular «haloed crypto broker», had collapsed in recent days after doubts about its financial soundness caused clients to attempt to withdraw their funds. In this context, not only did the scarce liquidity run out, but there were increasing indications of deficiencies in the legality of the management of the company, which, like many others, had marketed itself as “serious like a stock exchange”.
In the meantime, it is not only the focus of investigations by the American Securities Trading Commission Securities and Exchange Commission and the New York State Attorney’s Office. The Bahamian Securities Commission also froze some FTX assets and appointed an interim liquidator to review whether the firm’s operations should be conducted in the Bahamas, where it is officially headquartered. In Japan, authorities indefinitely suspended some local activities of FTX’s international platform, while the Australian business was placed under receivership and potential clients were advised not to deposit funds or transact.
Bankruptcy proceedings: long wait for the money
The bankruptcy proceedings are probably only the beginning of Bankman-Fried’s legal problems, but the crypto scene must also expect further consequences and turbulence with a high degree of probability. For example, the controversial crypto lender BlockFi, which was “rescued” by FTX as recently as July, has now informed its customers that they will not be able to access their funds until further notice. Well-informed market participants warn of further cascading effects that are looming in the near future.
— BlockFi (@BlockFi) November 11, 2022
In bankruptcy proceedings, it can sometimes take a long time for individual creditors to recover their funds – if at all. The repayment rate for creditors of energy trader Enron, which fell in December 2001, was about 52 cents on the dollar in 2008.
The creditors of the once-dominant «Bitcoin exchange» Mt.Gox are still waiting for their money after it went bankrupt due to a hack in 2014. No particularly good prospects for the naive creditors of former crypto high-flyers who recently became insolvent, such as Celsius Network, Voyager Digital or Three Arrows Capital.