FTX says it may have more than 1 million creditors in the new bankruptcy filing

FTX logo and crypto coins and 100 Dollar bills are shown for illustration. FTX has filed for bankruptcy in the US, seeking court protection as it seeks a way to return money to users.

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Beleaguered cryptocurrency exchange FTX may have more than 1 million creditors, according to a new bankruptcy filing, hinting at the huge impact of its collapse on crypto traders.

Last week, when it filed for Chapter 11 bankruptcy protection, FTX indicated it had more than 100,000 creditors with claims in the case.

But in one updated filing Tuesdaya lawyer for the company said: “In fact, there may be more than one million creditors in this Chapter 11 Case.”

Usually in such cases, the debtor is required to provide a list of names and addresses of 20 unsecured creditors, legal experts said. However, given the scale of the debt, the group intends to file a list of its 50 largest creditors on or before Friday.

Five new independent directors have been appointed at each of FTX’s main holding companies, according to the filing, including former Delaware district judge Joseph J. Farnan, who will serve as an independent director.

Over the past 72 hours, FTX has been in contact with “dozens” of regulators in the US and abroad, the company’s lawyer wrote. These include the US Attorney’s Office, the Securities and Exchange Commission and the Commodity Futures Trading Commission.

FTX crypto contagion risk

This year has seen several crypto firms, including Celsius and Voyager Digital, fail as they contend with declining digital asset prices and liquidity issues.

In previous bankruptcy cases, merchants on this platform have been designated “unsecured creditors,” meaning they will likely be at the back of a long queue of entities seeking repayment, from suppliers to employees.

Before its collapse, FTX offered amateur and professional traders crypto investments as well as more complex derivatives trading. At its peak, the platform was valued at $32 billion by investors and had more than 1 million users. The company’s failure has had a surprising effect on the industry, with investors selling their positions and moving funds out of exchanges.

On Monday, the CEOs of Binance and Crypto.com sought to reassure investors about the financial health of their businesses. Binance’s Changpeng Zhao said the exchange only saw a minor increase in withdrawals, while the head of Crypto.com Kris Marszalek said his firm had a “tremendously strong balance sheet”.

Combined client funds

FTX's collapse has caused a 'colossal loss of investor confidence,' says crypto broker exec

“FTX is facing a severe liquidity crisis that necessitated the filing of these cases on an emergency basis last Friday,” lawyers wrote in a Tuesday filing. “Questions arise about the leadership of Mr. Bankman-Fried and the handling of the FTX complex array of assets and businesses under his direction.”

CNBC reported Sunday that Alameda Research, FTX’s sister company, borrowed billions in customer funds from the exchange to ensure it had enough liquidity to process withdrawals.

In general, mixing customer and partner funds and trading them without explicit permission is illegal, according to US securities laws. It also violates FTX’s terms of service.

Bankman-Fried declined to comment on the allegations but said the company’s recent bankruptcy filing was the result of problems with its leveraged trading positions.

“I think it’s increasingly clear, even at a basic level, that this kind of intermingling of interests between the market maker and the exchange is highly unethical,” Jamie Burke CEO and founder of Web3-focused venture capital firm Outlier Ventures, told CNBC.

deep Mysterious Twitter thread This week, Bankman-Fried wrote the word “What” followed by the letters “H,” “A,” “P,” “P,” “E,” “N,” “E,” “D,” intermittently. tweets.

He ended Tuesday’s thread with the sentence: “10) [NOT LEGAL ADVICE. NOT FINANCIAL ADVICE. THIS IS ALL AS I REMEMBER IT, BUT MY MEMORY MIGHT BE FAULTY IN PARTS.]”

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