Attorneys say that FTX was run as a “personal fiefdom” and that it has been hacked and lost assets.

In the crypto exchange’s first bankruptcy hearing, lawyers said that former CEO Sam Bankman-Fried ran FTX like it was his “personal fiefdom.” They talked about ongoing problems like hacks and large amounts of missing assets.

FTX filed for protection in the U.S. after traders took $6 billion out of the platform in three days and rival exchange Binance backed out of a deal to save it. This was the biggest crypto scandal to date. About a million creditors will lose a total of billions of dollars because of the collapse.

At a bankruptcy hearing on Tuesday, an attorney for FTX said that the company now plans to sell off healthy business units. However, the company has been hacked, and “substantial” assets have gone missing.

Related: Vitalik Buterin teaches crypto lessons in the aftermath of the FTX crash.

FTX said on Saturday that it has started a strategic review of all of its global assets and is getting ready to sell or reorganize some of them. FTX said on Tuesday that potential buyers were interested in its assets and that it would start a process to either reorganize or sell them.

The hearing took place in Wilmington, Delaware, at the U.S. Bankruptcy Court, and about 1,500 people watched it live on YouTube and Zoom.

A lawyer also said that Bankman-Fried ran the company like it was his “personal fiefdom,” spending $300 million on real estate like homes and vacation homes for senior staff. Since filing for bankruptcy, FTX’s new CEO, John Ray, has been in charge. Since then, FTX has accused Bankman-Fried of working with Bahamian regulators to “undermine” the U.S. bankruptcy case and move assets overseas.

An email asking Bankman-Fried for comment went unanswered for a while.

Official property records show that Bankman-FTX, Fried’s parents, and top executives of the failed cryptocurrency exchange bought at least 19 properties in the Bahamas worth nearly $121 million over the past two years.

Lawyers also said that Binance’s sale of FTX in July 2021 needs to be looked into. In 2019, Binance bought a piece of FTX.

In a separate filing, Ed Mosley of Alvarez & Marsal, a consulting firm that works with FTX, showed that the company’s cash balance as of Sunday, $1.24 billion, was “substantially higher” than was thought before.

It includes about $400 million in accounts linked to Alameda Research, the crypto trading company owned by Bankman Fried, and about $172 million at FTX’s Japan branch.

Reuters said that Bankman-Fried secretly used at least $1 billion of his customers’ deposits to keep his trading business going.


At the hearing, FTX representatives said that customers’ names shouldn’t be made public because doing so could make the crypto market unstable and leave customers vulnerable to hacking. FTX also said that its customer list is a valuable asset and that giving it away could make it harder to sell in the future or let competitors steal its users.

A judge said that these names don’t have to be made public until another court hearing.

Lawyers for FTX also said that the court-appointed liquidators who were in charge of winding down FTX’s Bahamas unit, FTX Digital Markets, had reached an uneasy truce with them.

The two sides came to an initial agreement to coordinate their U.S. bankruptcy proceedings before Judge John Dorsey. This way, two different U.S. bankruptcy judges won’t be able to make decisions that go against each other. But both sides showed that they still have bigger disagreements about how to work together to recover and protect assets held by different FTX affiliates.

When asked for comments, Bankman-Fried, FTX, and the Bahamas liquidators did not respond right away.

Fear of transmission

The fall of FTX has sent shivers through the crypto world, sending bitcoin to its lowest level in about two years and making other firms, which are already reeling from the collapse of the crypto market this year, worried about contagion.

Genesis, a major U.S. crypto lender, said on Monday that it was trying to avoid going bankrupt. This came after the collapse of FTX, which forced it to stop letting customers get their money back.

“Our goal is to reach an agreement with creditors so that we don’t have to file for bankruptcy,” a Genesis spokesperson told Reuters in an email. The company is still talking with its creditors.

Sources told Bloomberg News that Genesis was having trouble getting more money for its lending unit.

The Wall Street Journal said, based on information from sources, that Genesis had asked Binance to invest, but the cryptocurrency exchange said no because it was worried about a conflict of interest. The WSJ said that Genesis also asked Apollo Global Management (NYSE: APO), a private equity firm, for money.

Apollo didn’t respond right away when Reuters asked for a comment on the WSJ report, and Binance didn’t want to say anything.

Related: Temasek of Singapore writes off a $275 million FTX investment.

Gemini and Genesis work together to run a crypto lending service called “Earn.” On Monday, Gemini tweeted that it was still working with Genesis to make it possible for “Earn” users to get their money back.

Gemini said on its blog last week that Genesis stopping withdrawals had no effect on its other products and services.

Since FTX went down, some crypto players are turning to “DEXs,” which are decentralized exchanges where investors trade with each other on the blockchain.

According to data from market tracker DeFi Llama, daily trading volumes on DEXs jumped to their highest level since May on November 10, when FTX collapsed. Since then, however, the gains have been cut back.

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