(AFP) The collapsed cryptocurrency exchange FTX revealed a “serious liquidity issue” in its bankruptcy filings, which were made public on Tuesday. At the same time, regulators started looking into the industry and asked for rules to be put in place faster.
FTX has named five new independent directors for each of its key companies, including Alameda Research, according to a bankruptcy court filing.
Sam Bankman-Fried, FTX’s founder and former CEO, said he expanded his business too quickly and missed warnings of problems, the New York Times reported late Monday.
“FTX had a serious cash flow problem, which is why these cases were filed as an emergency last Friday,” the court filing said.
“Mr. Bankman’s leadership, Fried’s handling of FTX’s complex assets, and the companies’ operations raised questions.”
FTX stated it responded to a cyber attack on Nov. 11, after reporting it saw “unauthorized transactions.”
It filed for bankruptcy on Friday, which was one of the most publicized crypto disasters. Angry traders took $6 billion out of the platform in just 72 hours, and rival exchange Binance gave up on a plan to help.
The implosion of FTX, once a $32 billion darling of the crypto sector, has prompted investigations by the U.S. Justice Department, the SEC, and the CFTC, a source told Reuters.
Friends and partners in the crypto industry have been quick to disassociate themselves from FTX or proclaim healthy financials, while bitcoin, with losses of 19% this month, and other tokens have suffered.
The fallout has so far been limited to crypto exchanges and traders, but is factoring into mainstream policy conversations too.
French central bank Governor Francois Villeroy de Galhau advocated for a global regulatory response to financial instability caused by the cryptocurrency market in a lecture in Tokyo.
“This uncertainty is why we must regulate crypto assets internationally,” he stated. “The last episodes show us that we cannot allow for a second ‘crypto winter’ to still add to uncertainty and financial instability.”
The Federal Reserve and legislative authorities advocated for more regulation of crypto on Monday.
REGISTRATION
The Delaware bankruptcy court ruled that FTX’s requested relief was in everyone’s best interests.
FTX’s filing said, “Debtors’ Chapter 1 cases are complex, with over 100 debtor entities and non-traditional assets.”
Alvarez & Marsal advise FTX.
Over the past 72 hours, the firm has been in communication with the U.S. Attorney’s Office, SEC, CFTC, and dozens of federal, state, and international regulatory bodies.
FTX chose five independent directors to maintain good corporate governance during bankruptcy, its lawyers claimed. Joseph Farnan and Matthew Doheny head FTX Trading.
Mitchell Sonkin, Matthew Rosenberg, and Rishi Jain were named directors, according to the petition.
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