Crypto exchange FTX expects to have more than 1m creditors

Bankruptcy filing says ‘questions arose’ about founder Sam Bankman-Fried’s leadership

The collapsed crypto exchange FTX expects to have more than 1 million individual creditors, the company has said in its first bankruptcy filing, scattered across more than 100 companies in the wider group.

According to the filing at the bankruptcy court in the US state of Delaware, where FTX US is based, Sam Bankman-Fried, the founder and chief executive, stepped down at 4.30am on Friday, “after consultation with his own legal counsel”.

“FTX faced a severe liquidity crisis that necessitated the filing of these cases on an emergency basis last Friday,” the documents say. “Questions arose about Mr Bankman-Fried’s leadership and the handling of FTX’s complex array of assets and businesses under his direction.”

The new leadership of the company has been in contact with a large number of law enforcement organisations, the filing confirms, including “the US Attorney’s Office, the US Securities and Exchange Commission, the Commodity Futures Trading Commission, and dozens of federal, state and international regulatory agencies”.

Typically, the Delaware bankruptcy court requires the company to file a list of the 20 largest unsecured debtors but FTX has requested permission to do things differently: because it has more than 100 companies filing for bankruptcy as one bloc, it wants to amalgamate all the claims into one list of 50 people and organisations.

“There are over 100,000 creditors in these Chapter 11 cases. In fact, there could be more than one million creditors in these Chapter 11 cases,” the lawyers say. “The debtors anticipate overlap among the various debtors’ creditor lists, and certain debtors may have fewer than 20 significant unsecured creditors.” The company has also asked permission to file notice by email, rather than post.

While depositors in a cryptocurrency exchange may feel similar to bank account holders, they have far less legal protection. In the case of a collapsed exchange such as FTX, they are simply unsecured creditors, and legally stand to be some of the last creditors to recover funds, far behind bank loans and slightly ahead of equity owners.

In the past, FTX has benefited from that disjunct between expectation and reality, acquiring the remnants of the failed crypto pseudobank Voyager this year with an explicit promise to protect every depositor in the company by rolling their accounts over onto FTX’s platform. Now, those depositors have again become unsecured creditors.


Alex Hern UK technology editor

The GuardianTramp

Related Content

Article image
Founder of failed crypto exchange FTX apologises to ex-employees
Sam Bankman-Fried continues to say firm’s downfall can be solely explained by misplaced $8bn

Alex Hern UK technology editor

23, Nov, 2022 @11:52 AM

Article image
Crypto exchange FTX owes nearly $3.1bn to 50 biggest creditors
Company says cryptocurrency allegedly stolen in collapse being transferred to other exchanges

Jasper Jolly and agencies

21, Nov, 2022 @10:37 AM

Article image
Cryptocurrency exchange FTX files for bankruptcy protection in US
Founder Sam Bankman-Fried resigns as CEO and tells of shock ‘to see things unravel the way they did’

Dan Milmo and Alex Hern

11, Nov, 2022 @5:00 PM

Article image
FTX’s former CEO claims crypto exchange is still solvent
Sam Bankman-Fried makes statement even as new boss begins formal bankruptcy process

Alex Hern UK technology editor

16, Nov, 2022 @2:01 PM

Article image
Failure of FTX crypto exchange will have huge implications, MPs hear
‘Hard to imagine sector bouncing back quickly from this ordeal,’ committee is told

Alex Hern UK technology editor

14, Nov, 2022 @8:05 PM

Article image
Cryptocurrency exchange FTX now worthless, says key investor
Firm valued at $25bn in 2021 suffered bank run-style crisis as investors rushed to withdraw money

Alex Hern UK technology editor

10, Nov, 2022 @11:28 AM

Article image
Crypto will survive the FTX collapse – but more scandals will follow | Kenneth Rogoff
Bitcoin and ethereum prices have plummeted, but it is unlikely the US will ban cryptocurrencies soon

Kenneth Rogoff

28, Nov, 2022 @7:00 AM

Article image
Crypto lender BlockFi files for bankruptcy after FTX collapse
BlockFi announces Chapter 11 bankruptcy filing in US as fall of FTX continues to reverberate across industry

Alex Hern UK technology editor

28, Nov, 2022 @5:28 PM

Article image
Binance to buy FTX in major cryptocurrency exchange merger
Public squabble between the two largest offshore exchanges’ bosses led to run on FTX and forced sale

Alex Hern

08, Nov, 2022 @6:13 PM

Article image
How Binance played a key role as FTX collapse unfolded
Cryptocurrency exchange run by Changpeng Zhao pulled out of deal to rescue its rival

Dan Milmo Global technology editor

11, Nov, 2022 @5:28 PM