Bankruptcy Filings Uncover Billions in Potential Losses for Crypto Exchange Stakeholders
NFL superstar Tom Brady is among several prominent investors who may have collectively lost billions due to the dramatic collapse of the cryptocurrency exchange FTX, as revealed in recent bankruptcy filings. At the time of FTX’s downfall, Brady held approximately 1.14 million shares in FTX Trading. Other notable investors include Robert Kraft, owner of the New England Patriots, and billionaires Dan Loeb and Peter Thiel.
In a bid to recover lost funds from what is alleged to be a significant fraud, FTX plans to petition a U.S. bankruptcy court on Wednesday to approve the auctioning off of various business segments, including LedgerX, Embed, FTX Japan, and FTX Europe. The company is also seeking to keep customer identities confidential for at least six months to protect them from potential scams and privacy violations while it works on recovery efforts.
FTX argues that the standard bankruptcy protocols, which require detailed disclosures about creditors—potentially affecting around 9.5 million customers—could hinder its recovery efforts and decrease the company’s value as it seeks buyers. This request has garnered support from both FTX’s official creditors committee and various ad hoc groups of customers.
Sam Bankman-Fried, the founder of FTX, was indicted last month on two counts of wire fraud and six counts of conspiracy in Manhattan federal court, accused of misappropriating customer deposits to cover debts related to his hedge fund, Alameda Research, and of misleading equity investors regarding FTX’s financial health. He has pleaded not guilty to the charges.
The four companies slated for sale are said to operate independently from the main FTX group, each maintaining separate customer accounts and management teams, as outlined in court documents. While FTX has expressed no firm commitment to selling these companies, it has received numerous unsolicited offers and anticipates generating further bids through scheduled auctions in February and March.
However, the U.S. Trustee, a bankruptcy oversight entity within the Department of Justice, has expressed concerns about selling these affiliates before a thorough investigation into the alleged fraud involving Bankman-Fried has been completed.
Bankman-Fried has admitted to certain failures in FTX’s risk management but maintains that he does not believe he holds criminal liability. Additionally, recent reports from Freedom of Information requests indicate that 13 U.K. investors have filed complaints with Action Fraud regarding losses totaling approximately £1.16 million due to their investments in FTX.
