A lawyer working on the bankruptcy of cryptocurrency firm FTX has told a US bankruptcy court that its CEO, Sam Bankman-Fried, treated the company like it was his personal fiefdom. He went on to tell the court that large sums of money were spent on items unrelated to the business, such as Bahamas vacation homes for over $300 million.
On November 11, FTX, which had a market capitalization of $32 billion, filed for US bankruptcy protection as customers fled and executives discovered billions of dollars in missing funds. This caused havoc and confusion throughout the cryptocurrency industry.
Currently, the legal team in charge of winding down FTX is attempting to locate a number of the company’s assets in order to use them and repay creditors. The case, however, has been marred by allegations of misconduct, government failures, and jurisdictional disputes between the United States and the Bahamas, where FTX did the majority of its business.
According to James Bromley, the bankruptcy team’s lawyer, “substantial funds” were transferred from the exchange to Bankman-Fried’s hedge fund Alameda Research. They also discovered that the Alameda hedge fund had invested in other companies, including Elon Musk’s SpaceX and Boring Company.
FTX was a cryptocurrency exchange that allowed users to exchange fiat currency for Bitcoin and other crypto coins. Many customers treat their FTX digital wallets like bank accounts, believing that their money is secure.
More than one million investors used the FTX exchange to store cryptocurrency. This is money they may never see again. According to company records, FTX customers were located in 27 different countries, with the Cayman Islands, the Virgin Islands, the United Kingdom, and China having the highest proportion of users.
It is unclear how much the company retained following the collapse, but lawyers claim that some of the firm’s cryptocurrency assets were also stolen by hackers following the collapse.
John J. Ray III, the company’s new CEO and Chief Restructuring Officer, now leads FTX. The next hearing is scheduled for January 11th.