FTX Doom Draws Dozens of Federal, State, International Agencies

Three-letter agencies are set to hone in on Sam Bankman-Fried’s collapsed FTX empire, which could have more than a million creditors


Blockworks exclusive art by Axel Rangel


Regulatory agencies around the world are in contact with FTX lawyers, who have said there could be anywhere from 100,000 to more than one million users affected by the exchange’s shock bankruptcy.

The firm’s flagship entity, FTX Trading Ltd, filed a motion with the US bankruptcy court in Delaware on Monday, seeking authority to contact its creditors via email.

Law firm Sullivan & Cromwell also requested relief from filing a list of the top 20 creditors for each of the 134 FTX affiliated entities which filed for Chapter 11 bankruptcy last Friday.

Instead, the motion asks the court to allow it to file a single, consolidated list detailing the top 50 creditors across all FTX companies by Friday.

“The Debtors [FTX] expect that the exercise of compiling separate creditor lists for each individual Debtor would consume an excessive amount of the Debtors’ limited time and resources at this critical time,” lawyers said.

The filing marks one of the first moves in what’s set to be a sprawling and landmark bankruptcy case for the crypto industry. 

“As set forth in the Debtors’ petitions, 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,” lawyers wrote.

FTX, led by founder Sam Bankman-Fried, was one of the largest crypto exchange brands in the world at the time of its collapse, handling billions in daily trade volume, second only to Binance.

Once valued at more than $32 billion, FTX suddenly collapsed last week. Its sister trading outfit Alameda Research, purportedly a totally separate firm, was revealed to be working with a precarious balance sheet heavily weighted toward the exchange’s native token FTT.

Binance CEO Changpeng Zhao, who had previously led his crypto exchange to invest in FTX, announced he’d soon be offloading his FTT stake to avoid outsized exposure. Markets reacted negatively, sending FTT down almost 90% and triggering a $6 billion bank run on FTX.

FTX users had rushed to withdraw their funds from the Bahamas-based platform, causing severe withdrawal bottlenecks. Around the same time, Zhao and Bankman-Fried floated a potential buyout deal to save FTX customers, which would’ve seen Binance absorb FTX.

The deal ultimately fell through, leading to FTX’s bankruptcy and countless customers out of pocket, including hedge funds and crypto projects.

Details of epic mismanagement at FTX later emerged — most glaringly the use of customer funds to make risky bets across the crypto ecosystem which amounted to a black hole of more than $8 billion. It’s a mess that must now be cleaned up by restructuring expert John Jay Ray III, who handled disgraced corporate giant Enron following its own bankruptcy.

“Immediately upon appointment, [Ray] began working with FTX’s external legal, turnaround, cybersecurity and forensic investigative advisors to secure customer and debtor assets around the world,” lawyers wrote.

Ray and his team stopped trading and withdrawal functionality on FTX and ordered the firm’s digital assets be moved to a new cold wallet custodian, a response to a hack involving nearly half a billion dollars in FTX assets over the weekend.

Bahamian authorities have already announced a criminal investigation into FTX and froze its local assets. FTX’s recent bankruptcy filing cited “substantial interest in these events among regulatory authorities around the world.”

FTX representatives have “been in contact over the past 72 hours with the U.S. Attorney’s Office, the U.S. Securities and Exchange Commission, the Commodity Futures Trading Commission, and dozens of Federal, state and international regulatory agencies,” the filing reads.

If that disclosure is anything to go by, this whole ordeal is just getting started.

H/T: Kadhim Shubber

Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.


Upcoming Events

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Screenshot 2024-05-23 091855.png


Bitcoin L2s aim to boost scalability while preserving decentralization and security, unlocking a better user experience, and new avenues for Bitcoin-powered innovations. However, no existing Bitcoin L2 leverages the full security of Bitcoin.


After accelerating conversations with issuers, the SEC took a step toward allowing ETH funds to launch


As FIT21 advances to the Senate, experts are cautiously optimistic but say to expect some changes to the bill


Three Democrats joined Republicans Thursday in supporting a bill that would block the Federal Reserve from issuing a retail CBDC


Plus, Zeta Markets has released a litepaper for the “Zeta X” layer-2 it’s hoping to send to mainnet in early 2025


From CME Group’s launch of ether futures to congressmen urging the SEC to approve spot funds, a lot has led up the agency’s decision



As part of the #Breakout2024 plans, Radix has introduced Token Trek