The US attorney explained in that letter that the collapse of FTX could be compared to complex bankruptcies such as Lehman, Washington Mutual Bank and New Century Financial. Additionally, while the U.S. Attorney filed an application requesting a third-party reviewer, former FTX CEO Sam Bankman-Fried continued to appear in numerous media interviews.
US Trustee: A reviewer should “investigate material and serious allegations of fraud”.
The US receiver, part of the US Department of Justice, is getting involved in FTX’s bankruptcy case after attorney Andrew Vara filed a request for an independent reviewer. The regulatory entity is responsible for overseeing the administration of the bankruptcy process to ensure that it protects the integrity of the federal bankruptcy system.
Andrew Vara’s filing cites the first testimony of current FTX chief John Ray, who noted at FTX a “complete failure of corporate control and complete lack of reliable financial information“. Andrew Vara argues that FTX’s collapse “is probably the fastest major corporate failure in American history, resulting in “free fall” bankruptcies“.
In addition, counsel for the US trustee compared the FTX fallout to some of the largest bankruptcies in history. “Like the Lehman, Washington Mutual Bank, and New Century Financial bankruptcies before them, these cases are exactly the kind of cases that call for the appointment of an independent receiver to investigate and report on the extraordinary collapse of debtors.“, details the filing by Andrew Vara. The US Trustee believes that the appointment of an independent reviewer will be in the best interest of debtors and creditors.
Andrew Vara also insists that the collapse of FTX should be thoroughly investigated for any form of financial misconduct and fraud. “An examiner could—and should—investigate material and serious allegations of fraud, dishonesty, incompetence, misconduct, and mismanagement by the debtors, the circumstances surrounding the debtors’ bankruptcy, the apparent conversion of assets of the exchange’s customers, and the existence of the debtors’ bankruptcy. if any, of colorable claims and causes of action to repair the losses.“
Kraken’s Jesse Powell: “SBF has no idea how margin trading works“.
When the American trustee was in the process of filing an application with the bankruptcy court, Sam Bankman-Fried (SBF) decided that it would be a good idea to make an analysis of the situation. interview on Twitter Spaces. The disgraced crypto boss was invited by Mario Nawfal and tens of thousands tuned in. SBF dodged many of the questions by noting that he was not aware of any specific details that happened, and he also said that he did not have good information because he had no more control over FTX.
Despite the lack of information, SBF answered questions for about two hours and he described a strange margining and lending process, completely at odds with how traditional derivatives exchanges are supposed to work. Kraken’s Jesse Powell called SBF’s description of margin trading complete bullshit.
SBF is completely full of crap about how margin trading works. He says the entire exchange operated on a net account equity model and anyone could borrow anything (in any amount?) from client funds or from nowhere. That’s not how it’s supposed to work.https://t.co/3k7PkbAHVM
— Jesse Powell (@jespow) 1 December 2022
“SBF is completely off the mark when it comes to how margin trading worksPowell said said during Thursday night’s (ET) interview. He says the entire exchange operated on a net equity model and anyone could borrow anything (any amount?) from customer funds or out of nowhere. That’s not how it’s supposed to work. “It all adds up if you counted negative balances as 100% recoverable” WTF!? No man. Borrowing 10,000 BTC from client balances against FTT at market value is not only poor risk managementsaid Mr. Powell. nods:
It is a hidden deception. The only difference between SBF and Madoff is that Madoff did not have a token.
During his interview, SBF explained that he feels “incredibly wrong” about the situation and that he recently got a new lawyer. “I have legal advice right now. I have a new legal advisor“, SBF told attendees at Nawfal’s Twitter Spaces event. Although SBF has great difficulty remembering the details, attendees insist that SBF admitted to mixing FTX’s spot trading books with FTX’s margin books. Simon Dixon of Bank to the Future have explained:
We managed to get Sam Bankman-Fried to directly admit that FTX spot and margin hot wallets were mixed, including Alameda and FTX accounts. Backing bitcoin to sell short or invest in VC with illiquid FTT as collateral involves custody.
We managed to get it @SBF_FTX to even admit it #FTX Spot & Margin Hot Wallets were mixed together, including Alameda #FTX account (Depository & Security). Support a #BTC loan to go short or VC invest with illiquid $FTT as collateral, custody means get REKT pic.twitter.com/vneMwUhFf8
— Simon Dixon (Beware Impersonators) (@SimonDixonTwitt) 2 December 2022
The former FTX CEO’s interview was a bit more revealing than the interviews he did during his media tour. Some of the Twitter Spaces guests believe that SBF’s main motivation for talking to people is to be able to project a better image of himself in order to take time off. The SBF also admitted that withdrawals from the Bahamas have taken place, possibly on two occasions.
The thing is, no one is sure why SBF is doing these interviews, but many Twitter Spaces listeners believe that he simply avoided the questions and answered them in a very calculated way. As the US Attorney seeks to appoint a third-party reviewer to investigate the possibility of wrongdoing, the reviewer may find the SBF interviews very interesting.
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