Insolvent cryptocurrency exchange FTX could have as many as a million investors looking to recoup their losses.
The Bahamas-based brokerage filed for bankruptcy after facing massive liquidity problems as its acquirer, Binance, pulled out of a merger.
FTX’s bankruptcy attorneys, Landis Rath & Cobb and Sullivan and Cromwell, said on Nov. 15 that the number of creditors could exceed one million, according to a filing with the U.S. Bankruptcy Court for the District of Delaware.
“In fact, there could be over a million creditors in these Chapter 11 cases,” the filing said.
Submit updated list of creditors
The company plans to file an updated creditors list with the top 50 creditors instead of a standard Top 20 list by Friday.
As such, Debtors argue that there is reason to amend that requirement so that Debtors will submit a consolidated list of their top 50 creditors (the “Top 50 List”) rather than a top 20 list for each Debtor on or for November December 18, 2022.”
FTX had said in its first Chapter 11 bankruptcy protection filing that the company had more than 100,000 creditors with claims.
FTX has also appointed five new independent directors for FTX’s main parent companies, according to the filing.
The lead independent director is former Delaware District Judge Joseph J. Farnan.
Over the past 72 hours, the company has been “in contact with dozens of regulators in the US and abroad,” the lawyers said.
The regulators include the U.S. Attorney’s Office, the Securities and Exchange Commission, and the Commodity Futures Trading Commission, and “dozens of federal, state, and international regulatory agencies.”
Other crypto companies are going out of business
Several other crypto companies, including Celsius and Voyager Digital, also filed for bankruptcy in 2022 as they also faced liquidity problems and falling prices in bitcoin and other digital asset prices.
FTX was an exchange used by crypto investors, including retail and institutional traders, such as various hedge funds. It has been backed by numerous high-profile venture capitalists such as SoftBank, Ontario Teachers’ Pension Plan, Sequoia Capital, Temasek, Sea Capital, IVP, ICONIQ Growth, Tiger Global, Ribbit Capital, Lightspeed Venture Partners, and funds and accounts managed by BlackRock.
The insolvency of FTX, which filed for Chapter 11 bankruptcy on Nov. 11, appears to have occurred when founder Sam Bankman-Fried reportedly transferred $10 billion in client funds from FTX to its cryptocurrency trading platform Alameda Research, according to Reuters, which cites two sources who “held senior FTX positions until this week.”
FTX is facing a $1.7 billion shortfall, one source told Reuters, while the other source said between $1 billion and $2 billion was missing. Bankman-Fried, who stepped down as CEO, was once hailed as the industry’s savior during last summer’s liquidity crisis. His company was valued at $32 billion in February.