FTX Bahamas Unit Seeks US Bankruptcy Protection

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Facts

  • In a court filing released Tuesday, FTX Digital Markets, the Bahamas unit of the FTX cryptocurrency exchange, is seeking protection under Chapter 15 of the US Bankruptcy Code.
  • Chapter 15 is used by foreign debtors to shield themselves from creditors seeking to file lawsuits or to tie up assets in the US. FTX filed for bankruptcy on Friday after investors rushed to withdraw $6B from the cryptocurrency exchange.
  • As the company faces lawsuits from upwards of 1M creditors, FTX is also in contact with US federal attorneys, the Securities and Exchange Commission, and the Commodity Futures Trading Commission. Authorities in the Bahamas are also reportedly investigating potential criminal wrongdoing.
  • The company's court filing argues that the US should recognize the Bahama-based unit since one of its client accounts held $15K at the Holland and Knight law firm in New York. Other parties involved have three weeks to object before the court makes a determination.
  • Amid its latest court filing in the Southern District of New York, FTX has also faced suspensions of their licenses in Australia and Cyprus. The company is also unauthorized to operate in the UK.
  • FTX founder and CEO, now-resigned 30-year-old Sam Bankman-Fried, has vowed to describe "what happened" and that he has sufficient resources "to repay all customers."

Sources: Reuters, Al Jazeera, CNN, Coin Desk, and Finance Magnates.

Narratives

  • Pro-establishment narrative, as provided by CBS. The collapse of FTX shows just how risky it is to invest in cryptocurrency. The US government is justifiably investigating the matter, and it's key to track how the public sector will respond through legislation. Companies like FTX need to be regulated the same way traditional banks are.
  • Establishment-critical narrative, as provided by Consortium News. The pious calls of regulators are disingenuous. Besides the current headlines of bankruptcy, financial fraud, and risky investments, FTX's relationship with politicians and governments also needs scrutiny. The multi-billion-dollar exchange was used for everything from funding Ukraine's war effort to political campaign donations in the US. The public sector got tangled up in this crypto mess.