FTX seems to be inviting trouble day after day. According to court documents submitted late Wednesday by the company’s Bahamian liquidators, there are indications that “serious fraud and mismanagement” occurred at the crypto exchange FTX.
The crypto exchange, which has its headquarters in the Bahamas, filed for bankruptcy in the United States after investor panic and sizable outflows were sparked by CoinDesk’s revelations about a blurring of lines with family trading establishment Alameda Research’s financials.
FTX court filings indicate mismanagement of funds
According to the document submitted to the U.S. Bankruptcy Court for the Southern District of New York, “The Joint Provisional Liquidators’ findings to date indicate that serious fraud and mismanagement may have been committed” with regard to the group. The people in charge of closing down the company’s affairs in the Bahamas, Brian Simms, Kevin Cambridge, and Peter Greaves, filed the paperwork on their behalf.
On November 11, FTX filed for bankruptcy in Delaware, but Simms has disputed that, claiming in a legal filing on Tuesday that the entire group was actually run from the Bahamas.
The Wednesday filing seeks a provisional halt on the sale of any FTX assets until a formal ruling under Chapter 15 of the U.S. bankruptcy code, which addresses cross-border insolvency, is made.
The filing also cited the failed $500 million loan to Voyager in May as evidence of how last week’s media reports that Alameda owed FTX $10 billion were “basically confirming that FTX Brand’s management misused customer deposits on Fried’s digital asset exchange to extend undisclosed loans to Alameda.”
The business, which has 134 worldwide subsidiaries and affiliates, is embroiled in complex legal proceedings to liquidate its assets and pay up to one million creditors.
Sam Bankman-Fried, the founder of Alameda, resigned on Friday, and the company may be subject to legal action, according to a statement released by the Bahamas Securities Commission on Sunday.
The fall of Fried’s exchange was something that no one saw coming. FTX, which was saving troubled firms during the fall of Terra, has ended up with the same fate with no one to come to rescue.