FTX bankruptcy sparks crisis between US and Bahamas; Exchanges’ Bitcoin reserves melt away after the FTX crisis; US Senator Warren and Durbin demand answers from Bankman-Fried.
FTX bankruptcy sparks a crisis between the US and the Bahamas
Brian Simms, the interim trustee overseeing FTX Digital Markets’ filing for bankruptcy in the Bahamas, is questioning the validity of the company’s subsidiary FTX Trading and its 134 subsidiaries’ filing for bankruptcy, filed on November 14.
Simms filed for bankruptcy under Article 15 on November 15 in the Southern District of New York District Court in the United States. This type of application is used for recognition in the USA of the ongoing bankruptcy process of a foreign representative of the debtor abroad.
In the filing, the interim trustee argued that FTX Digital was not part of the bankruptcy filing with the Delaware court and that it alone had the authority to manage all processes, including filing an application as a temporary trustee.
Simms considers that the FTX subsidiaries’ bankruptcy filing is invalid because he did not give such instructions.
Simms did not ask the court to reject his US bankruptcy filing. The trustee demanded that the US courts recognize the legal proceedings in the Bahamas.
Exchanges’ Bitcoin reserves melt away after the FTX crisis
A significant amount of BTC was withdrawn from exchanges over the past week as Bitcoin users’ concerns about security and regulatory oversight have increased. On-chain tracking resource Coinglass shows that most withdrawals are from US-based exchanges.
Over $3 billion worth of cryptocurrencies were withdrawn from exchanges over the week after the rumors of FTX’s insolvency surfaced.
Investor anxiety continues to rise as regulators plan to investigate the incident and pay more attention to the crypto industry in general.
The most withdrawals were from Gemini at nearly 30,000 BTC. Names such as Kraken, Binance, and Coinbase followed suit.
US Senator Warren and Durbin demand answers from Bankman-Fried
On November 16, US senators Elizabeth Warren and Richard Durbin wrote to former FTX CEO Sam Bankman-Fried and new CEO John Ray requesting more information about the stock market crash. Senators requested 13 documents, lists, and answers.
Warren and Durbin requested that a mass of documents from former and new FTX CEOs be available by November 28. The senators have requested full copies of the balance sheets of all FTX and its subsidiaries since 2019, as well as explanations of Bankman-Fried’s commercial decisions and his Twitter posts. Warren and Durbin also explore the relationship between FTX and Alameda Research.
Warren and Durbin have previously teamed up on crypto policy. The senators objected to including Bitcoin (BTC) in one of Fidelity Investments’ mutual funds. Elizabeth Warren has always been a crypto critic who has voiced her concerns about energy use in crypto mining, the dangers associated with decentralized finance and using crypto in ransomware attacks.
Ironically, SBF’s father, Joseph Bankman, who is a professor of law at Stanford University, assisted Warren in drafting tax legislation.