FTX spiraled into bankruptcy amid a "severe liquidity crisis" that toppled the three-year old firm, once valued at $32 billion, in less than a few days, lawyers for the group told a Delaware court late Monday.
Alvarez & Marsal, the firm now established as the lead financial advisor to bankrupt crypto exchange platform FTX, said late Monday that it has been in contact with dozens of state, federal and international regulatory officials over the past three days, including a U.S. District Attorney's office, as outsiders pick through the debris of the group's spectacular collapse under former CEO Sam Bankman-Fried and the suspected hack of its accounts over the weekend.
The Wall Street Journal has reported that the U.S. attorney's office for the Southern District of Manhattan is investigating the FTX collapse, and plans to focus on allegations that customer funds from the trading platforms were used to back risky bets made by Alameda Research, the hedge fund founded by Bankman-Fried.
The details of potential investigations, both criminal and civil, formed part of a deeper filing with the Bankruptcy Court in Delaware that will oversee the petition of FTX and more than 100 associated companies that was filed late Monday.
"FTX faced a severe liquidity crisis that necessitated the filing of these cases on an emergency basis last Friday," the filing said. "Questions arose about Mr. Bankman-Fried's leadership and the handling of FTX's complex array of assets and businesses under his direction."
Sullivan & Cromwell, one of the firms expected to lead the legal proceedings, suggested "there could be more than one million creditors in these Chapter 11 Cases" and urged the court to allow a "consolidated list of their top 50 creditors."
Bankman-Fried, thought to be still in the Bahamas where the now-failed FTX was based, Tweeted "What Happened" through his Twitter account last night, following an interview with the New York Times in which he said he had grown the company "too fast" and that this, more than anything else, was what ultimately lead to its collapse.
London's Financial Times posted details of FTX's balance sheet the day before it sought Chapter 11 protection under newly-appointed CEO John Ray, with the data indicating just $900 million in liquid assets against more than $9 billion in overall liabilities.
The largest of the liquid assets, interestingly, was a $200 million U.S. dollar cash balance held within Alameda. The report also noted that a $472 million holding in Robinhood Markets (HOOD) was held in a separate account, controlled only by Bankman-Fried, which was not included in Friday's Chapter 11 filing.
