Bankruptcy proceedings against FTX are delayed after filing its first day of motions yesterday.
Required to formally initiate proceedings, these documents describe events leading up to bankruptcy and typically request emergency relief. They are called first day resolutions because they are usually filed on the same day as the bankruptcy petition.
But when FTX filed for bankruptcy on Friday morning, these documents were not published until Monday evening.
Commentators commented that the delay was representative of the complicated case FTX presented. “It is playing out much slower and opaque than usual,” said a restructuring consultant. financial Times, He said the complexities surrounding the case had prevented him from giving good advice to creditors.
FTX appoints new directors
The filing described the onset of a liquidity crisis, which led to the resignation of founder Sam Bankman-Fried as CEO. Upon accepting the role, John Jay Ray III filed for bankruptcy “to secure the client and debtor assets”. A veteran restructuring executive, Ray previously held oversight positions in high-profile bankruptcy cases such as Enron.
Ray later appointed new directors, each of whom was experienced in bankruptcy cases, including Joseph Farnan, Jr. at FTX Trading, Matthew Doheny at FTX Trading, and Matthew R., Alameda Research. Rosenberg was involved.
FTX needs such experts to fill these roles in order to demonstrate to the court that it can manage proceedings effectively. If the court lacks confidence in the company’s ability to do so, it can hire an independent Chapter 11 trustee. This trustee would then replace the chief executive and appoint his own advisors to manage the case.
FTX and its creditors
In its petition last week, FTX claimed to have 100,000 creditors and between $10-50 billion in assets and liabilities. However, the latest filing showed that the actual figure could be closer to 1 million creditors.
Once the case begins, the Justice Department’s bankruptcy agency will appoint a committee of unsecured creditors, most likely FTX account holders.
As a result, FTX petitioned for a form of consolidation in view of its various related companies. Rather than treating each of the more than 134 entities as individual cases, the FTX requested joint administration of the overall group.
FTX further requested a list of top-50 creditors for the group, instead of the top-20 for each company.
no paw back
One legal expert said creditors would likely be reimbursed through personal lawsuits against Bankman-Fried and other FTX executives.
“There are billions in potential priority actions and the SBF and its crew are likely to sue Wazoo,” he said. Such preference actions are payments made just before the bankruptcy filing, which creditors can potentially “paw back.”
However, another legal expert Told That in accordance with FTX’s Terms of Service, title to the property remains with the customers. This effectively prevents “pawn backs” from customers who managed to get their funds back prior to the bankruptcy petition.
Despite its exploits, the exchange has managed to live up to the core crypto principle of individual ownership of assets.
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