So much for winning “a jurisdictional battle against Delaware.”
FTX lawyers agreed this week that its Bermuda bankruptcy would be heard in Delaware, not New York where it was originally filed. In other words, the turf war ended with a truce.
Unfortunately, Delaware is also a notorious haven for corporate secrecy. A counter-argument to Blue Hen’s criticism of the state is that the US Department of Justice can reach directly within its borders, unlike, say, the Bahamas or the Cayman Islands.
But for now, the court has sided with FTX representatives on the US DoJ trustee and will keep the crypto exchange’s biggest creditors unnamed. The non-disclosure will last at least until an evidence hearing on December 16 – and the list could remain permanently redacted. FTX’s arguments for anonymity deserve a separate article, but for now, we’ll just raise an eyebrow.
So what did do we learn, in addition to the transfer of the NY/Bahamas dossier to Delaware? First, we learned that Delaware isn’t necessarily prepared for hundreds of Zoom participants, many of whom are otherwise extremely online. Officials relied on the honor system to stop callers turning on their cameras and microphones, meaning the court’s only 10-minute break came with a few guys asking for their money and at least one who has enabled music streaming. When asked to be quiet, one participant asked who the “boomer” was.
We also learned that the new CEO and his team consider some former employees to be “compromised”. It’s not yet clear what they mean by that, but we have a feeling we’ll find out!
The team (and its new board) also want to sell some FTX-controlled businesses as soon as possible. “We believe, your honor, that we will be ahead of you fairly soon with an attempt to sell some of the businesses that we understand, at least today, to be self-sufficient and robust and have attracted the interest of others on the market,” said James Bromley, a Sullivan 039;Cromwell attorney representing FTX’s new management.
We also learned that Sam Bankman-Fried consulted not only his father, a professor at Stanford Law School, but also his father’s colleague, David Mills, who “teachers Criminal law and White Collar Crime.”
More facts have surfaced about FTX’s customer base, cash reserves, and number of employees, with some handy charts to boot:
1) Customer locations”
Excluding traditional tax havens, the UK is tied with China for the highest share of FTX customers. The Cayman Islands and the Virgin Islands have a higher proportion of customers, but given their tax haven status, who knows where the ultimate owners of these accounts are spending their time.
Congratulations London, you beat Singapore!
We also learned that there were “approximately 260” employees remaining at the company, as James Bromley of Sullivan 039;Cromwell told the judge.
Below are the locations of FTX employees as of the end of October. The “debtor company” chart, on the left, includes the workforce of companies that have filed for Chapter 11. The pie chart on the right includes these companies, as well as subsidiaries in Australia and the Bahamas.
We also have a selection of companies supported by FTX. Sequoia is on the list, as our colleagues at the FT reported, along with a group of AI research companies, IEX and . . . developer of the Storybook Brawl video game? (For a list of investors, please see our tombstoNFT.)
Finally, we have a nice little recap of the cash the new management team has been able to track down so far:
Alameda has by far the largest reserve of liquidity, as fiat is needed to turn YOLO degen markets into dogecoin. Note that these sums do not reflect any costs beyond those absolutely necessary to keep the business running for the next five weeks. Everything else was put on hold by bankruptcy.
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