FTX can owe more than 1 million creditors

Collapsed cryptocurrency exchange FTX and related companies could owe money to more than a million people and organizations, according to documents filed in bankruptcy court Monday, illustrating the scale of the company’s collapse that has drained traders’ accounts and plunged the crypto industry into crisis.

In the first FTX substantive court filing since then I filed for bankruptcy on FridayThe company’s lawyers provided few details about the business case. But they said FTX has been in contact with “dozens” of federal, state and international regulators and law enforcement officials, including the Securities and Exchange Commission, the Department of Justice and the Commodity Futures Trading Commission.

Those investigations began last week after the deposit rush left FTX with an $8 billion shortfall. In a stunning institutional drama, a company that was once considered among the safest and most reliable corners of the free cryptocurrency industry collapsed overnight.

Company founder and CEO, Sam Bankman Fried, announced his resignation when bankruptcy papers were filed Friday in federal bankruptcy court in Delaware. Mr. Bankman-Fried agreed to step down at around 4:30 a.m. that morning, according to the new filing, after consulting with his legal team.

He handed control over to John C. Ray III, a veteran of corporate crises. Since then, Mr. Ray and other FTX officials have worked “around the clock” to arrange the company, according to the bankruptcy statement. The filing said the company had halted trading and responded to a “cyber attack” reported late on Friday evening.

Until last week, Mr. Bankman Fred was considered a pioneer in the cryptocurrency industry. He had a frequent presence in the halls of Congress, where he attempted to craft legislation governing new and largely unregulated technology. He was also a prominent donor, contributing more than $5 million to the efforts to elect President Biden.

But his fall was swift. A run on deposits last week left FTX unable to meet customer demand. Mr. Bankman-Fried struck a deal to sell his company to its biggest competitor, Binance, a modest surrender after a lengthy online skirmish between Mr. Bankman-Fried and Binance CEO, Changpeng Zhao. But the FTX financial review led to several problems, and Binance withdrew from the deal.

Mr. Bankman-Fried was quick to provide new financing, but unable to find a solution, he filed for bankruptcy. Now the Securities and Exchange Commission and the Department of Justice are investigating his administration of FTX. They are focusing on whether FTX improperly transferred client funds to Alameda Research, a trading company also founded by Bankman-Fried.

Alameda is among more than 100 related companies that joined FTX in filing for bankruptcy on Friday.

This is an evolving story. Check back for updates.