The FTX bankruptcy proceedings have been interesting, to say the least. Aside from the company’s downfall making for one of the most unexpected occurrences of 2022, Sam Bankman-Fried’s criminal trial and sporadic interviews and blog posts have given depth to the storyline. This week, as the bankruptcy case drags on, the FTX executive team is being put on its toes. The company is putting all of its weight into defending its current legal counsel. Meanwhile, both U.S. Trustees and Bankman-Fried have been vocally critical of the team and are seeking to have them replaced.
Sam Bankman-Fried hasn’t been with FTX since mid-November. The founder stepped down in the wake of the initial implosion of FTX’s balance sheet. After the company declared bankruptcy, John Ray III of Enron fame was appointed as the new CEO. However, Bankman-Fried has not remained quiet around the company’s inner-workings after leaving — even as he faces up to 115 years in prison.
As Bankman-Fried’s own courtroom saga unfolds, he has maintained a presence in the FTX bankruptcy process through a new blog. Last week, he made his first post to the blog that outlines an overview of FTX’s bankruptcy. The post provides much of the information he was to be grilled over in front of Congress in December, before he was arrested and extradited by Bahamian authorities.
In the post, Bankman-Fried argues that the FTX.US brand remains solvent, contrary to claims by FTX legal counsel Sullivan & Cromwell (S&C). He also attacks S&C for pressuring him into naming Ray as FTX’s new CEO.
FTX CEO Leaps to Defend Counsel Amid Trustee Motion, SBF Claims
This week, Bankman-Fried is continuing to stir the pot around FTX’s bankruptcy. The disgraced crypto entrepreneur has updated his blog with a revised look at FTX.US’s balance sheet amid new information provided by lawyers.
Bankman-Fried argues lawyers’ new estimates about FTX’s shortfalls are still inaccurate, even as they dig up $5.5 billion in assets. “FTX US [sic] had at least $111m, and likely around $400m, of excess cash on top of what was required to match customer balances,” he writes. By not accounting for customer balances, Bankman-Fried says the legal counsel is incorrectly labelling the company as insolvent.
For all of his own gripes with S&C’s work in the FTX.US proceedings, Bankman-Fried is not alone. A trustee presiding over the bankruptcy trial is moving to have the team dismissed. The motion for S&C’s dismissal was filed on Jan. 14. In it, the trustee argues that S&C “failed to sufficiently disclose its connections and prior work for FTX.”
FTX.US had used S&C as its primary legal counsel, as Bankman-Fried previously laid out. That’s not all, either, as one user on Twitter explains. Apollo Global (NYSE:APO), whose chairman is an employee of S&C, has been rumored to be buying up FTX creditor claims for very cheap prices. The company has also previously expressed interest in doing so. This would make for an obvious conflict of interest.
John Ray III has filed a motion of his own to retain S&C’s counsel. In it, Ray argues that the motion is a misdirected attack:
“The advisors working at my direction have worked tirelessly and nonstop for the last seventy days to take control over what can only be described as a ‘dumpster fire’ in order to stop assets from being depleted.”
On the date of publication, Brenden Rearick did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.