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New CEO Testifies Against Old CEO during FTX/Cryptocurrency Inquiry

The former CEO of the cryptocurrency exchange FTX was blamed for allowing Bahamian investors to withdraw $100 million in assets even as everyone else’s accounts were locked. Investors woke up to find their accounts locked amid concerns of a run on the exchange. The exchange filed for bankruptcy protection, and the accounts have been locked ever since. The latest news raises concerns that the company has defrauded investors and the bankruptcy court and undermined the bankruptcy process. 

The acting CEO described it as one of the worst financial disasters he has ever seen and said the lack of documentation will make it very difficult to understand what happened. However, a complete lack of concern for the company’s solvency is what happened. And now, investors are left holding the bag.

In one case, the acting CEO found evidence that the former CEO had issued a loan to himself, as both lender and recipient. The company did not have any accountants. What, if any, information they could find was found in QuickBooks. At one point, expenses were authorized by emoji. 

The former CEO, Sam Bankman-Fried was scheduled to testify before Congress. However, he was arrested in the Bahamas for wire fraud and money laundering. 

Understanding crypto

It’s immensely disheartening that crypto investors were abused this way. While some crypto investors are fat cats, the majority were ordinary people who saw a way to make money with a lucrative and accessible investment. Bitcoin and other cryptocurrencies provided large returns quickly for those who invested. Many folks with regular jobs could make investments that were previously off-limits to them. 

Now, it appears that the lack of regulation, a failure of oversight, and a failure of morals have resulted in millions of investors losing access to their investments with an unclear future ahead. If Bankman-Fried removed $100 million from the company’s coffers to pay off Bahamian investors after declaring bankruptcy, then that would certainly constitute fraud against the bankruptcy process. An individual filing for bankruptcy would be enjoined from paying their grandmother a $25 loan they received last Christmas, let alone $100 million. 

Understanding Bankruptcy

Bankruptcy’s purpose is to protect debtors from creditors and creditors from one another. If a debtor files for bankruptcy protection, each of the creditors are treated equally. In other words, no debt is given precedence over another, or more precisely, no creditor is given preferential treatment. Instead, the debt itself determines the priority of repayment. So, essentially, the crime is committed against the other creditors, who are the victim of the fraud. In this case, those creditors are just average people hoping to recover their investments. 

Talk to an Indiana Bankruptcy Attorney Today

Chris Arrington represents the rights of those who are struggling with spiraling debt. Call today, and we can discuss your current financial situation and how to improve it. 


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