FTX Opposes New Bankruptcy Inquiry As It Investigates Bankman-Fried Relationship

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ZURICH/LONDON — FTX has opposed a request by the US Department of Justice for an independent investigation into the collapse of the once-large crypto exchange, saying it is already carrying out a wide-ranging investigation that includes members of the family of FTX founder Sam Bankman-Fried.

FTX said in a filing Wednesday night in court in Wilmington, Delaware, that the DOJ’s proposed review would only add costs and delays to its bankruptcy case. FTX admitted “fraud, dishonesty, incompetence, misconduct, mismanagement and impropriety” in its past conduct, but said its prior wrongdoing was already being probed by the company’s new management , its creditors and law enforcement.

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As part of its own investigation, FTX has asked U.S. Bankruptcy Judge John Dorsey, who is overseeing its Chapter 11 proceedings, to help secure the documents of Bankman-Fried, his family members and other insiders with information about FTX transactions that used stolen funds”. Those transactions, he said, include a $16.7 million Bahamian real estate purchase under the names of Bankman-Fried’s parents, Joseph Bankman and Barbara Fried.

FTX is also seeking information on political donations from Mind the Gap, a political action committee founded by Barbara Fried, and Guarding Against Pandemics, an advocacy organization founded by Sam Bankman-Fried and his brother, Gabriel Bankman-Fried. FTX said Guarding Against Pandemics’ multimillion-dollar headquarters in Washington, DC, was purchased with misappropriated funds.

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Bankman-Fried and his family members could not immediately be reached for comment.

FTX, once among the top crypto exchanges in the world, rocked the industry in November by filing for bankruptcy, leaving around 9 million customers and other investors facing total losses of billions of dollars.

The US Justice Department’s bankruptcy watchdog has called for an independent investigation into its collapse, a demand that has received support from a bipartisan group of US senators.

New FTX CEO John Ray, who worked with court-appointed examiners while running Enron Corp and Residential Capital through bankruptcy, is ready to testify that the examiners in those two cases cost $150 million combined and provided “minimal” benefits to creditors, FTX said. .

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FTX’s official committee of creditors has joined the company in opposing the appointment of a reviewer.

FTX also filed a new list of creditors in bankruptcy court late Wednesday, which included financial watchdogs and government agencies from the United States, Japan and Switzerland, as well as companies like Airbnb Inc and the giant Binance cryptography.

Airbnb and Binance did not immediately respond to a request for comment.

The US Treasury’s Financial Crimes Enforcement Network (FinCEN) and the US Internal Revenue Service (IRS) are among the new list of creditors. He did not give details on the nature or the amount of the sums owed.

A FINMA spokesperson said he could not explain why he was on the list of creditors. The watchdog was not a customer of FTX and had not acted on its platforms, the spokesperson added.

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FinCEN and the IRS declined to comment. Japan’s FSA, contacted after hours, did not immediately respond to a request for comment.

FTX said last year that it owed its 50 largest creditors nearly $3.1 billion. Dorsey in January allowed FTX to keep the names of 9 million of its individual customers secret for three months.

Sam Bankman-Fried, who was accused of stealing billions of dollars from FTX clients to pay off debts incurred by his crypto-focused hedge fund, has pleaded not guilty to fraud charges. He is to be tried in October.

(Reporting by Noele Illien in Zurich, Tom Wilson in London and Dietrich Knauth in New York Editing by Kirsten Donovan, Alexia Garamfalvi and Matthew Lewis)

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