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A top financial regulator is crafting a plan to ensure that more derivatives exchanges keep client funds separate from their corporate cash, the latest response by U.S. policymakers to the havoc wrought by fallen crypto giant FTX, Bloomberg News reported. A draft proposal being worked on by the Commodity Futures Trading Commission would expand the scope of existing regulatory defenses to apply to exchanges that let customers trade without going through a brokerage. A version of those limits helped keep FTX from raiding customer funds at its LedgerX subsidiary, a former unit of Sam Bankman-Fried’s sprawling crypto universe that was overseen by the CFTC, according to one of the agency’s commissioners. The CFTC required the firm to separate customer and company assets as a condition for letting it offer crypto derivatives fully backed by collateral directly to customers. Kristin Johnson, a Democratic member of the CFTC, said rules requiring segregation of customers assets should apply to any firms using or seeking similar direct-to-customer models, whether they’re offering crypto products or other types of derivatives. That argument is bolstered by LedgerX’s insulation from the broader crumbling of the FTX empire and a desire to avoid such crises going forward. The CFTC should act immediately to put in place rules to prevent misuse or loss of customer funds, in light of events like FTX’s collapse, Johnson said. “This is especially critical when we are considering direct-to-retail market structures for complex financial products, like leveraged, crypto derivatives transactions, and particularly important when permitting untested liquidation and resolution approaches,” she said.

A company run by former New York Stock Exchange President Tom Farley is among three suitors vying to buy the remnants of FTX, as the auction for the collapsed cryptocurrency exchange founded by Sam Bankman-Fried reaches its final stages, the Wall Street Journal reported. Bullish, the crypto exchange run by Farley, fintech startup Figure Technologies and crypto venture-capital firm Proof Group are competing to buy FTX, according to people familiar with the matter. The winner could restart the exchange after its planned exit from bankruptcy next year. A banker advising FTX on the process said at a hearing last month that the company received interest from over 70 parties and narrowed it to three, without naming them. A winner could be picked in December. CoinDesk earlier reported on Proof’s bid; the other two haven’t been previously reported. There are no guarantees a deal will come together, and another suitor could yet emerge. As recently as last fall, FTX ranked as one of the world’s biggest crypto exchanges, handling billions of dollars in trading volumes for individual investors outside the U.S. and professional traders. Venture capitalists valued FTX at $32 billion in January 2022, making Bankman-Fried a billionaire several times over. It collapsed abruptly in November 2022 following a run on FTX customer funds. Prosecutors charged Bankman-Fried with fraud, accusing him of using a back door to plunder billions of dollars of customer funds and spend it on luxury real estate, personal investments and political donations. A New York federal jury last week convicted him on all seven counts he faced. He is expected to be sentenced in March and faces up to 110 years in prison.

Congressional pressure is growing on the U.S. Treasury to help salvage trucking giant Yellow from bankruptcy, from Republicans and Democrats alike, letters viewed by Reuters show. Republican Senator Josh Hawley is the latest lawmaker to ask Treasury, in a letter on Thursday, to extend the terms of a controversial $700 billion pandemic loan granted by the Trump administration to Yellow. It follows separate letters sent by Republican Senator Roger Marshall and Democrats Sherrod Brown and Bob Casey last month. Earlier this week, Democratic senators Elizabeth Warren and Ed Markey sent letters. Republicans and Democrats pushing Treasury could benefit Jack Cooper, one the largest U.S. privately owned auto transport companies, making its long-shot bid to rescue Yellow from bankruptcy liquidation more likely. Key to Jack Cooper's bid is convincing Treasury to extend the loan currently due at the end of September 2024 to the same time in 2026, allowing Jack Cooper to offer more favorable terms for Yellow.

Sam Bankman-Fried’s criminal fraud conviction came just as the FTX implosion was approaching its first anniversary. But for others who helped promote the cryptocurrency exchange, the legal fallout will continue for years, Bloomberg News reported. Attention now turns to a sweeping class-action suit in Miami federal court by investors who claim they lost billions in the collapse of FTX and seek to pin blame not just on Bankman-Fried and his inner circle, but also on celebrities who were paid to endorse it to the masses, as well as bankers, accountants and lawyers who propped up the empire’s legitimacy. Flashy advertisements featuring Larry David and Tom Brady touting FTX were among the very first bits of evidence shown to the jury at the start of a monthlong trial in Manhattan that culminated in Bankman-Fried being found guilty last week of seven counts of fraud and conspiracy. The class action, which seeks to cover hundreds of thousands of investors, alleges that celebrity endorsers and firms that provided financial and legal services to FTX would have seen red flags about the business if they had done proper due diligence. The Miami case seeks unspecified damages for the $8 billion that FTX allegedly “stole” from investors — and most of which “vanished.” The guilty verdict for Bankman-Fried doesn’t directly establish a central contention in the class action — that dozens of celebrities and other alleged enablers should have known he was up to no good when they signed on as advisers or brand ambassadors. But the 31-year-old’s conviction for what Manhattan’s top federal prosecutor Damian Williams called “one of the biggest financial frauds in American history” will add momentum to the investors’ case, according to Daniel Richman, a professor at Columbia Law School.

The office of Attorney General Andrea Joy Campbell on Monday filed a petition objecting to the proposed terms of the chapter 11 voluntary bankruptcy of Vantage Travel, the Boston-based international travel company that went out of business last month, the Boston Globe reported. In a 15-page petition filed in U.S. Bankruptcy Court in Boston, Campbell joined with the attorney general of New York in saying the proposed terms of liquidation of Vantage’s paltry remaining assets doesn’t do enough for consumers. Thousands of Vantage customers are owed a total of more than $100 million in refunds for trips the company booked but then postponed or canceled. The attorneys general in New York and Pennsylvania earlier this year sued not only Vantage on behalf of customers in their state, but also Vantage’s founder and longtime owner Hank Lewis, who may have personal assets that could be subject to the proceedings. The suits accused Vantage and Lewis of “persistent fraudulent conduct” and “deceptive and unfair business practices” in the handling of customer deposits. In Monday’s filing, Campbell’s office said the bankruptcy proceedings unfairly treats customers as “general unsecured” creditors, when they should be treated as priority creditors for at least the first $3,350 owed to them. It also says future travel credits offered to customers “are really just coupons” which aren’t appropriate for settling claims.

In a closing argument, a prosecutor told New York jurors Wednesday to follow the overwhelming evidence of FTX founder Sam Bankman-Fried 's “pyramid of deceit” to find him guilty of defrauding customers and investors of at least $10 billion, while a defense lawyer said prosecutors were unfairly portraying an honest entrepreneur as a monster, Reuters reported. Assistant U.S. Attorney Nicolas Roos launched a day of closings in Manhattan federal court by saying Bankman-Fried was at fault for stealing billions of dollars from investors worldwide despite four days of testimony in which Bankman-Fried insisted that he was unaware that his customers' deposits were at risk until weeks before his companies collapsed. “He told a story and he lied to you,” Roos told jurors a day after Bankman-Fried concluded his testimony at the monthlong trial. The prosecutor said Bankman-Fried wanted jurors to believe that he had no idea what was happening at his companies or what was happening was wrong, but that his words conflicted with the testimony of his fellow executives, his “partners in crime,” and other evidence including financial documents and public statements Bankman-Fried had made.

Water Gremlin Co., rattled in recent years by pollution scandals, has filed for chapter 11 protection and is in the process of trying to sell the company, the Minneapolis Star Tribune reported. The White Bear Township, Minn.-based company, founded in 1949, makes lead battery terminals and fishing sinkers. Water Gremlin had significant clashes with regulators in 2019 over pollution from its facility. The company had to pay more than $7 million in fines to the Minnesota Pollution Control Agency (MPCA) over toxic air emissions. The MPCA's commissioner at the time said the company "put people's health at risk." The MPCA levied another $325,000 fine in 2021 over alleged violations of hazardous waste and industrial storm water rules. The MPCA issued a new air emissions permit with "more stringent emissions limits and operating requirements" to the Water Gremlin facility in June. In July, Tokyo-based Okabe Co. Ltd., parent company of Water Gremlin, said that the litigation could lead to Water Gremlin "incurring substantial liability." An affidavit filed in the bankruptcy case cites possible liability from lawsuits related to the pollution cases and a decline in sales. The company's sales fell from $57.8 million in 2018 to $46.8 million in 2022, according to the court papers.