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A U.S. Justice Department bankruptcy watchdog called for an independent investigation into FTX’s collapse, comparing the cryptocurrency platform’s sudden failure to the fall of Lehman Brothers, the Wall Street Journal reported. U.S. Trustee Andrew Vara, an official at the Justice Department unit monitoring bankruptcy courts, asked the judge overseeing FTX’s chapter 11 case to appoint an independent examiner to provide a transparent account of FTX’s failure because of the wider implications the exchange’s collapse has on the crypto industry. FTX’s collapse “is likely the fastest big corporate failure in American history,” said Vara, saying the platform suffered an astonishing loss in value from a market high of $32 billion earlier this year to bankruptcy. Vara said that an examiner is necessary to investigate “the substantial and serious allegations of fraud, dishonesty, incompetence, misconduct, and mismanagement” at FTX and circumstances around its collapse. Vara also said that an examiner should review whether any viable legal claims exist to remedy losses of FTX customers. He said reports produced by the examiner appointed in the bankruptcies of Lehman and subprime lender New Century Financial “stand as examples of the bankruptcy system serving the public interest in transparency and accountability.”

Online wine club Winc Inc. filed for chapter 11 protection, just over a year after the company’s initial public offering, Bloomberg News reported. The subscription service listed $50.3 million of assets and $36.8 million in liabilities in its bankruptcy petition, which was filed on Wednesday in Delaware. The company is arranging a buyer for its assets and has hired Canaccord Genuity Group Inc. as its investment banker, according to court papers. Winc was founded in 2012 as Club W. It’s aimed at helping younger consumers buy wine online, personalized to their tastes. It ships customers proprietary bottles based on results from an online quiz, and promising savings and convenience from cutting out middle men. The company garnered funding from backers including Bessemer Venture Partners. Winc raised $22 million in an initial public offering in November 2021, touting itself as “one of the fastest growing at scale wineries in the United States.” But it never turned a profit, and its shares slid 98% from their $13 debut to around 30 cents on Wednesday before the filing. Meta Platforms Inc. is listed as the company’s largest unsecured creditor, with a $724,000 trade claim.

Citigroup Inc. is negotiating the return of about $500 million it mistakenly paid a group of hedge funds and investment firms on a loan owed by Revlon Inc., the now-bankrupt cosmetics company controlled by billionaire Ronald Perelman, Reuters reported. In a Thursday filing in Manhattan federal court, lawyers for the bank and the lenders said they have been discussing a "consensual resolution" to end Citigroup's August 2020 lawsuit to recoup the mistaken payment. While no agreement has been reached, the lawyers said "material terms" of a settlement would provide for the return of Citigroup's money, with the bank transferring interest and amortization payments it began receiving in early 2021. Talks to end the lawsuit had been disclosed on Nov. 10. The lawyers asked U.S. District Judge Jesse Furman to let them update the status by Dec. 5. Citigroup, which was Revlon's loan agent, had accidentally used its own money in August 2020 to pay off the company's $894 million loan three years early instead of paying $7.8 million in interest.

The end of the era of easy money is forcing companies that need cash to get creative. Dozens of companies have recently raised money through so-called structured private funding rounds, and bankers and lawyers say there are many more in the works, the Wall Street Journal reported. A number of companies with depressed stocks and limited access to traditional financing are doing so, often adding sweeteners like extra dividends or preferred-note status to lessen the risk and make the deals more attractive for investors. Some, like electric-vehicle maker Lordstown Motors Corp., are announcing them after they are done, in an effort to limit an additional drop in share price. Typically, public companies disclose plans to sell more shares and then spend a few days meeting with prospective investors to drum up interest, often putting pressure on existing shares as they do so. Health-insurer Bright Health Group Inc. raised $175 million in a similarly structured deal in October.

Reverse Mortgage Investment Trust Inc., one of the nation’s largest mortgage lenders that enables people to tap the equity built up in their homes, has filed for chapter 11 bankruptcy protection, WSJ Pro Bankruptcy reported. The Bloomfield, N.J.-based company partly attributed rising interest rates to the disruption of its business. Reverse Mortgage said it faced a liquidity crunch and stopped mortgage origination in early November as it had to increase the capital to support the origination of new loans and to service portfolios. Reverse mortgages are typically made to seniors looking to tap the value built up in their homes. Backed by investment firm Starwood Capital Group, the company lists both assets and liabilities of $10 billion to $50 billion, according to a court filing. Reverse Mortgage is in talks to ensure that its servicing portfolio is managed and that work has begun to transfer loans in its pipeline to other lenders. Reverse Mortgage, established in 2012, is at least the second real-estate lender to file for bankruptcy this year. In June, residential lender First Guaranty Mortgage Corp. filed for bankruptcy as fewer home borrowers were refinancing due to rising interest rates and tight housing supply.

Sam Bankman-Fried said that he didn’t intend to commit any fraud or use customer funds to back leveraged bets that went wrong at Alameda Research, a cryptocurrency hedge fund attached to FTX that pushed the exchange to bankruptcy, WSJ Pro Bankruptcy reported. Mr. Bankman-Fried denied knowingly commingling customer funds to back his crypto trading operation and tried to deflect some of the blame for FTX’s collapse away from himself, saying he was surprised at the size of Alameda’s bets that went wrong. “I didn’t know exactly what was going on,” Mr. Bankman-Fried said via livestream from the Bahamas. “I learned a lot of these things as they were going on.” The comments came at Mr. Bankman-Fried’s first known public appearance since he resigned from FTX and the firm collapsed into the largest-ever bankruptcy by a cryptocurrency platform. FTX, long a chaotic mess despite its public image of stability, failed after dipping into customer funds to back billions of dollars in risky bets by Alameda, its affiliated trading firm. New managers hired to steer the firm through bankruptcy are only beginning to sift through FTX’s liabilities and hunt down assets that left it before it failed. The firm was plagued by an unprecedented lack of corporate controls, according to its new management, and cryptocurrencies deposited by millions of customers are still frozen on the exchange, with little indication of how much they will get back or when.

Senate Banking Committee Chair Sherrod Brown (D-Ohio) yesterday pressed U.S. Treasury Secretary Janet Yellen for help in securing legislation to better regulate cryptocurrency, the latest sign of pressure for tougher regulations following the collapse of crypto exchange FTX, Reuters reported. Brown also urged the Financial Stability Oversight Council (FSOC), a U.S. regulatory panel comprising top financial regulators, to find ways to enhance crypto asset disclosures and bolster market integrity. "It is crucial that risks in this area are contained and do not spill over into traditional financial markets and institutions, and we draw the correct lessons regarding customer and investor protection," said Brown, who is chairman of the Senate Banking Committee. FTX filed for bankruptcy on Nov. 11 after traders pulled $6 billion from the platform in three days and rival exchange Binance abandoned a rescue deal, sending shock waves across the crypto market. In his letter to Yellen, Brown also urged the FSOC to press forward with recommendations made by the council in an October report stemming from U.S. President Joe Biden's executive order this year "on Ensuring Responsible Development of Digital Assets." In that report, regulators identified several gaps in the oversight of cryptocurrencies, including in the crypto spot market for tokens that are not securities. Read more.

In related news, the Senate Agriculture, Nutrition and Forestry Committee will hold a hearing at 10 a.m. ET today titled "Why Congress Needs to Act: Lessons Learned from the FTX Collapse." Commodity Futures Trading Commission Chair Rostin Behnam is scheduled to testify. Click here for a live web stream of the hearing.

Beleaguered crypto lenders are being dealt another blow from Bitcoin miners as they weather the aftermath of the FTX collapse, Bloomberg News reported. Miners, who raised as much as $4 billion from mining-equipment financing when profit margins were as high as 90%, are defaulting on loans and sending hundreds of thousands of machines that served as collateral back to lenders. New York Digital Investment Group, Celsius Network, BlockFi Inc., Galaxy Digital, and the Foundry unit of Digital Currency Group were among the biggest providers of funding to finance computer equipment and build data centers. The liquidity crunch hitting digital-asset markets after FTX failed comes as low Bitcoin prices, soaring energy costs and more competition weigh on miners. Loans backed by the computer equipment, known as rigs, had become one of the industry’s most popular financing tools. Many lenders are now likely facing substantial losses since they can’t seize any other assets besides the machines, whose value has dropped by as much as 85% since last November.

The company behind the tether stablecoin has increasingly been lending its own coins to customers rather than selling them for hard currency upfront, the Wall Street Journal reported. The shift adds to risks that the company may not have enough liquid assets to pay redemptions in a crisis. Tether Holdings Ltd. says it lends only to eligible customers and requires that borrowers post lots of “extremely liquid” collateral, which could be sold for dollars if borrowers default. These loans have appeared for several quarters in the financial reports that Tether shows on its website. In the most recent report, they reached $6.1 billion as of Sept. 30, or 9% of the company’s total assets. They were $4.1 billion, or 5% of total assets, at the end of 2021. Tether calls them “secured loans” and discloses little about the borrowers or the collateral accepted. Alex Welch, a Tether spokeswoman, confirmed that all of the secured loans listed in the reports were issued and denominated in tether. The company said the loans were short-term and that Tether holds the collateral. Tether, which is incorporated in the British Virgin Islands, doesn’t publish audited financial statements or a complete balance sheet, leaving outsiders with an incomplete picture of the company’s financial health. “Tether’s disclosures are limited to the information contained in the mentioned reports,” Ms. Welch said. The rise in Tether’s lending represents a broad risk to the crypto world. Stablecoins such as tether are anchors in the system. They are vital for trading many cryptocurrencies and are widely held by traders. The premise of tether — and other stablecoins — is that the issuer always will redeem one coin for $1. Issuers take pains to demonstrate they have ample funds available to do so. (Subscription required.)