%1

On Nov. 7, Sam Bankman-Fried, the chief executive of the cryptocurrency exchange FTX, took to Twitter to reassure his customers: “FTX is fine,” he wrote. “Assets are fine.” On Friday, FTX announced that it was filing for bankruptcy, capping an extraordinary week of corporate drama that has upended crypto markets, sent shock waves through an industry struggling to gain mainstream credibility and sparked government investigations that could lead to more damaging revelations or even criminal charges, the New York Times reported. In a statement on Twitter, the company said that Mr. Bankman-Fried had resigned, with John J. Ray III, a corporate turnaround specialist, taking over as chief executive. The speed of FTX’s downfall has left crypto insiders stunned. Just days before filing, Mr. Bankman-Fried was considered one of the smartest leaders in the crypto industry, an influential figure in Washington who was lobbying to shape regulations. And FTX was widely viewed as one of the most stable and responsible companies in the freewheeling, loosely regulated crypto industry. Now, the bankruptcy has set up a rush among investors and customers to salvage funds from what remains of FTX. A surge of customers tried to withdraw funds from the platform this week, and the company couldn’t meet the demand. The exchange owes as much as $8 billion, according to people familiar with its finances. FTX’s collapse has destabilized the crypto industry, which was already reeling from a crash in the spring that drained $1 trillion from the market. The prices of the leading cryptocurrencies, Bitcoin and Ether, have plummeted. The crypto lender BlockFi, which was closely entangled with FTX, announced on Thursday that it was suspending operations as a result of FTX’s collapse.
Read more.

Bankrupt cryptocurrency exchange FTX is probing a potential hack and asked customers to stay off the FTX website, the company said. More than $370 million worth of crypto funds appears to be missing, according to crypto analytics firm Elliptic Enterprises Ltd, the Wall Street Journal reported. A rival crypto exchange said Saturday it knew the identity of the alleged hacker and would help authorities in their investigation. The potential hack occurred Friday after FTX filed for bankruptcy. Ryne Miller, FTX US’s general counsel, said in a Saturday tweet that FTX and FTX US had started moving all digital assets to cold storage — crypto wallets that aren’t connected to the internet — after the bankruptcy filing. FTX is “investigating abnormalities with wallet movements related to the consolidation of FTX balances across exchanges,” Mr. Miller said on Twitter. He called the movements unauthorized transactions and said the facts are still unclear. FTX will “share more info as soon as we have it,” he said.
Read more. (Subscription required.)

​​In related news, the collapse of crypto exchange FTX has tripped up casual day traders and professional investors alike, the Wall Street Journal reported. Some 10% of the assets of a Multicoin Capital hedge fund are stuck at FTX, according to an investor letter viewed by the Wall Street Journal. It was able to pull out around 24% of fund assets held there before withdrawals were halted, the letter said. Earlier this month it told investors the fund was $1.2 billion in size. The trading desks and lenders that serve institutional investors are in limbo, too. Cryptocurrency lender BlockFi Inc. has paused withdrawals and limited activity on its platform, saying FTX’s woes were preventing it from operating as usual. Another crypto lender, Genesis, said some $175 million from its derivatives business was frozen in an FTX trading account. Crypto market maker B2C2, which matches trades between other entities, has $5 million stuck on FTX. Read more. (Subscription required.)

Binance chief executive Changpeng Zhao said the cryptocurrency exchange plans to launch a fund to help crypto projects facing a liquidity crisis as the collapse of rival FTX ricochets through the industry, Reuters reported. The recovery fund will help "reduce further cascading negative effects of FTX," Zhao said in a tweet on Monday, targeting projects that are "otherwise strong, but in a liquidity crisis". Binance, which abandoned a mooted rescue of FTX, did not immediately respond to a request for comment on the size of the planned fund. The crypto industry is reckoning with the collapse of rival exchange Sam Bankman-Fried's FTX, which filed for bankruptcy on Friday after users rushed to withdraw $6 billion in crypto tokens in just 72 hours. Zhao said in a tweet on Nov. 6 that Binance would liquidate its holdings of FTX's native token, FTT, which raised investor concerns about FTX's balance sheet. Binance said on Nov. 8 it was considering a rescue deal for FTX, later abandoned after due diligence. Earlier on Monday, Zhao called for new but stable and clear regulations for the industry, in light of recent developments and participants "cutting corners". "We're in a new industry, we've seen in the past week, things go crazy in the industry," Zhao told a gathering of G20 leaders at a summit in Bali. "We do need some regulations, we do need to do this properly, we do need to do this in a stable way."

More than two years after filing for chapter 11 bankruptcy protection in the face of mounting lawsuits related to past child sexual abuse, the Archdiocese of New Orleans is beginning to raise cash by selling some of its vast real estate holdings, NOLA.com reported. Attorneys for the local Roman Catholic Church will ask a judge this week to allow two separate property transfers to move forward. One is the sale of a former 12-story office building at 1000 Howard Ave. to a Lafayette-based investor. The other is the sale of a parking lot on Loyola Avenue behind the Howard Avenue building. Together, the deals would generate nearly $10 million for the local church, and follow property sales totaling some $1.9 million earlier in the bankruptcy process. It's unclear how far the millions raised by the property sales will go to resolving the 450 abuse claims levied at priests and other clergy who served in the archdiocese. And it's also not known what other financial steps Archbishop Gregory Aymond and his advisers will take to pay off what is expected to be a multimillion-dollar settlement with abuse victims. When the New Orleans Catholic Church joined two dozen other U.S. archdioceses by filing for bankruptcy protection in May 2020, it listed $243 million in assets and $139 million in liabilities. At the time, Aymond said that the church, which serves 500,000 Catholics across 112 parishes, needed to seek chapter 11 protection due to the mounting costs of abuse settlements and the fallout from the pandemic. Financial records have previously valued archdiocesan-owned buildings and land at some $70 million. But that estimate is likely significantly lower than what the properties would fetch on the market, because it is based on the prices that the archdiocese paid for the properties.

The Borrego Community Health Foundation, which filed for chapter 11 protection earlier this year amid a criminal investigation into its finances, has agreed to mediation to try and resolve disputes with creditors and regulators, the San Diego Union-Tribune reported. Officials from the health care provider known as Borrego Health joined creditors and California Department of Health Care Services lawyers in agreeing to non-binding negotiations that will be overseen by an independent court-appointed official. “Because litigation is time-consuming and expensive, it is beneficial to both Borrego Health and our patients if we are able to sit down with DHCS in front of a judicial officer and resolve our issues quickly,” Borrego Health spokesperson Daniel Kramer said. “This more efficient process also benefits our patients by allowing our managers and other team members to spend more time focusing on providing excellent medical care,” he said. State regulators did not respond to a request for comment on the mediation effort. They previously have resisted discussing Borrego Health beyond saying they are working to protect its patients. Meanwhile, businesses and others owed tens of millions of dollars by Borrego Health set up a committee to represent their interests before the bankruptcy court. An attorney for the committee said he welcomes the plan to negotiate a settlement.

If Twitter Inc. files for bankruptcy, Elon Musk would be the biggest loser, according to a WSJ Pro Bankruptcy commentary. Mr. Musk told Twitter employees in an all-hands staff meeting Thursday that he wasn’t sure how much financial runway the social-media company still has and that “bankruptcy isn’t out of the question.” Mr. Musk can be flamboyant at times, but let’s take his words seriously for a moment. In case of a Twitter bankruptcy, Mr. Musk — who took over Twitter for $44 billion just two weeks ago and put in $27 billion of his own money — most likely would have his investment wiped out, as equityholders are the last to be paid when a company restructures. Those that joined him and took equity stakes, like Sequoia Capital, Binance and the Qatar Investment Authority, would face a similar outcome. But Mr. Musk is by far the biggest investor. Banks, including Morgan Stanley and Bank of America Corp., that together put up $13 billion of their own money for debt in Twitter, could also see losses. The banks had to place the debt on their books as they couldn’t sell the bonds fast enough to a wider group of investors. They, however, have some safety nets. Roughly $10 billion of the $13 billion in debt is backed by specific assets, ensuring that they would be paid back, even if not in full.

*The views expressed in this commentary are from the author/publication cited, are meant for informative purposes only, and are not an official position of ABI.