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A bankruptcy trustee is alleging a DFW home flipper perpetrated a Ponzi scheme — with the participation or knowledge of the former regional executive vice president of Valliance Bank — that saw the bank paid back in full but defrauded investors out of at least $3 million, the Dallas Business Journal reported. In the litigation that’s ongoing in bankruptcy court in Phoenix, Arizona, trustee James Cross has set his sights on the bank itself and its former chief lending officer and executive vice president for Texas, Shelby Bruhn, in trying to recoup funds for the investors allegedly duped by Skyler Aaron Cook. The bank and Bruhn have denied the allegations and moved to dismiss them, a request U.S. Bankruptcy Judge Eddward Ballinger Jr. denied. “I don’t know whether this case can be resolved by way of summary disposition,” Ballinger said at a brief hearing in October. “Maybe yes, maybe no, but I don’t believe it can be resolved by way of a motion to dismiss…. If you think you’ve got a summary judgment motion, well, bring it on, and that will force the other side to put up the evidence and we can find it out.” Cross has alleged, in support of the claim that a Ponzi scheme was ongoing, that Cook bounced checks at Valliance Bank at least 257 times between January 2019 and August 2019.“Despite the incredible series of substantial overdraws and suspicious Ponzi activity in the Cook Enterprise accounts for close to a year, Valliance managed to prolong the existence of the Cook Enterprise to assure that Valliance received payment in full at the expense of all other creditors of the Cook estate,” the trustee argued in a July response to the motion to dismiss.

Federal prosecutors yesterday said that two associates of FTX founder Sam Bankman-Fried had pleaded guilty for their roles in fraud that contributed to the cryptocurrency exchange’s collapse and were cooperating in the ongoing investigation, the Wall Street Journal reported. Damian Williams, the U.S. attorney for the Southern District of New York, said in a video posted on Twitter that Caroline Ellison, the former chief executive of Alameda Research, and Gary Wang, FTX’s former chief technology officer, had both pleaded guilty to criminal violations. The announcement came shortly after Mr. Bankman-Fried had been transferred to U.S. custody in the Bahamas, where he was arrested last week. Read more.

In related news, Sam Bankman-Fried told a Bahamian court yesterday that he has agreed to be extradited to the U.S. to face criminal charges related to the collapse of cryptocurrency exchange FTX, the Associated Press reported. The former FTX CEO appeared at a Magistrate’s Court and is expected to head to Odyssey Aviation to return to the United States, according to Bahamian news organization Our News. Bahamian authorities arrested Bankman-Fried last week at the request of the U.S. government. U.S. prosecutors allege he played a central role in the rapid collapse of FTX and hid its problems from the public and investors. The Securities and Exchange Commission said Bankman-Fried illegally used investors’ money to buy real estate on behalf of himself and his family. The 30-year-old could potentially spend the rest of his life in jail. Bankman-Fried was denied bail on Friday after a Bahamian judge ruled that he posed a flight risk. The founder and former CEO of FTX, once worth tens of billions of dollars on paper, is being held in the Bahamas’ Fox Hill prison, which has been has been cited by human rights activists as having poor sanitation and as being infested with rats and insects. Read more.

FTX, the bankrupt cryptocurrency exchange, used a token it invented to fund its takeover of trading platform Blockfolio, according to financial statements obtained by Bloomberg News. FTX paid roughly $84 million in 2020 to take a majority stake in Blockfolio, in what was then among the largest crypto acquisitions. About 94% was paid in FTT tokens, a cryptocurrency that FTX created, according to documents reviewed by Bloomberg. Details of the Blockfolio acquisition, which haven’t been previously reported, offer a glimpse of former FTX CEO Sam Bankman-Fried’s appetite for whimsical financial engineering, and an early hunger to amass customers through large-scale deals. Bankman-Fried doubled down on that ethos this year, going on a buyout binge for firms including Voyager and BlockFi, although those deals were thwarted when FTX imploded in November. At the time the Blockfolio deal was announced, news outlets reported FTX financed it with a mix of cash, crypto and equity, without further details. The arrangement heralded big things for FTX, which Bankman-Fried founded only a year before. The agreement gave it a 52% equity stake in Blockfolio and valued the company at almost $160 million — with the option to buy the rest within two years, the financial statements show.

Core Scientific Inc., one of the biggest publicly traded cryptocurrency mining companies in the United States, said on Wednesday it filed for chapter 11 bankruptcy protection, the latest in a string of failures to hit the sector, Reuters reported. Trillions in value has been wiped out from the crypto sector this year on rising interest rates and exacerbating worries of an economic downturn. Austin, Texas-based Core Scientific said that it would not liquidate and would continue to operate normally, as it expects to enter into a restructuring support agreement with its creditors, who represent over 50% of the holders of its convertible notes. The company's shares, which have lost roughly 98% of their value so far in 2022, fell another 14% in premarket trading. In a statement on Wednesday, Core Scientific said its creditors have also agreed to provide up to $56 million in debtor-in-possession financing. One of the largest creditors of Core Scientific, B. Riley Financial Inc., had offered $72 million last week to avoid the bitcoin miner's bankruptcy. In its bankruptcy petition, Core Scientific said it has $1 billion to $10 billion in assets and liabilities, and creditors between 1,000 and 5,000.

New management at the collapsed crypto exchange FTX said it would try to recoup donations made by Sam Bankman-Fried and other executives, which include tens of millions of dollars in contributions to U.S. politicians and affiliated groups, the Wall Street Journal reported. The Securities and Exchange Commission said in a lawsuit last week that customer assets were used to make investments, real-estate purchases and large political donations. Mr. Bankman-Fried was charged last week by federal prosecutors with secretly diverting customer funds from the exchange to an affiliated trading arm. He is currently being detained in the Bahamas, where he and FTX were based. In a statement, the new management of FTX said it has been approached by a number of recipients of contributions and other payments that wanted to return the funds. The company, now led by Chief Executive Officer John J. Ray III, said other recipients should also contact it about returning the payments.

FTX founder Sam Bankman-Fried inched closer to being transferred into U.S. custody to face criminal charges related to the cryptocurrency exchange’s collapse, after a chaotic court hearing in the Bahamas yesterday in which his local lawyer appeared at odds with his U.S. legal team, the Wall Street Journal reported. Bankman-Fried has agreed to be extradited and plans were being fleshed out by his legal team after the day’s court proceedings. Bankman-Fried’s lawyers hope to have a new hearing on the matter as early as today.