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U.S. prosecutors, laying the groundwork for a potential fraud case against Sam Bankman-Fried and others involved in the collapse of cryptocurrency giant FTX, are scrutinizing how funds held by the exchange operator moved outside the U.S. as it was hurtling toward bankruptcy, Bloomberg News reported. Prosecutors are closely examining whether hundreds of millions of dollars were improperly transferred to the Bahamas around the time of FTX’s Nov. 11 bankruptcy filing in Delaware, the person said, asking not to be named without authorization to discuss the case publicly. As Justice Department officials embark on a sweeping investigation into how FTX handled customers’ cash and assets, they met this week with FTX’s court-appointed overseers to discuss materials they aim to gather, the person said. They’re also digging into whether FTX broke the law by transferring funds to Alameda Research, the bankrupt investment firm also founded by Bankman-Fried, an area of inquiry that has been reported previously. Bankman-Fried, who’s in the Bahamas and hasn’t been charged with any crimes, has admitted to grievous managerial errors at FTX but steadfastly denied that he ever knowingly misused customers’ funds.

Symbiont.io, which almost a decade ago joined the rush of startups trying to bring crypto's underlying blockchain technology into conventional finance, filed for chapter 11 protection on Dec. 1, CoinDesk.com reported. The New York-based company said that its assets and liabilities both ranged between $1 million and $10 million, according to a filing with the U.S. Bankruptcy Court for Southern District of New York. Originally named Math Money FX, the company was formed in 2013 to help financial institutions leverage the Bitcoin blockchain to "reduce risk, save costs, and increase efficiencies," according to a company timeline. Early on, it raised money from finance titans including the former CEO of the New York Stock Exchange, and allowed investors to track the cap table (finance jargon for who owns how much of a privately held startup) using the Bitcoin network. Over the years, it continued to win partnerships with large institutions including index-fund giant Vanguard. Just last year, Vanguard and State Street used Symbiont's platform for a foreign exchange forward contract. And just a few months ago, SWIFT, which helps banks move money across borders, said it was using Symbiont's technology. But it apparently fell into distress amid the brutal bear market in crypto that's felled other players, too.

A bankruptcy judge approved a new $34.5 million loan to allow Reverse Mortgage Investment Trust Inc. to continue operating under chapter 11 after rising interest rates disrupted its business, WSJ Pro Bankruptcy reported. In an emergency hearing Thursday, Judge Mary Walrath of the U.S. Bankruptcy Court in Wilmington, Del., granted approval for a $44.5 million loan. Of the total, $10 million was already advanced to Reverse Mortgage by Leadenhall Capital Partners LLP, one of its lenders. The $34.5 million in new financing is being provided by Leadenhall and Reverse Mortgage’s parent company, BNGL Holdings LLC, a Starwood Capital Group affiliate. The funds are critical for Reverse Mortgage to “deliver money into the hands of consumers” and to “mitigate disruption to borrowers and facilitate a smooth transition” of its mortgage-servicing platform to reverse-mortgage provider Longbridge Financial LLC, said Anthony Grossi, a lawyer representing the bankrupt company. Bloomfield, N.J.-based Reverse Mortgage is one of the U.S.’s largest originators and servicers of reverse mortgages, which enable people — typically seniors — to tap into the equity built up in their homes. Most of the mortgages originated by the company are insured by the Federal Housing Administration. Reverse Mortgage securitized those loans and sold them to investors to generate revenue. The company also originated and serviced other loans.

FTX's new chief executive officer and attorneys this week met with Justice Department officials as the investigation into the crypto firm's collapse continues, Reuters reported. FTX Trading's new CEO John J. Ray III and lawyers for the crypto firm met in person with prosecutors from the Manhattan U.S. attorney's office, which has been leading a probe into the firm's sudden collapse. A Justice Department spokesperson declined to comment. Last month, FTX filed for U.S. bankruptcy protection and its founder Sam Bankman-Fried resigned as chief executive, after rival exchange Binance walked away from a proposed acquisition. Ray, who was tapped to oversee the firm's restructuring, has said the company is working with law enforcement and regulators. FTX is cooperating with the government's investigations and may have further meetings with prosecutors, said the source, who declined to be named, as the meeting and the investigation are not public.

A U.S. judge this week is considering for the first time the question of who owns bitcoin and other tokens in frozen accounts at a bankrupt digital asset exchange in a case that could shape customer protections in the cryptocurrency industry. Bankruptcy Judge Martin Glenn in New York City will sort through who owns cryptocurrencies held in accounts at the Celsius Network LLC exchange, which suspended withdrawals and then fell into chapter 11 during this year's crypto crash. Judge Glenn's eventual rulings will help shape the treatment of crypto in accounts that have been frozen at other failed firms such as FTX, Voyager Digital Ltd. and BlockFi, which do not have enough funds to repay everyone in full. If Celsius deposits are determined to belong to customers, users are far more likely to get their assets returned. If the account holdings belong to Celsius, those customers will be at the back of the line for repayment, collecting pennies on the dollar. Unlike bank deposits or brokerage accounts, which are backed by the U.S. government up to $250,000 and $500,000 respectively, crypto deposits are not insured, and digital-asset companies are lightly regulated and often operate offshore. Crypto companies typically offer a variety of accounts and will likely be treated differently in bankruptcy. Celsius, for one, has argued that its "earn" accounts, which offer interest to customers, should be treated differently than its "custody" accounts, which provide a place to store cryptocurrency without generating interest. BlockFi, which is at the beginning of its own bankruptcy case, also offers both interest-bearing and custody accounts.

FTX founder Sam Bankman-Fried said he couldn’t explain what happened to billions of dollars that customers of his failed cryptocurrency exchange sent to the bank accounts of his trading firm, Alameda Research, the Wall Street Journal reported. And he said that he couldn’t rule out the possibility that money deposited by FTX customers who were told their money was theirs alone was in fact lent to Alameda. Bankman-Fried distanced himself from Alameda, saying that he had stepped back from running the firm and had little insight into its workings even though he owned 90% of it. Some FTX customers made deposits by wiring money to Alameda-controlled bank accounts, with the intention that the money be used to fund their FTX accounts. That was a legacy of the exchange’s early days when FTX didn’t have its own bank account, Bankman-Fried said. Over time, FTX customers deposited more than $5 billion in those Alameda accounts, he said. Now those funds are gone. “They were wired to Alameda, and … I can only speculate about what happened after that,” Bankman-Fried said. “Dollars are fungible with each other. And so it’s not like there’s this $1 bill over here that you can trace through from start to finish. What you get is more just omnibus, you know, pots of assets of various forms,” he added.

Federal prosecutors are investigating whether FTX’s founder, Sam Bankman-Fried, manipulated the market for two cryptocurrencies this past spring, leading to their collapse and creating a domino effect that eventually caused the implosion of his own cryptocurrency exchange last month, the New York Time reported. U.S. prosecutors in Manhattan are examining the possibility that Mr. Bankman-Fried steered the prices of two interlinked currencies, TerraUSD and Luna, to benefit the entities he controlled, including FTX and Alameda Research, a hedge fund he co-founded and owned, the people said. The investigation is in its early stages, and it is not clear whether prosecutors have determined any wrongdoing by Bankman-Fried, or when they began looking at the TerraUSD and Luna trades. The matter is part of a broadening inquiry into the collapse of Bankman-Fried’s Bahamas-based cryptocurrency empire, and the potential misappropriation of billions of dollars in customer funds. Federal prosecutors and the Securities and Exchange Commission have been examining whether FTX broke the law by transferring its customer funds to Alameda. Last month, a run on deposits exposed an $8 billion hole in the exchange’s accounts, causing the company to collapse. Bankman-Fried stepped down as FTX’s chief executive when the company filed for bankruptcy on Nov. 11. FTX is also under investigation for violating U.S. money-laundering laws that require money transfer businesses to know who their customers are and flag any potentially illegal activity to law enforcement authorities, three people familiar with the investigation said. Investigators are also looking into the activities of other offshore cryptocurrency trading platforms.

U.S. Senators Sherrod Brown (D-Ohio) and Patrick Toomey (R-Pa.) have asked Sam Bankman-Fried to testify at a hearing about cryptocurrency exchange FTX’s collapse on Dec. 14, Bloomberg News reported. Brown, who is the chair of the Senate Banking Committee, said that he and Toomey are prepared to issue a subpoena if the disgraced crypto founder doesn’t choose to appear voluntarily. Brown wrote in a letter that Bankman-Fried “must answer” for the failures of FTX Trading Ltd. and of Alameda Research, two of the entities in the sprawling and now-bankrupt FTX universe. “There are still significant unanswered questions about how client funds were misappropriated, how clients were blocked from withdrawing their own money, and how you orchestrated a cover-up,” he wrote. Bankman-Fried had previously suggested that he would be willing to appear in front of a different committee — House Financial Services — after he’d finished “learning and reviewing.” In response, Rep. Maxine Waters (D-Calif.), chairwoman of the House Financial Services Committee, told Bankman-Fried that it was “imperative” that he attend that hearing, scheduled for Dec. 13. “Based on your role as CEO and your media interviews over the past few weeks, it’s clear to us that the information you have thus far is sufficient for testimony,” Waters’ verified account posted on Twitter. By Wednesday night, Rep. Waters’ rhetoric had hardened further. “A subpoena is definitely on the table. Stay tuned,” Waters’ account said in a tweet posted jointly with the verified account for the House Financial Services Committee. Waters’ tweet also directly referenced a report from CNBC that said she had informed a group of Democrats that she didn’t plan to issue a subpoena to Bankman-Fried. “Lies are circulating,” Waters said, referring to the report.

Celsius Network LLC’s recent customer agreements were clearer than earlier versions of its terms of use about whether customers were handing over ownership of their coins when they made deposits into the firm’s high-interest Earn accounts, according to the bankruptcy judge overseeing its chapter 11 case, WSJ Pro Bankruptcy reported. Judge Martin Glenn of the U.S. Bankruptcy Court in New York made the remarks at a hearing Monday over a legal issue in the Celsius case that could also affect millions of customers of other bankrupt crypto platforms: What rights do crypto banks, brokerages or exchanges have over their customers’ holdings? Celsius is asking for a court decision backing its rights to use its customers’ crypto, including to sell stablecoins worth $18 million to fund a longer stay in bankruptcy. Judge Glenn said that he expects to rule on the matter next week or later and listened to arguments from lawyers for Celsius and customers, as well as several customers who spoke for themselves, state regulators, and a Justice Department watchdog. Celsius updated its terms of use eight times between 2018 and September 2022, asking customers to accept changes each time by clicking on online forms that popped up, usually on users’ mobile devices. “Versions one through five are less clear to me on the issue of ownership. Version six was clearer,” Judge Glenn said from the bench. The agreements gave Celsius the right to unilaterally update the terms of use, and continued use of the Celsius app was treated as acceptance of revised terms, according to a court filing by Oren Blonstein, the company’s chief compliance officer. The firm made significant efforts to get customers to accept the sixth version of the terms launched in July, sending emails and then threatening to cut off interest earnings and later suspending access to the platform for users who didn’t sign off, according to Mr. Blonstein’s filing.

Citigroup Inc. is close to getting back about $500 million it accidentally paid to 10 Revlon Inc. lenders, with three on the verge of returning their payouts and others making "substantial progress" toward a resolution, a court filing shows, Reuters reported. Citigroup, as Revlon's loan agent, had accidentally used its own money in August 2020 to prematurely pay off an $894 million loan owed by billionaire Ronald Perelman's now-bankrupt cosmetics company. Some recipients returned their payouts after realizing the mistake, which Citigroup blamed on human error, but the 10 lenders had refused, saying the bank paid what they were owed. The potential settlement was discussed in a joint letter by lawyers for Citigroup and the lenders, which include hedge funds and investment funds, filed late Monday night in Manhattan federal court. A resolution would end more than two years of litigation by Citigroup against Brigade Capital Management, HPS Investment Partners, Symphony Asset Management and the other lenders over a blunder that the bank's Chief Executive Jane Fraser called a "massive unforced error."