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Sam Bankman-Fried said in a blog post yesterday that he did not steal money and blamed the collapse of his now-bankrupt FTX exchange on a broad crash in cryptocurrency markets, Reuters reported. Federal prosecutors in Manhattan in December said Bankman-Fried stole billions of dollars from FTX customers to pay debts for his crypto-focused hedge fund, Alameda Research, purchase lavish real estate, and donate to U.S. political campaigns. He has pleaded not guilty. The Substack blog post — a rare public statement by a U.S. criminal defendant — amounts to a preview of the defense case Bankman-Fried may present when his trial begins on Oct. 2. "I didn't steal funds, and I certainly didn't stash billions away," Bankman-Fried wrote. In the post, Bankman-Fried did not directly address many of the other charges brought against him by federal prosecutors in Manhattan last month, namely that he misled investors and lenders about the financial conditions of FTX and Alameda. He wrote that he had "a lot more to say." The 30-year-old onetime billionaire wrote that Alameda failed to hedge against an "extreme" crash in the crypto markets, which ultimately came to pass last year. "As Alameda became illiquid, FTX International did as well, because Alameda had a margin position open on FTX," Bankman-Fried wrote. Read more.

In related news, the father of FTX founder Sam Bankman-Fried has retained a New York attorney in recent weeks as prosecutors probe Bankman-Fried's alleged cryptocurrency fraud scheme, Reuters reported. Joseph Bankman, a tax law professor at Stanford Law School, has tapped Sean Hecker of Kaplan Hecker and Fink LLP. Hecker, who focuses on white collar crime, previously represented a former top foreign exchange trader at Barclays accused of an alleged multi-billion-dollar fraud scheme. In a rare move, a federal judge tossed out that case immediately after prosecutors presented it. Bankman had closely advised his son ever since Bankman-Fried launched his hedge fund Alameda Research in 2017, according to three former FTX executives. In his later consulting work for FTX, Bankman helped arrange meetings in Washington for his son, the sources said. Read more.

House Republicans on Thursday unveiled a new panel focused on cryptocurrency, following the collapse of the prominent crypto exchange FTX late last year, The Hill reported. Rep. Patrick McHenry (R-N.C.), the chairman of the House Financial Services Committee, announced the new Subcommittee on Digital Assets, Financial Technology and Inclusion on Thursday, alongside other subcommittee assignments. The subcommittee, which will be chaired by Rep. French Hill (R-Ark.), aims to provide clear rules for federal regulators in the “digital asset ecosystem,” according to a committee press release. It also seeks to develop policies that promote financial technology in underserved communities and increase diversity and inclusion in the field. The creation of the new panel comes in the wake of FTX’s collapse in November. The crypto exchange’s founder and CEO, Sam Bankman-Fried, was arrested in the Bahamas in December and is now facing a slew of criminal charges over the company’s meltdown, including wire and securities fraud.

Crypto exchange FTX has recovered more than $5 billion in liquid assets but the extent of customer losses in the collapse of the company founded by Sam Bankman-Fried is still unknown, an attorney for the company told a U.S. bankruptcy court on yesterday, Reuters reported. The company, which was valued a year ago at $32 billion, filed for bankruptcy protection in November and U.S. prosecutors accused Bankman-Fried of orchestrating an "epic" fraud that may have cost investors, customers and lenders billions of dollars. "We have located over $5 billion of cash, liquid cryptocurrency and liquid investment securities," Andy Dietderich, an attorney for FTX, told U.S. Bankruptcy Judge John Dorsey in Delaware at the start of Wednesday's hearing. Dietderich also said the company plans to sell nonstrategic investments that had a book value of $4.6 billion. However, Dietderich said the legal team is still working to create accurate internal records and the actual customer shortfall remains unknown. The U.S. Commodities Futures Trading Commission has estimated missing customer funds at more than $8 billion. Dietderich said the $5 billion recovered does not include assets seized by the Securities Commission of the Bahamas, where the company was headquartered and Bankman-Fried resided. Read more.

The intersection of cryptocurrency and bankruptcy is one of the key issues to be discussed by expert panels at ABI's upcoming Rocky Mountain Bankruptcy Conference from January 26-27 in Salt Lake City, Utah. Are you registered?

FTX raised equity capital before its collapse from Robert Kraft ‘s Kraft Group and entertainment giant Endeavor Group Holdings Inc., among other newly-identified backers who now face the loss of their investments in the once-highflying exchange, the Wall Street Journal reproted. The crypto firm’s chapter 11 administrators disclosed a new roster of its financial backers that listed affiliates of Kraft Group and entertainment giant Endeavor as holding common and preferred stock. FTX also disclosed that it raised capital from affiliates of investment offices including Daniel Och’s Willoughby Capital LLC and Blue Pool Capital, a Hong-Kong office backed by Alibaba Group co-founder Joseph Tsai, according to the shareholder list, filed in bankruptcy court on Tuesday. Marquee investors from the U.S. and around the world poured roughly $1.8 billion into FTX with few strings attached, valuing the firm at $32 billion at its peak. Equity holders are likely to be wiped out now that FTX has filed chapter 11. Customers are facing big losses and generally must be paid ahead of stockholders.

Forma Brands LLC, the parent company of beauty retailer Morphe LLC, filed for bankruptcy in Delaware on Thursday as it reached a deal with lenders including Jefferies and Cerberus Capital Management, Bloomberg News reported. As part of the agreement, secured creditors will take over Forma’s wholesale operations, online platforms and international Morphe retail stores while providing $33 million of new money, subject to court approval, according to a company statement. The court filing caps a tumultuous two-and-a-half years for the San Francisco-based company that failed to see revenues grow in spite of marketing deals with youtubers and influencers. The retailer recently announced that it would shutter all of Morphe’s retail locations in the U.S. It had to cut ties with two of its big three influencers and wrestle with a litany of litigation for missed rent and vendor payments. Forma has between $500 million and $1 billion in liabilities, according to court documents.

The owner of a former vermiculite mine in northwestern Montana that spread harmful asbestos in and around the town of Libby has offered $18.5 million to settle the last of the state’s claims for environmental damages, Gov. Greg Gianforte announced on Tuesday, the Associated Press reported. The proposed settlement was filed in W.R. Grace & Co.’s bankruptcy case in Delaware for the Libby Asbestos Superfund Site in Lincoln County. Asbestos from a vermiculite mine owned by W.R. Grace beginning in 1963 polluted the area until the mine was shuttered in 1990. Cleanup began in 2000, after media reports spurred federal officials to investigate widespread health problems among area residents. Health officials estimate that several thousand people have been sickened in northwest Montana from exposure to Libby’s asbestos and at least 400 have died. More than 2,600 homes, businesses and other properties were cleaned up at a cost of more than $600 million under the U.S. Environmental Protection Agency’s Superfund program for hazardous sites. W.R. Grace agreed in a 2008 settlement to pay the EPA $250 million for cleanup work.

A Menomonee Falls window installer with hundreds of unhappy customers is entering chapter 11 bankruptcy, Fox6Now.com reported. Window Select confirmed that it plans to enter bankruptcy proceedings in late January. More than 400 consumers have filed complaints with Wisconsin Consumer Protection about Window Select. Many said they paid for projects that had not started — or were not finished. Window Select moved out of its headquarters in 2022. The company faces dozens of cases in small claims court.

Crypto exchange FTX will ask a U.S. bankruptcy court on Wednesday to allow it to auction off pieces of its business and to keep customer names secret for at least six months while it works to recover funds lost in what was allegedly a huge fraud, Reuters reported. FTX will ask U.S. Bankruptcy Judge John Dorsey in Delaware to approve procedures for selling affiliates LedgerX, Embed, FTX Japan and FTX Europe as a way of raising funds for customers, who have lost potentially billions of dollars. FTX's founder, Sam Bankman-Fried was indicted on two counts of wire fraud and six conspiracy counts last month in Manhattan federal court for allegedly stealing customer deposits to pay debts from his hedge fund, Alameda Research, and lying to equity investors about FTX's financial condition. He has pleaded not guilty. The four companies FTX intends to sell are relatively independent from the broader FTX group, and each has its own segregated customer accounts and separate management teams, according to FTX court filings. The crypto exchange has said it is not committed to selling any of the companies, but that it received dozens of unsolicited offers. FTX expects to generate additional bids by scheduling auctions in February and March. The U.S. Trustee, a bankruptcy watchdog that is part of the Department of Justice, has opposed selling the affiliates before an extensive investigation can be done into the extent of the FTX fraud allegedly carried out by Bankman-Fried.

Sullivan & Cromwell LLP, the law firm FTX tapped to steer it through bankruptcy, is facing scrutiny from federal lawmakers over whether its lawyers knew about problems at the cryptocurrency exchange before the company collapsed and co-founder Sam Bankman-Fried was charged with fraud, WSJ Pro Bankruptcy reported. A bipartisan group of U.S. senators said in a letter Monday that Sullivan & Cromwell should disclose whether its lawyers suspected fraud at FTX or had concerns about the company’s lacking appropriate legal controls before it filed for chapter 11 in early November. Law firms seeking to work in chapter 11 are required under bankruptcy rules to disclose any past representations that could pose a conflict of interest before they can be officially retained. Sullivan & Cromwell worked for FTX before its collapse, charging more than $8.5 million in legal fees before the bankruptcy, according to the law firm’s retention application. Companies commonly use existing law firms to handle bankruptcy filings, but the arrest of Mr. Bankman-Fried and other former FTX executives has drawn lawmakers’ attention to Sullivan & Cromwell’s prior work for the exchange. Four U.S. senators cited their concerns with the law firm in a letter urging Judge John Dorsey of the U.S. Bankruptcy Court in Wilmington, Del., who is overseeing the FTX case, to appoint an independent examiner to review how and why FTX failed.