The Roman Catholic Bishop of the Diocese of Santa Rosa plans to file for bankruptcy, and the Diocese is citing the large number of sexual abuse lawsuits it is facing as the key reason why, according to a statement from Bishop Robert F. Vasa, KRON.com reported. After Assembly Bill 218 lifted the statute of limitations for a three-year period, allowing victims to bring civil claims against the Diocese for sexual assault cases that occurred as early as 1962, more claims have come to light. The Diocese is now facing more than 130 sexual assault claims dating back to its establishment in 1962 until the present day. Bishop Vasa says that attorneys representing the Diocese plan to file for chapter 11 protection sometime between Jan. 1 and Mar. 1, 2023. The Bishop noted that the Diocese in Santa Rosa is not the only one to choose this path. Thirty-one dioceses across the U.S. had filed bankruptcy by May of this year, according to the Penn State Law Library. Vasa's statement was also careful to note that parishes and Catholic schools within the area are “separate civil corporations or separate ecclesial entities and should not be parties to this filing.”
Carolina Panthers owner David Tepper and his real estate company are the focus of a criminal investigation to see if they misused any public money in their failed effort to build a practice facility for the NFL team in South Carolina, the Associated Press reported. The York County Sheriff’s Office said state agents and local prosecutors are aiding its investigation, and that the probe does not mean that any crime happened. “An investigation is simply an inquiry and should not create any inference that wrongdoing has been committed by any party,” York County Sheriff Kevin Tolson and Solicitor Kevin Brackett said in a joint statement Thursday night that named Tepper and GT Real Estate, the company created to oversee the construction project. Tepper’s company denied any criminal wrongdoing and suggested the timing of the announcement might be meant to disrupt a settlement the team reached with York County to repay more than $21 million, an amount roughly equivalent to the sales tax money the project received to improve roads around the facility.
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.”
Alex Jones filed for bankruptcy on Friday, less than two months after a jury ordered him and the parent company of his Infowars website to pay nearly $1 billion in compensatory damages to relatives of victims of the 2012 Sandy Hook mass shooting, Reuters reported. Jones filed for chapter 11 protection from creditors with the U.S. bankruptcy court in Houston, a court filing showed. The filing said Jones has between $1 million and $10 million of assets and between $1 billion and $10 billion of liabilities. n October, a Connecticut jury in a case brought by relatives of more than a dozen Sandy Hook victims ordered Jones and Free Speech Systems, the parent company of Infowars, to pay nearly $1 billion in damages. Free Speech Systems filed for bankruptcy in July. In a separate case in Texas, a jury in August decided Jones must pay the parents of a 6-year-old boy killed in the Sandy Hook massacre $45.2 million in punitive damages, on top of $4.1 million in compensatory damages.
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.
BlockFi Inc. told a U.S. bankruptcy court on Tuesday it was blindsided by cryptocurrency exchange FTX’s rapid demise and would work to repay creditors and allow customers access to their digital wallets as soon as possible, WSJ Pro Bankruptcy reported. Jersey City, N.J.-based BlockFi, which secured a rescue loan from FTX in June to shore up its liquidity, reviewed unaudited FTX financial reports as part of due diligence it performed at the time of the transactions, said Joshua Sussberg, a lawyer for BlockFi, during its debut hearing in the U.S. Bankruptcy Court in Trenton, N.J. BlockFi filed for chapter 11 on Monday after the loan fell apart in the wake of FTX’s collapse earlier in November. BlockFi, which also counts FTX as one of its largest borrowers, is an early victim brought down by FTX’s downfall in an exceptionally intertwined and lightly regulated sector. Over the past few months, since a drastic drop in crypto prices that has wiped out roughly two-thirds of the sector’s market value, crypto hedge fund Three Arrows Capital, digital-assets lender Celsius Network LLC and crypto brokerage firm Voyager Digital have filed for chapter 11 protection. Given its entangled relationship with FTX, BlockFi on Tuesday sought to distinguish itself from the failed platform by assuring customers that it had appropriate internal controls in place and that it is working to return client funds as soon as possible. Read more.
In related news, a BlockFi representative laid the blame for the crypto lender’s bankruptcy filing on Monday squarely on FTX Trading, whose Alameda Research affiliate defaulted on $680 million of collateralized loans to the digital financing platform, Forbes reported. BlockFi also sued a company controlled by FTX founder Samuel Bankman-Fried, apparently seeking to take control of a 56.3 million-share stake in the online brokerage Robinhood, after a separate default. In the bankruptcy case, an affidavit by Mark A. Renzi of Berkeley Research Group, a proposed financial adviser to BlockFi, revealed what the company’s communications earlier in the day hinted at: that financial exposure to the collapsed FTX conglomerate was the proximate cause of Monday’s petition for protection from creditors. FTX had engineered a bailout of BlockFi over the summer, as the collapse of the luna and terraUSD cryptocurrencies set off a cascade of liquidity events in the digital assets market. The deal had included a credit line of $400 million that BlockFi could tap. The company borrowed about $275 million, the affidavit indicated, and then sought $125 million more on November 8. FTX did not provide the additional funds, and it filed its own chapter 11 case three days later. Read more.
The company tasked with locking down the assets of the failed cryptocurrency exchange FTX says it has managed to recover and secure $740 million in assets so far, a fraction of the potentially billions of dollars likely missing from the company’s coffers, the Associated Press reported. The numbers were disclosed on Wednesday in court filings by FTX, which hired the cryptocurrency custodial company BitGo hours after FTX filed for bankruptcy on Nov. 11. The biggest worry for many of FTX’s customers is they’ll never see their money again. FTX failed because its founder and former CEO Sam Bankman-Fried and his lieutenants used customer assets to make bets in FTX’s closely related trading firm, Alameda Research. Bankman-Fried was reportedly looking for upwards of $8 billion from new investors to repair the company’s balance sheet. The $740 million figure is from Nov. 16. BitGo estimates that the amount of recovered and secured assets has likely risen above $1 billion since that date. The assets recovered by BitGo are now locked in South Dakota in what is known as “cold storage,” which means they’re cryptocurrencies stored on hard drives not connected to the internet. BitGo provides what is known as “qualified custodian” services under South Dakota law. It’s basically the crypto equivalent of financial fiduciary, offering segregated accounts and other security services to lock down digital assets.
Collapsed cryptocurrency exchange FTX remains the subject of "an active and ongoing investigation" by Bahamian authorities, Bahamian Attorney General Ryan Pinder said on Sunday, as he praised the Bahamas' regulatory regime and swiftness with which it responded to the crisis, Reuters reported. FTX, which had been among the world's largest cryptocurrency exchanges, is headquartered in the Bahamas. The firm, whose liquidity crunch forced the company to declare bankruptcy on Nov. 11, is the subject of investigations by Bahamian and U.S. authorities. In mid-November, the Royal Bahamas Police said that government investigators in the Bahamas were looking at whether any "criminal misconduct occurred." "We are in the early stages of an active and ongoing investigation," Pinder said on Sunday, according to prepared remarks for the speech. "It is a very complex investigation." He said it involved both civil and criminal authorities. Pinder said that the Bahamas Securities Commission, Financial Intelligence Unit and the police's Financial Crimes Unit would "continue to investigate the facts and circumstances regarding FTX's insolvency crisis, and any potential violations of Bahamian law."
Cryptocurrency flows through a largely unregulated financial system every day and the industry answers to no governmental authority, according to a WSJ Pro Bankruptcy commentary. These upstarts pride themselves on sticking it to the established financial system. And yet, some of the most celebrated crypto executives have revealed themselves to be far worse guardians of capital than their traditional counterparts, according to the commentary. FTX, along with other crypto platforms, touted itself as a better option than traditional banks and brokerages all with little to no internal or regulatory oversight. As was laid bare in a U.S. bankruptcy court on Tuesday, the exchange’s ousted co-founder Sam Bankman-Fried took control of customers’ money and put it in undisclosed risky investments. He and his inner circle also appear to have been entangled in the business, in a way a lawyer for the firm described as “a personal fiefdom” of Mr. Bankman-Fried. FTX’s sister company, Alameda Research LLC, lent Mr. Bankman-Fried $1 billion, the company used corporate funds to buy swanky properties for senior staff in the Bahamas without proper record-keeping and bosses approved expenses using emoji, according to the firm’s new management. All this only came out once the firm collapsed into bankruptcy and the world got the first glimpse into its affairs. The digital-assets sector ballooned in the last decade to a peak of roughly $3 trillion globally last year. That growth has mostly taken place under the banner of building a decentralized financial system to upend traditional systems, where a handful of mega banks and broker dealers control the vast majority of financial transactions. Read more.
*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.
