Official Committee of Unsecured Creditors of FTX Responds to IRS’s $44 Billion Claims

The Official Committee of Unsecured Creditors of FTX, a now-bankrupt cryptocurrency exchange, has publicly responded to the U.S. Internal Revenue Service’s (IRS) staggering $44 billion in claims against various debtors affiliated with FTX.

The committee made the acknowledgment via a recent tweet, stating: “On April 27 and 28, the U.S. Internal Revenue Service submitted numerous proofs of claim asserting substantial claims against various Debtors. The Debtors and the Committee are in the process of assessing the nature, validity, priority, and amount of such claims.”

The response comes on the heels of the IRS filing a substantial number of claims against FTX and its associated entities. According to bankruptcy filings dated April 27 and 28, the IRS presented 45 claims against FTX companies. These include West Realm Shires, the legal entity of FTX.US, Ledger Holdings, the parent company of LedgerX and LedgerPrime, and Blockfolio.

The claims filed by the IRS are significant, with Alameda Research LLC facing a $20.4 billion claim and a $7.9 billion claim. Moreover, two claims amounting to $9.5 billion have been lodged against Alameda Research Holdings Inc. These filings underscore the scale of the financial and regulatory challenges now confronting these entities.

This substantial assertion of claims by the IRS highlights the potential financial risks and regulatory hurdles faced by cryptocurrency companies, particularly those with operations across different jurisdictions.

As the involved parties grapple with the immense claims and their validity, the implications for the broader cryptocurrency industry could be profound. The bankruptcy of FTX and the ensuing IRS claims underline the critical importance of compliance with tax laws within the cryptocurrency realm.

The complexities surrounding the nature, validity, priority, and amount of the IRS claims will likely take weeks, if not months, to fully unpack. In the meantime, all eyes within the crypto industry will be on FTX and its affiliates as they navigate these unprecedented challenges.


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FTX CEO John Ray III Confirms Plans for FTX 2.0 Amidst Legal Proceedings

In a recent disclosure of the CEO’s legal billings, FTX CEO John J. Ray III has confirmed the existence of plans for FTX 2.0, the next iteration of the cryptocurrency exchange. The disclosed legal billings, totaling $290,190.39, shed light on the ongoing efforts by Ray and his team to recover funds and rebuild the collapsed exchange.

John J. Ray III, an esteemed American attorney with expertise in recovering funds from failed corporations, was appointed as the CEO of FTX following the exchange’s collapse in November 2022. Since then, Ray has been diligently working to chart a course for the future of FTX, aiming to restore its former glory and ensure a more stable and secure platform for its users.

The announcement of FTX 2.0 plans had an immediate impact on the market, particularly on the FTX exchange native token, FTT. The news caused a significant surge in FTT’s value, with the token pumping nearly 24% at its peak. 

While the plans for FTX 2.0 have been confirmed, no concrete timetable has been established. The disclosed information reveals that, thus far, there is no tangible evidence of a comprehensive plan to restart the exchange, aside from internal sketches. However, Ray has not entirely ruled out the possibility of such a plan materializing in the future.

Amidst the news of FTX 2.0, concerns arise regarding the creditors of the collapsed exchange. On May 10, 2023, the United States Department of Treasury and Internal Revenue Service (IRS) filed 45 claims worth $44 billion against FTX and its subsidiaries, further complicating the financial landscape. It remains uncertain whether the creditors will receive any compensation from the potential reboot of FTX.


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FTX Group and Alameda Research Recover Crypto Assets

After filing for bankruptcy and coming under new management, FTX Group and its affiliated companies, including Alameda Research, have been actively trying to recover funds from firms they previously sent crypto to.

FTX reached a settlement with hedge fund Modulo Capital on March 23, allowing it to recover $460 million previously invested in the fund. On May 4, FTX filed a motion to claw back $4 billion it allegedly lent to bankrupt crypto lending firm Genesis Global.

Meanwhile, Alameda Research recently received approximately $60 million worth of digital assets from OKX as part of a recovery effort to pay back customers of FTX. According to data from crypto analytics platform Arkham Intelligence, the funds included Mask Network (MASK) tokens and the Tether (USDT) stablecoin, and were spread out among 16 separate transactions.

Alameda Research currently holds over $284 million worth of assets in its crypto wallets, with its largest holdings being USDT, BitDAO (BIT), Ether (ETH), and Stargate Finance (STG).

FTX and Alameda Research’s recovery efforts come after a tumultuous period that saw the companies file for bankruptcy in November following a liquidity crisis. Alameda Research’s former CEO, Caroline Ellison, has been charged with fraud for allegedly colluding with former FTX CEO Sam Bankman-Fried to misappropriate FTX customer funds.

In summary, FTX Group and Alameda Research are making progress in recovering lost crypto assets, with FTX reaching a settlement with Modulo Capital and seeking to claw back funds from Genesis Global, while Alameda Research received $60M from OKX in a recovery effort. The recovery efforts come after FTX Group and its affiliated companies filed for bankruptcy in November following a liquidity crisis.


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Google, UK, FTX and Binance in Crypto News

In the latest crypto news, Google has expanded its Web3 program by adding 11 blockchain partners to its Google for Startups Cloud Program. The program will provide expertise, grants, and services to emerging Web3 entrepreneurs. The UK government has also allocated $125 million to establish an AI task force aimed at promoting the country’s sovereign capabilities, such as public services, and fostering the adoption of safe and reliable AI foundation models. On the other hand, FTX has agreed to sell its LedgerX futures and options exchange and clearinghouse to M7 Holdings for $50 million, while Binance.US has backed out of its $1 billion Voyager asset purchase due to the “hostile and uncertain regulatory climate in the United States.”

In more detail, Google has partnered with 11 Web3 blockchain firms, such as Alchemy, Polygon, Celo, and Hedera, to expand its Google for Startups Cloud Program. As part of the program, pre-seed Web3 startups can receive up to $2,000 in Google Cloud credits valid for two years, while seeded startups can access $200,000 over two years for Google Cloud and Firebase usage. Additionally, blockchain partners are offering grants of up to $3 million to seeded companies in the program. Nansen, a blockchain analytics company, has also partnered with Google Cloud to provide real-time blockchain data for startups.

Meanwhile, the UK government has launched an AI task force to accelerate the country’s readiness for AI. The task force will focus on promoting sovereign capabilities, such as public services, and fostering the adoption of safe and reliable AI foundation models. The task force aims to launch its first pilots of AI usage and integration targeting public services in the next six months. The UK is committed to becoming a science and technology superpower by 2030 and is pushing for “safe AI” that regulates technology to “keep people safe” without limiting innovation.

In terms of cryptocurrency exchanges, FTX has agreed to sell its LedgerX futures and options exchange and clearinghouse to M7 Holdings for $50 million. The deal is subject to approval from the US Bankruptcy Court for the District of Delaware, which is scheduled to hear the case on May 4. FTX purchased LedgerX in August 2021 to expand its spot trading services, and the sale is part of FTX’s efforts to monetize assets and deliver recoveries to stakeholders.

On the other hand, Binance.US has backed out of its agreement to purchase bankrupt cryptocurrency brokerage Voyager Digital’s assets for $1 billion, citing the “hostile and uncertain regulatory climate in the United States.” The Voyager Official Committee of Unsecured Creditors expressed its disappointment at the news and said it was investigating potential claims against Binance.US. Voyager and the creditors’ committee will now work on distributing cash and crypto to customers directly via the Voyager platform.

In conclusion, the crypto world has seen significant developments this week, from Google expanding its Web3 program to the UK government allocating funding for an AI task force. FTX is set to sell LedgerX, and Binance.US backs out of the Voyager asset purchase. The industry remains dynamic and unpredictable, with companies and governments adapting to the ever-changing regulatory environment.


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Celsius Creditors Seek Help from Bankruptcy Judge to Uncover Potential Market Manipulation

Creditors of Celsius Network have requested the help of a bankruptcy judge to investigate potential market manipulation of Celsius’ CEL token. The creditors, represented by a committee, are seeking information from cryptocurrency exchange FTX regarding users associated with 10 wallets that were allegedly involved in suspicious trades of the CEL coin between April and August 2022. The creditors suspect that the trades may have artificially inflated the price of the CEL token and want to determine if they were legitimate or constituted market manipulation, such as wash trading.

To identify the suspicious transactions, the committee employed the services of blockchain consultant Elementus. According to Elementus, 947 transactions involving a near one-to-one relationship of CEL token deposits and withdrawals occurred over three-day periods between 10 private wallets and 10 FTX-operated wallets. The committee believes that the information from FTX will be crucial in determining whether the trades were intended to inflate the price of CEL token artificially.

In addition to uncovering potential market manipulation, the committee is also requesting information regarding any short positions taken on CEL. The committee believes that short positions could have had a negative impact on the price of the CEL token, and that this information could also be critical in resolving a dispute related to Celsius’ bankruptcy.

The creditors are seeking permission from the bankruptcy judge to issue subpoenas to FTX to obtain the requested information. The request for subpoenas was made in court papers filed on April 26. The information obtained from FTX could be important in resolving disputes related to Celsius’ bankruptcy.

Meanwhile, FTX is pending approval from the United States Bankruptcy Court for the District of Delaware to sell LedgerX, its futures and options exchange and clearinghouse, to an affiliate of Miami International Holdings for approximately $50 million. The sale is expected to provide FTX with the funds needed to pay back its creditors. A hearing to approve the sale is scheduled for May 4.

In conclusion, the Celsius creditors’ request for subpoenas to FTX reflects their efforts to investigate potential market manipulation of the CEL token. The information obtained from FTX could be crucial in determining whether the trades involving CEL were legitimate or constituted market manipulation, and could be important in resolving disputes related to Celsius’ bankruptcy. Meanwhile, FTX’s pending sale of LedgerX is expected to provide the exchange with the funds needed to pay back its creditors.


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Binance Executive Accuses Former FTX CEO of Spreading Fake Rumors

Binance executive Patrick Hillmann recently took to Twitter to accuse former FTX CEO Sam Bankman-Fried, also known as SBF, of spreading “fake rumors” about Binance CEO Changpeng “CZ” Zhao. Hillmann claimed that Bankman-Fried used his influence to label Zhao as an “evil Chinese” in an attempt to perpetuate his alleged scams at FTX.

The public relationship between SBF and CZ had been often antagonistic, with the two exchanges having financial ties. However, Hillmann’s recent comments suggest that Bankman-Fried had taken things further than what was publicly visible. Hillmann also claimed that the denigration of CZ was the norm at FTX and had nothing to do with the decision to sell the worthless FTT on the company’s books.

The rivalry between FTX and Binance came to a head when CZ announced plans for Binance to liquidate its position in FTX Token (FTT) prior to FTX’s bankruptcy, hinting that Binance would consider purchasing the competitor. However, when the deal fell apart, and FTX filed for Chapter 11, the two industry heads traded barbs through social media. CZ called SBF a “fraudster,” and the former FTX CEO suggested that Zhao lied about the buyout discussions.

Despite the animosity between the two leaders, Zhao continues to lead Binance as CEO and regularly posts messages on social media. In contrast, Bankman-Fried faces 13 federal charges, including those related to bribery and wire fraud. As part of his bail conditions, he has only limited internet access.

Bankman-Fried’s alleged actions to denigrate CZ raise concerns about the role of social media in perpetuating rivalries and conflicts within the crypto industry. As crypto exchanges continue to grow in size and importance, it is crucial for their leaders to maintain a professional and respectful public image. Failure to do so could lead to reputational damage and undermine investor trust in the entire industry.

The rivalry between FTX and Binance is not unique in the crypto industry. The space is known for its intense competition, with companies vying for dominance in an emerging market with vast potential. However, the leaders of these companies must remember that they have a responsibility to act with integrity and professionalism in their public statements and behavior.

In conclusion, Hillmann’s accusations against Bankman-Fried highlight the need for greater scrutiny of the conduct of crypto industry leaders. As the industry continues to grow and evolve, it is important for regulators and investors to demand transparency and accountability from these companies and their leaders. Only by doing so can we ensure that the promise of crypto technology is fulfilled in a way that benefits everyone.


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Former US Secret Service Officer Warns of FTX Customer Targeting Risk

Jeremy Sheridan, a former assistant director of the United States Secret Service Office of Investigations, has warned of the potential risks to FTX customers if their personal information is made public. In an April 20th declaration, Sheridan supported a motion from the debtors of FTX, a failed cryptocurrency exchange, to withhold the confidential information of its users from public release.

According to Sheridan, who is currently a managing director for FTI Consulting, the release of names associated with the failed crypto exchange could lead to severe consequences. He stated that such disclosure could impose “a severe and unusual risk of identity theft, asset theft, personal attack, and further online victimization” on FTX customers.

The former Secret Service officer went on to explain that the public disclosure of FTX customers’ names would provide potential malefactors with an itemized list of vulnerable targets. He warned that releasing the schedules of assets and liabilities of FTX customers could provide attackers with a menu of potential targets and the cryptocurrency holdings of each debtor.

Sheridan’s warning comes in the wake of FTX’s recent bankruptcy filing in the United States. The company had been struggling financially for some time, and the filing was seen as an inevitable step for the exchange.

The motion to withhold confidential information was supported by Sheridan and several other experts in the field. They argued that the release of personal information could have a significant impact on FTX customers, particularly given the prevalence of identity theft and cybercrime.

In recent years, the number of cyberattacks and data breaches has increased dramatically, with companies and individuals around the world falling victim to hackers and other malicious actors. In many cases, these attacks have resulted in the theft of personal and financial information, leaving victims vulnerable to further exploitation.

Given this threat, it is clear that the release of personal information could have a severe impact on FTX customers. The potential for identity theft and asset theft, as highlighted by Sheridan, is a very real concern, and it is essential that measures are taken to protect the privacy and security of FTX users.

In conclusion, Sheridan’s warning highlights the need for caution when it comes to the release of personal information. As we move further into the digital age, it is clear that cybersecurity will become an increasingly important issue, and it is essential that individuals and companies take steps to protect themselves from the risk of cybercrime.


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Tribe Capital explores injecting capital into bankrupt FTX exchange

Tribe Capital, a San Francisco-based venture capital firm, is reportedly exploring the possibility of injecting new capital to revive the bankrupt cryptocurrency exchange, FTX. Bloomberg reported on April 18 that Tribe Capital is considering leading a $250 million fundraising campaign, with $100 million from itself and its limited partners. According to sources familiar with the matter, Tribe co-founder, Arjun Sethi, met with FTX’s Committee of Unsecured Creditors in January to discuss the informal proposal.

The venture capital firm’s proposal in January included an estimated 9 million customer accounts, FTX US, FTX Australia, FTX Japan, FTX EU, FTX International, and LedgerX. However, the proposal excluded a venture capital portfolio and crypto assets, among others. If the reboot plan is successful, the revived exchange would retain the name FTX.

On April 18, the Official Committee of Unsecured Creditors of FTX confirmed via Twitter that it was “working with the Debtors to evaluate all options to reboot or sell the FTX exchanges and create value for creditors.” However, the committee added that “there is no definitive timetable for a reboot or sale of the exchanges at this time.”

In January, the judge overseeing the FTX bankruptcy proceedings gave the troubled crypto exchange approval to sell some of its assets to help repay its creditors. According to a filing in Delaware Bankruptcy Court, Judge John Dorsey approved the sale of four key units of FTX – the derivatives platform LedgerX, stock-trading platform Embed, and the exchange’s regional arms, FTX Japan and FTX Europe.

Attorneys from Sullivan & Cromwell, representing FTX at a hearing in the United States Bankruptcy Court for the District of Delaware on April 12, stated that the exchange had recovered approximately $7.3 billion in liquid assets. This development offers hope for the future of the exchange, and it is possible that Tribe Capital’s proposed capital injection could be a critical step in FTX’s revival.

FTX was one of the fastest-growing cryptocurrency exchanges in the world, with a valuation of $18 billion in December 2021. The exchange was founded in 2019 by Sam Bankman-Fried, a former Wall Street quant trader, and Gary Wang, a software developer. The exchange’s meteoric rise was driven by its advanced trading infrastructure and innovative products, such as leveraged tokens and prediction markets.

However, in December 2021, the exchange suffered a massive blow when it was hit by a wave of liquidations caused by the collapse of its risk-management system. The incident resulted in the loss of over $4 billion in customer funds, triggering a chain of events that led to the exchange’s bankruptcy.

Tribe Capital’s potential involvement in FTX’s revival is significant given its previous investment in the exchange. The venture capital firm was part of a group of investors that participated in FTX’s $900 million funding round in July 2021. However, Tribe Capital was also an investor in Archegos Capital Management, the family office that triggered a $20 billion margin call in March 2021, resulting in significant losses for several banks. The firm’s involvement with Archegos led some to question its due diligence processes and risk management practices.


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Law Firm Pleads with Shaquille O Neal to Acknowledge Legal Complaint

The Moskowitz Law Firm, representing victims affected by the FTX collapse, has publicly appealed to NBA superstar Shaquille O’Neal to acknowledge its legal complaint. The firm has been standing outside TNT studios in Atlanta all week, where O’Neal is employed as a television host, attempting to serve him on behalf of FTX investors regarding his previous endorsement of the now-defunct crypto exchange. However, his security guards have not allowed them in to deliver the legal complaint.

O’Neal is the only one among the “FTX celebrities” named in the class-action lawsuit filed against several celebrities for endorsing FTX, including Tom Brady, Steph Curry, and Larry David, who has not yet been served. The law firm has stated that O’Neal has been “running” from them “for 3 months” and should show courtesy and honor by allowing its process servers to deliver the legal complaint on his behalf. This will enable him to defend his “actions in this matter.”

The Moskowitz Law Firm’s public plea highlights the legal challenges faced by FTX investors who lost funds due to the exchange’s collapse. It also emphasizes the responsibility of celebrities who endorse cryptocurrency platforms to understand the risks and potential impact of their actions on investors.

FTX was a major cryptocurrency exchange that collapsed in 2019, resulting in significant losses for its investors. The collapse led to a class-action lawsuit filed by affected investors against several celebrities who endorsed FTX. O’Neal, as one of the endorsers, is now being pursued by the Moskowitz Law Firm to acknowledge its legal complaint.

The Moskowitz Law Firm’s plea to O’Neal reflects the importance of acknowledging legal complaints and taking responsibility for one’s actions. It also highlights the need for greater transparency and accountability in the cryptocurrency industry to protect investors and prevent similar collapses from occurring in the future.


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FTX Control Failures

FTX, a multi-billion dollar cryptocurrency company, has faced control failures due to inadequate financial and accounting controls, an inadequate group management structure, and the use of software not suitable for large companies, according to CEO John Ray III. In a court filing in April 2021, Ray gave a detailed account of the deficiencies that his restructuring team had identified at FTX.

Ray noted that FTX relied on a hodgepodge of Google documents, Slack communications, shared drives, and Excel spreadsheets to manage its assets and liabilities. The company used QuickBooks for its bookkeeping, which Ray said was designed for small and mid-sized businesses and not for a company that operates across multiple continents and platforms like FTX. As a result, around 80,000 transactions were left as unprocessed accounting entries in “catch-all QuickBooks accounts titled ‘Ask My Accountant.'”

According to Ray, FTX was run by three inexperienced people “not long out of college” who controlled almost every significant aspect of the company. Co-founders Sam Bankman-Fried and Gary Wang, along with former engineering director Nishad Sing, had the “final voice in all significant decisions” despite their limited experience. An unnamed FTX executive noted that “if Nishad [Singh] got hit by a bus, the whole company would be done. Same issue with Gary [Wang].”

It was also reported that FTX failed to file its financials on time at the end of financial reporting periods and did not carry out back-end checks to identify and correct material errors. Additionally, the company couldn’t provide a complete list of its employees at the time of bankruptcy filing in November.

Brett Harrison, the president of FTX.US, raised concerns regarding “the lack of appropriate delegation of authority, formal management structure, and key hires at FTX.US.” However, when Harrison voiced his concerns to Bankman-Fried and Singh, his bonus was significantly reduced, and he was instructed to apologize to Bankman-Fried by the firm’s internal counsel. Harrison refused and resigned following the disagreement.

Ray stated that when he took control of FTX in November, there was “not a single list of anything” related to bank accounts, income, insurance, or personnel, which caused a “massive scramble for information.” He also pushed back against the motion to assign an independent examiner to the bankruptcy case out of fears that “inadvertent errors” could result in “hundreds of millions of dollars of value being destroyed.”

In conclusion, FTX’s control failures were due to a lack of appropriate financial and accounting controls, an inadequate group management structure, and the use of software not suitable for large companies. Inexperienced founders controlled the company, and it relied on a hodgepodge of online shared documents and communications.


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