Insolvent cryptocurrency exchange FTX could have as many as one million investors who are seeking to recoup their losses.
The Bahamian-based brokerage filed for bankruptcy after facing massive liquidity issues when its acquirer, Binance, backed out of a merger.
The bankruptcy attorneys for FTX, Landis Rath & Cobb and Sullivan and Cromwell, said on Nov. 15 that the number of creditors could exceed one million, according to a filing with the U.S. Bankruptcy Court for the District of Delaware.
“In fact, there could be more than one million creditors in these Chapter 11 Cases,” according to the filing.
The company plans to file an updated list of creditors that will include the top 50 creditors instead of a standard Top 20 list by Friday.
“As such, the Debtors submit that cause exists to modify that requirement such that the Debtors will file a consolidated list of their top 50 creditors (the “Top 50 List”) in lieu of a top 20 list for each Debtor on or before November 18, 2022.”
FTX had said in its initial Chapter 11 bankruptcy protection filing that the company had over 100,000 creditors with claims.
FTX has also appointed five new independent directors for FTX’s main parent companies, according to the filing.
The lead independent director is former Delaware district judge Joseph J. Farnan.
During the past 72 hours, the company has been “in contact with dozens of regulators in the U.S. and overseas, the lawyers said.
The regulators include the U.S. Attorney’s Office, the Securities and Exchange Commission and the Commodity Futures Trading Commission and “dozens of Federal, state and international regulatory agencies.”
Several other crypto firms, including Celsius and Voyager Digital, also filed for bankruptcy in 2022 as they also faced liquidity issues and falling prices in bitcoin and other digital asset prices.
FTX was an exchange used by crypto investors that included retail and institutional traders such as several hedge funds. It was backed by numerous high profile venture capitalists such as SoftBank, Ontario Teachers’ Pension Plan, Sequoia Capital, Temasek, Sea Capital, IVP, ICONIQ Growth, Tiger Global, Ribbit Capital, Lightspeed Venture Partners, and funds and accounts managed by BlackRock.
The insolvency of FTX, which filed for Chapter 11 bankruptcy on Nov. 11, appears to have occurred when its founder Sam Bankman-Fried reportedly transferred $10 billion of customer funds from FTX to his cryptocurrency trading platform Alameda Research, according to Reuters, which cites two sources that “held senior FTX positions until this week.”
FTX faces a shortfall of $1.7 billion, one source told Reuters, while the other source said between $1 billion and $2 billion was missing. Bankman-Fried, who resigned as CEO, was once hailed as the savior of the sector during the liquidity crisis of last summer. His company was valued at $32 billion in February.