Recovery of invested funds in FTX became doubtful as bankruptcy counsel indicated mass theft of assets and related information.
The lead counsel in FTX bankruptcy proceedings, James Bromley, submitted before the District of Delaware court that the remaining assets were vulnerable to cyberattacks risk. While representing debtors, the partner in Sullivan & Cromwell firm indicated hackers are posing the immense threat of sweeping the remaining FTX’s assets.
Earlier in the November 22 proceedings, Bromley acknowledged current FTX chief executive John Ray’s commitment by laying ground to navigate the firm, funds, and employees through the controversial downfall.
While addressing the live-streamed court session, the FTX co-counsel commended the continued presence of employees working at the crypto exchange to secure assets and maintain records.
Substantial Assets and Information Loss
In an explosive remark, Bromley emphasized that besides the crypto assets, physical assets, and cash deposits, debtors were disadvantaged by the continued loss of information he considered an asset. Lamenting the situation, the FTX co-counsel indicated it was unfortunate for the substantial assets stolen or untraceable.
Further, the lead counsel reported FTX platforms experiencing a series of cyberattacks that began from the petition date to subsequent days. Such occurrences have turned inevitable even after engaging sophisticated expertise to shield the systems against hacks.
Multistakeholder Protection Necessary to Secure FTX Assets
The lawyer sympathized with the debtors, citing the declining coffers as a situation that compelled enlisting of several legal, cybersecurity, and blockchain analyst firms. Primarily, Sullivan & Cromwell had, in an earlier submission, indicated engaging Chainalysis given the experience of previous engagement by US government agencies to furnish information critical to the crypto-related enforcement proceedings.
Bromley admitted engaging an undisclosed cybersecurity firm to help resolve the case. Nevertheless, the counsel failed to disclose the identity citing concerns that hackers could target it through cyberattacks.
Mysterious Disappearance of Cryptos Worth Million-dollars
Initial scrutiny of FTX Group platforms shows the massive movement of cryptos. Bromley acknowledged an anonymous actor withdrew 228,523 Ether and facilitated the conversion of funds into Bitcoin. For instance, the counsel cited November 21 as a day when the actor withdrew $200 million ETH and moved them to 12 wallet addresses.
Bromley’s submission commended the reorganized leadership as a priority for FTX chief executive Ray. While celebrating Ray’s priorities, Bromley cast Bankman-Fried as only leading an inexperienced crew of individuals that were often compromised.
The presence of unsophisticated individuals led to massive resignations. Such is evident from court documents indicating Bankman-Fried, relatives, and FTX-senior executives spent over $121 million to acquire properties across the Bahamas, with another firm linked with Alameda Research spending $300 million in real estate.
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