{"id":15076,"date":"2022-12-02T15:49:50","date_gmt":"2022-12-02T15:49:50","guid":{"rendered":"https:\/\/crowdfundjunction.com\/blog\/us-trustee-plans-to-appoint-an-examiner-to-ftx-case-while-sbf-describes-strange-margin-trading-practices-bitcoin-news\/"},"modified":"2022-12-02T15:49:50","modified_gmt":"2022-12-02T15:49:50","slug":"us-trustee-plans-to-appoint-an-examiner-to-ftx-case-while-sbf-describes-strange-margin-trading-practices-bitcoin-news","status":"publish","type":"post","link":"https:\/\/crowdfundjunction.com\/blog\/us-trustee-plans-to-appoint-an-examiner-to-ftx-case-while-sbf-describes-strange-margin-trading-practices-bitcoin-news\/","title":{"rendered":"US Trustee Plans to Appoint an Examiner to FTX Case, While SBF Describes Strange Margin Trading Practices \u2013 Bitcoin News"},"content":{"rendered":"

(Originally posted on : Bitcoin News )<\/b>
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On Dec. 1, 2022, an attorney for the U.S. Trustee submitted a written letter to Delaware bankruptcy court officials that seeks to establish an independent examiner to investigate the FTX Chapter 11 bankruptcy proceedings. The U.S. Trustee explained in the letter that FTX\u2019s collapse was comparable to complex bankruptcy cases like Lehman\u2019s, Washington Mutual Bank\u2019s, and New Century Financial\u2019s. Moreover, while the U.S. Trustee submitted a filing that requested a third-party examiner, former FTX CEO Sam Bankman-Fried has continued to appear in numerous interviews with the media.<\/strong><\/p>\n

U.S. Trustee: An Examiner Should \u2018Investigate the Substantial and Serious Allegations of Fraud\u2019<\/h2>\n

The U.S. Trustee, a component of the U.S. Department of Justice, is getting involved with the FTX bankruptcy case after attorney Andrew Vara filed a request<\/a> for an independent examiner. The regulatory entity is responsible for overseeing the administration of bankruptcy proceedings in order to make sure it protects the integrity of the Federal bankruptcy system.<\/p>\n

Vara\u2019s filing cites the current FTX CEO John Ray\u2019s initial testimony<\/a>, which noted at FTX there was a \u201ccomplete failure of corporate controls [and] a complete absence of trustworthy financial information.\u201d Vara says that the FTX collapse \u201cis likely the fastest big corporate failure in American history, resulting in these \u2018free fall\u2019 bankruptcy cases.\u201d<\/p>\n

Furthermore, the U.S. Trustee attorney compared the FTX fallout to some of the largest bankruptcies in history. \u201cLike the bankruptcy cases of Lehman, Washington Mutual Bank, and New Century Financial before them, these cases are exactly the kind of cases that require the appointment of an independent fiduciary to investigate and to report on the debtors\u2019 extraordinary collapse,\u201d Vara\u2019s filing details. The U.S. Trustee believes that appointing an independent examiner would be in the interests of debtors and creditors.<\/p>\n

Further, Vara insists that the FTX collapse should be investigated thoroughly for any types of financial misconduct and fraud. \u201cAn examiner could\u2014and should\u2014investigate the substantial and serious allegations of fraud, dishonesty, incompetence, misconduct, and mismanagement by the debtors, the circumstances surrounding the debtors\u2019 collapse, the apparent conversion of exchange customers\u2019 property, and whether colorable claims and causes of action exist to remedy losses.\u201d<\/p>\n

Kraken\u2019s Jesse Powell: \u2018SBF Is Completely Full of Sh** About How Margin Trading Works\u2019<\/h2>\n

While the U.S. Trustee\u2019s filing with the bankruptcy court was being submitted, Sam Bankman-Fried (SBF) decided it would be a good idea to do an interview on Twitter Spaces<\/a>. The disgraced crypto CEO was invited by Mario Nawfal and tens of thousands of people tuned in to listen. SBF avoided a lot of the questions by noting that he wasn\u2019t aware of certain specifics that happened, and he also said that he didn\u2019t have good information because he was no longer in control of FTX.<\/p>\n

Despite the lack of information, SBF answered questions for roughly two hours, and he described an odd margin and lending process, one that was completely contradictory to how traditional derivatives exchanges are supposed to work. Kraken\u2019s Jesse Powell called SBF\u2019s description of margin trading complete bologna.<\/p>\n

\u201cSBF is completely full of sh** about how margin trading works,\u201d Powell said<\/a> during the interview on Thursday evening (ET). \u201cHe\u2019s saying that the whole exchange operated on a net account equity model and anybody could borrow anything (in any amount?) from client funds or from nowhere. That\u2019s not how it should work. \u2018It all added up if you counted negative balances as 100% recoverable\u2019 WTF!? No, dude. Borrowing 10,000 BTC<\/a> from client balances vs FTT at \u2018mark-to-market\u2019 is not just bad risk management,\u201d Powell opined<\/a>:<\/p>\n

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It is obfuscated fraud. The only [difference] between SBF & Madoff is Madoff didn\u2019t have a token.<\/p>\n<\/blockquote>\n

During his interview, SBF explained that he feels \u201cincredibly bad about\u201d about the situation and that he recently acquired a new lawyer. \u201cI do have legal counsel right now. I have new legal counsel,\u201d SBF told attendees listening to Nawfal\u2019s Twitter Spaces event. Despite SBF having a really hard time remembering specifics, attendees insist SBF admitted to co-mingling FTX\u2019s spot exchange books with FTX\u2019s margin books. Bank to the Future\u2019s Simon Dixon explained<\/a>:<\/p>\n

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We managed to get [Sam Bankman-Fried] to straight up admit that FTX spot [and] margin hot wallets were co-mingled including Alameda [and] FTX accounts (Custody & Collateral). Backing a [bitcoin] loan to go short or VC invest with illiquid FTT as collateral means custody.<\/p>\n<\/blockquote>\n

The former FTX CEO\u2019s interview was a bit more revealing than the interviews he has done during his media tour<\/a>. Some of the Twitter Spaces guests believe SBF\u2019s main motivation to speak to people is so he can paint a better picture of himself to stay out of jail<\/a>. SBF also admitted that withdrawals to Bahamian residents did happen, and possibly on two occasions.<\/p>\n

The fact is, no one is certain about why SBF is doing these interviews, but many of the Twitter Spaces listeners believed he simply dodged questions and answered them in a very calculated manner. With the U.S. Trustee looking to appoint a third-party examiner to investigate the possibility of misconduct, it is possible the examiner may find SBF\u2019s interviews quite interesting.<\/p>\n

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\nTags in this story
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alameda<\/a>, Andrew Vara<\/a>, Bank to the Future<\/a>, borrow<\/a>, co-mingling<\/a>, department of justice<\/a>, DOJ<\/a>, Fraud<\/a>, FTT<\/a>, FTT collateral<\/a>, FTX collapse<\/a>, FTX’s margin books<\/a>, FTX’s spot exchange books<\/a>, independent examiner<\/a>, independent examiner FTX<\/a>, Investigation<\/a>, Jesse Powell<\/a>, Kraken<\/a>, leverage<\/a>, Margin Trading<\/a>, Mario Nawfal<\/a>, misconduct<\/a>, Simon Dixon<\/a>, Trustee FTX<\/a>, US Trustee<\/a>, US Trustee Case<\/a>, US Trustee FTX<\/a><\/div>\n<\/div>\n

What do you think about the U.S. Trustee aiming to appoint an independent examiner to investigate the FTX Chapter 11 bankruptcy proceedings? What do you think about SBF\u2019s odd descriptions about margin trading and why he\u2019s doing interviews? Let us know what you think about this subject in the comments section below. <\/strong><\/em><\/p>\n

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\nJamie Redman <\/h6>\n

\nJamie Redman is the News Lead at Bitcoin.com News and a financial tech journalist living in Florida. Redman has been an active member of the cryptocurrency community since 2011. He has a passion for Bitcoin, open-source code, and decentralized applications. Since September 2015, Redman has written more than 6,000 articles for Bitcoin.com News about the disruptive protocols emerging today.

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Image Credits<\/b>: Shutterstock, Pixabay, Wiki Commons<\/em><\/p>\n

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Disclaimer<\/strong>: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com<\/a> does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.<\/p>\n<\/div>\n

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