FTX’s bankruptcy hearing: the highlights

So much for winning “a jurisdictional battle vs Delaware”.

FTX’s lawyers agreed this week that its Bermuda bankruptcy will be heard in Delaware, not New York where it was originally filed. In other words, the turf war has ended in a truce.

Unfortunately, Delaware is also a notorious haven for corporate secrecy. One counterargument to the criticism of the Blue Hen State is that the US Department of Justice can reach directly within its borders, unlike, say, the Bahamas, or the Cayman Islands.

But for now, the court has sided with FTX’s representatives over the DoJ’s US Trustee and will keep the crypto exchange’s biggest creditors anonymous. Non-disclosure will last at least until a December 16 evidentiary hearing — and the list could remain redacted permanently. The arguments FTX made for anonymity deserve a separate post, but for now we will simply raise an eyebrow.

So what did we learn, besides the transfer of the NY/Bahamas case to Delaware? First, we learned that Delaware isn’t necessarily prepared for hundreds of Zoom participants, many of whom are otherwise extremely online. Officials relied on the honour system to keep callers from turning their cameras and microphones on, which meant the court’s single 10-minute recess came with a couple of guys asking for their money back and at least one unmuting to broadcast music. When asked to pipe down, a participant asked who the “boomer” was.

We also learned that the new CEO and team consider some former employees to be “compromised.” It isn’t yet clear what they mean by this, but we get a sense that we’ll find out!

The team (and its new board) also want to sell some FTX-controlled businesses ASAP. “We believe, your honor, that we will be before you quite quickly with an attempt to sell certain of the businesses that we understand, at least today, are self-sufficient and robust and have generated interest from others in the marketplace,” said James Bromley, a Sullivan & Cromwell attorney representing FTX’s new management.

We also learned that Sam Bankman-Fried has consulted not only with his father, a Stanford Law School professor, but also his father’s colleague David Mills, who “teaches classes in Criminal Law and White-Collar Crime.”

Other facts came out about FTX’s customer base, cash reserves, and employee count, with some handy charts to boot:

1) Customer “locations”

Excluding traditional tax havens, the UK is tied with China for the highest share of FTX clients. The Cayman Islands and Virgin Islands have greater proportions of customers, but given their tax-haven status, who knows where the ultimate owners of those accounts spend their time.

Congrats London, you beat out Singapore!

2) Employees

We also learned there are “roughly 260” employees left at the company, as Sullivan & Cromwell’s James Bromley told the judge.

Below you can find FTX’s employee locations as of the end of October. The “debtor companies” chart, on the left, includes the headcount of the companies that filed for Chapter 11. The pie chart on the right includes those companies, plus the subsidiaries in Australia and the Bahamas.

3) Investments

We also have a selection of companies backed by FTX. Sequoia is on the list, as our FT colleagues have reported, along with a bunch of artificial-intelligence research firms, IEX, and . . . developer of the video game Storybook Brawl? (For an investor list, please do check out our tombstoNFT.)

4) Liquidity

Last, we have a nice little summary of the cash that the new management team has been able to track down so far:

Alameda has the biggest cash reserve by far, because fiat is required to make markets for degens YOLOing into dogecoin. Note that these sums do not reflect any costs besides those that are absolutely necessary for the company to keep operating for the next five weeks. Everything else has been put on pause by the bankruptcy.

Find the full exhibits on PACER or here.