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Ex-FTX execs team up to build new crypto exchange 12 months after FTX collapse: Report

November 12, 2023 Coin Telegraph

The cryptocurrency exchanges offers a self-custody solution that integrates a multiparty computation technique to secure funds.

Several former FTX executives have teamed up to help build a new cryptocurrency exchange in Dubai with a specific focus on what FTX failed to do — secure customer funds.

Ex-FTX lawyer Can Sun is leading the way with Trek Labs, a Dubai-based startup that received a license to offer cryptocurrency services in the region in late October. Backpack Exchange is the name under which Trek Labs will offer those services.

Sun will receive support from ex-FTX employee, Armani Ferrante, who serves as CEO of Trek’s holding company in the British Virgin Islands, according to a Nov. 11 report by the Wall Street Journal. Ferrante also runs Backpack, a cryptocurrency wallet which is integrated in Backpack Exchange.

Sun’s former legal deputy at FTX, Claire Zhang, who is also Ferrante’s wife, is also on Trek’s executive team. However, once Trek raises an investment round, Zhang plans to transition out of the company as she has been working without pay to “help bootstrap the exchange," WSJ said.

Sun and Ferrante iterated they wanted to use the lessons learned from FTX’s failure to protect customer funds. Backpack’s technology offers a self-custody solution which integrates a multiparty computation (MPC) technique to ensure funds remain secure. MPC typically involves several parties approving a transaction before funds are moved.

With things heating up, please be aware of phishing attacks on the rise.

Backpack will NEVER ask you for your private keys.

The only valid website URLs are in our bio. Assume anything else is a scam.

Stay safe.
— Backpack (@xNFT_Backpack) November 11, 2023

It will also enable Backpack customers to verify funds whenever they want, Sun told WSJ:

“In a post-FTX world, you need trust and transparency to create a true alternative to the other players.”

Backpack Exchange is currently in beta and a wider launch will come later this month, the firm said.

Sun was a witness at Bankman-Fried’s recent fraud trial where he revealed that the former FTX CEO turned to him seeking a legal justification as to why FTX’s funds were at Alameda Research. Bankman-Fried was convicted on all seven fraud-related charges.

Sun said he quit as FTX’s general counsel the day after Bankman-Fried told him about the use of customer money.

“This went against everything that I stood for and was represented to me by Sam.”

Bankman-Fried’s former empire commingled billions of dollars of customer funds through Alameda Research for investment purposes. About $9 billion in customer funds went missing.

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SBF seeks to probe FTX lawyers’ roles in $200M Alameda loans

October 10, 2023 Coin Telegraph

Alameda

Sam Bankman-Fried’s legal team is seeking permission to cross-examine Gary Wang over FTX lawyers' involvement in Alameda loan approvals.

Sam Bankman-Fried’s legal team is looking for permission to probe the alleged involvement of FTX lawyers in the issuance of $200 million worth of loans from Alameda that were approved by Gary Wang.

As previously reported in the build-up to the highly anticipated trial, an Oct. 1 court ruling provisionally barred Bankman-Fried from apportioning blame to FTX lawyers who were allegedly involved in structuring and approving loans between Alameda and FTX.

United States Judge Lewis Kaplan granted the government’s motion and ruled that Bankman-Fried's legal team would have to request permission to make any mention of FTX lawyers' involvement throughout the trial.

Following the initial cross-examination of former FTX co-founder Gary Wang by the prosecution on Oct. 9, the defense is now seeking permission to question Wang over the alleged involvement of FTX counsel in structuring loans issued to FTX by Alameda.

A letter filed on Oct. 9 highlighted the government’s questioning of Wang over a series of personal loans worth up to $300 million from Alameda that FTX used to fund venture investments. Wang had also used some of the funds to purchase a home in the Bahamas.

During the prosecution's line of inquiry, Wang said that either Bankman-Fried or FTX lawyers had presented him with loans which he was then directed to sign.

Bankman-Fried’s attorneys argue that the prosecution has already established that FTX lawyers were present and involved in structuring and executing the loans and intend to carry out their own line of questioning over the scope of FTX counsel involvement.

A screenshot of the defense's letter requesting permission to question Gary Wang over the involvement of FTX lawyers in the structuring of loans to Alameda and senior executives. Source: Court Listener.

The defense adds that it could potentially introduce promissory notes that memorialized the loans to Wang, who has previously indicated to the prosecution in proffer meetings that he did not suspect FTX lawyers would coerce him to sign illegal agreements:

“Mr. Wang's understanding that these were actual loans - structured by lawyers and memorialized in formal promissory notes that imposed real interest payment obligations - is relevant to rebut the inference that these were simply sham loans directed by Mr. Bankman-Fried to conceal the source of the funds.”

Cointelegraph journalist Ana Paula Pereira is on the ground in New York covering the trial of Bankman-Fried. Her latest report from the Federal District Court in Manhattan highlights the defense's efforts to paint Bankman-Fried as a young entrepreneur who tripped up amid the rapid growth of FTX and Alameda.

Magazine: Can you trust crypto exchanges after the collapse of FTX?

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FTX bankruptcy will be ‘very expensive’ but there’s a reason: Auditor

June 21, 2023 Coin Telegraph

auditor

The legal fees charged in the first months of FTX’s bankruptcy have been examined by an auditor, who has confirmed the case is “on track to be very expensive.”

Fees charged by the lawyers and the restructuring team working on the bankrupt crypto exchange FTX have topped $200 million in just over seven months, but an independent auditor argues it makes sense, given the mammoth task.

On June 20 the court-appointed fee examiner, Katherine Stadler, filed a 47-page report on the fees charged by the law firms in the roughly three months following FTX’s Nov. 11 bankruptcy and concluded they were not “wholly unreasonable in the moment.”

She remarked on the “largely unregulated financial system” in which FTX operates, adding the case was “remarkable” for the exchange’s “global scope, the complete absence of corporate records, and the non-existence of even the most basic corporate governance.”

FTX Professional Fees
This continues to be an extremely expensive case and the Estate has been petitioned for nearly $225mm over 5.5 months (with a couple small stragglers remaining).

March fees peaked at $1.6mm PER DAY!

Fortunately, April is trending positively downward. pic.twitter.com/eMTJC3R9Xr
— Mr. Purple ️ (@MrPurple_DJ) June 14, 2023

Stadler confirmed the team working on FTX had “requested more than $200 million in fees” since its November bankruptcy, adding:

“Notwithstanding the relative scope of the known asset pool, these proceedings appear on track to be very expensive by any measure.”

She gave a glowing review of the FTX restructuring team, saying she was “struck” by those who “sprung into action” to “begin transforming a smoldering heap of wreckage.”

“The fees incurred to date are remarkable, but so is the professionals’ performance.”

“Very few firms could have accomplished what these professionals accomplished in 90 days,” Stadler added.

Charging by the hour

Stadler’s report broke down the fees charged by the law firms in the first weeks after FTX filed for Chapter 11 bankruptcy.

It said hourly rates for the 242 lawyers on the case ranged from $388 to $2,165 and 46 lawyers were on more than $2,000 an hour.

New York-based law firm Sullivan & Cromwell has walked away with the biggest paycheck, having charged around $42 million in fees and expenses over that time.

Consultants Alvarez & Marshal were next in line, pocketing over $28 million in fees and expenses.

Previously, Cointelegraph analyzed the billings of the five firms involved in the proceedings and found they collectively invoiced over $100 million in the first quarter of 2023.

Stadler added some advice, saying “careful stewardship of administrative expenses will translate to a better outcome for creditors” along with a “cost-conscious and cost-effective” Chapter 11 process.

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