FTX Foundation staffer fights for $275K bonus promised by SBF

November 14, 2023 Coin Telegraph

FTX Foundation staffer fights for 5K bonus promised by SBF

FTX Foundation employee Ross Rheingans-Yoo said he was not part of Sam Bankman-Fried’s “inner circle” and knew nothing about FTX’s fraud.

An employee of FTX’s charity wing recruited by FTX co-founder Sam Bankman-Fried is trying to get paid $275,000, the remainder of his claimed 2022 salary bonus.

Ross Rheingans-Yoo's lawyers argued in a Nov. 13 court filing that only $375,000 of his $650,000 bonus was paid by FTX. They claim the remaining funds were owed when the crypto exchange filed for bankruptcy in November 2022.

Rheingans-Yoo’s latest filing comes in response to FTX’s objection filed on Oct. 30.

*Excerpt of Ross Rheingans-Yoo’s Nov. 13 response to FTX Debtor’s objection. Source: Kroll*

Rheingans-Yoo shared part of a Google Doc created by Bankman-Fried that laid out his employment terms at the FTX Foundation, which came with a $100,000 base salary. He claimed Bankman-Fried told him in memo

Rheingans-Yoo iterated he was not part of Bankman-Fried’s “inner circle” and wasn’t aware that FTX misappropriated customer funds with his lawyers adding:

“Instead, Rheingans-Yoo was a faithful employee who found himself in a mess he did not create.”

Rheingans-Yoo claims he is entitled to a further $650,000 specifically to donate to charity, a prepetition salary payment of about $5,700 and a post-petition salary of at least $62,800.

Advisers claim FTX has already fully paid Rheingans-Yoo his bonus because he elected to have the award partially repaid via options in the firm’s corporate affiliates before it filed for bankruptcy.

However, Rheingans-Yoo denies that claim.

The fate of Rheingans-Yoo’s bonus will be determined by a Delaware bankruptcy judge who is overseeing FTX’s Chapter 11 bankruptcy.

FTX sued Rheingans-Yoo’s Latona Biosciences Group, Bankman-Fried and several other defendants in July to return $71.6 million in investments and donations allegedly sent to various life science companies.

FTX seeks to recover through avoidance of transfers of $71.5m from

Life Sciences, Lumen Bioscience, GreenLight Biosciences Holdings, PBC, Riboscience, Genetic Networks, 4J Therapeutics, Latona Biosciences, FTX Foundation, SBF, Ross Rheingans-Yoo and Nicholas Beckstead pic.twitter.com/T7lF3sZmzN
— Sunil (FTX Creditor Champion) (@sunil_trades) July 20, 2023

The crypto exchange claims Rheingans-Yoo and Bankman-Fried personally benefited from the investments and donations but FTX and Alameda Research did not.

“Each of these transfers was made with the intent to hinder, delay, or defraud present or future creditors, a fact known by the FTX Foundation, Latona, and Bankman-Fried.”

Rheingans-Yoo claims his work at Latona, which involved analyzing potential recipients, speaking with their founders and executives and conducting due diligence, would’ve produced “positive results for society.”

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

BlockFi argues FTX, Three Arrows Capital isn’t entitled to repayments

August 23, 2023 Coin Telegraph

Blockfi

BlockFi argues its creditors, not FTX’s, are the “ultimate victims” of FTX’s alleged fraud.

Bankrupt cryptocurrency lender BlockFi is trying to block attempts by the similarly bankrupt FTX and Three Arrows Capital (3AC) that aim to retrieve hundreds of millions of dollars to pay back their creditors.

BlockFi claimed in an Aug. 21 filing to a New Jersey bankruptcy court that its own creditors shouldn’t be pushed to the back of the line because FTX’s creditors were harmed by the exchange allegedly misappropriating $5 billion BlockFi lent it.

“FTX seeks to recover on over $5 billion of claims filed against the BlockFi estates at the direct expense of the ultimate victims of FTX’s fraud: BlockFi’s clients and other legitimate creditors.”

“To prevent further injustice to the creditors of BlockFi’s estates, the Court should disallow the FTX Claims under the doctrine of unclean hands,” BlockFi added.

FTX also provided $400 million to BlockFi in June 2022 in addition to buying BlockFi equity pursuant to a loan agreement, the filing stated.

However, BlockFi claimed it wasn’t a standard loan agreement — it was an unsecured, 5-year term that was well below market interest rates and repayments weren’t due until the firm would supposedly mature.

BlockFi referred to FTX’s investment as a “gamble” that BlockFi creditors shouldn’t be liable for.

“Just because FTX’s fraudulent actions caused FTX’s bet to fail does not mean BlockFi’s creditors are now somehow liable to refund the purchase price,” it argued.

*BlockFi suggested a* *loan from* *FTX was a “gamble” that the market would stabilize. Source: Kroll*

Estimates show BlockFi owes up to $10 billion to over 100,000 creditors including $1 billion to its three largest creditors and $220 million to bankrupt crypto hedge fund 3AC.

BlockFi claimed 3AC committed fraud with the money it borrowed and argued it also shouldn’t be entitled to a potential repayment.

BlockFi claims its litigation with FTX, 3AC and other firms could cost it up to $1 billion — impacting the amount its creditors are owed.

Several BlockFi creditors previously accused the firm of overlooking several red flags before transacting with FTX and its trading firm Alameda Research in the months prior to FTX’s collapse in November 2022.

Despite this, creditors settled with BlockFi last month to move forward with a repayment plan.

BlockFi filed for Chapter 11 bankruptcy on Nov. 28, about two weeks after FTX similarly filed for bankruptcy.

Magazine: Deposit risk: What do crypto exchanges really do with your money?

Mainstream media renew push for non-US FTX user identities

May 4, 2023 Coin Telegraph

Bankruptcy Code

A May 3 filing to the United States Bankruptcy Court brings new objections to a motion that aimed to redact customer identities.

Four media outlets in the United States have continued efforts to get the identities of non-U.S. FTX customers revealed, filing new objections to a previous motion to seal their identities.

Bloomberg, Dow Jones, The New York Times and the Financial Times first filed a motion objecting to FTX and the Official Committee of Unsecured Creditors being authorized to redact and withhold customer information on Jan 11.

While the court previously had heard similar arguments by the four firms, the May 3 filing made a new objection to the Committee’s motion to seal the identities of non-U.S. customers.

*The four media firm’s most recent filing against FTX and the Committee. Source: Kroll.*

The media outlet's most recent argument is that there is no legal basis to redact the names pursuant to non-U.S. data privacy laws.

The media giants argued that under section 105 of the Bankruptcy Code — the provision which grants the bankruptcy court judicial power — there is no part that permits foreign law to override the right of access to information under U.S. constitutional and statutory law:

“At bottom, Movants desire to avoid ‘enforcement of the public disclosure requirements of U.S. bankruptcy law’ [...] furnishes no basis for sealing.”

“The law of the United States — constitutional and statutory — guarantees the public a strong presumptive right to inspect bankruptcy filings. That right cannot be abrogated by a party’s assertion of legal obligations under foreign law,” the media firms added.

The first argument raised — which was claimed in an earlier filing — was that the names of FTX’s creditors do not constitute “confidential commercial information.”

The second — also raised in an earlier filing — is that such disclosure wouldn’t subject the creditors to “undue risk.”

FTX and the committee have until May 4 at 4:00 pm Eastern Time to submit an objection.

The hearing date for the filing will take place on May 17 at 1:00pm.

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

Names of non-US FTX users demanded by mainstream media outlets

April 6, 2023 Coin Telegraph

Ad Hoc Committee of Non-US Customers of FTX.com

A number of mainstream media outlets are pushing to publicize the personal details of FTX’s non-U.S. customers, similar to what happened with Celsius.

Some mainstream media outlets have objected to attempts to withhold the identities of non-United States customers of cryptocurrency exchange FTX during its bankruptcy proceedings.

In an April 4 filing to a Delaware Bankruptcy Court, media outlets Bloomberg, The Financial Times, The New York Times, and its parent firm the Dow Jones & Company jointly objected to the names of the customers being redacted, arguing the press and public have "a presumptive right of access to bankruptcy filings.”

Media group files objection to redacting FTX customer names.

If the objection succeeds, the names of up to 1.4 million customers and their FTX balances would be made public. pic.twitter.com/w0avsJ6JYv
— FTX 2.0pium (FTX Creditor) (@AFTXcreditor) April 5, 2023

While FTX’s debtors are able to argue for the names of creditors to be redacted in bankruptcy filings — and have done so — the media outlets believe FTX and its customers have failed to “justify such secrecy.”

The Ad Hoc Committee of Non-US Customers of FTX.com claimed in a Dec. 28 filing that publicly revealing the names and private information of non-U.S. customers leaves them vulnerable to identity theft, targeted attacks, and “other injury.”

In the recent filing, the media outlets argued that if the “permanent sealing” of the users were permissible on the grounds claimed by FTX and the Committee “then sealing customers’ names would be routine in virtually every bankruptcy proceeding.”

They added that “public access is of the utmost importance here,” as the magnitude of the FTX collapse has “ignited intense public interest in the U.S. legal system’s approach to the burgeoning and largely unregulated cryptocurrency market,” and added:

“The sealing of the names of FTX’s creditors to date has significantly impeded reporting on, and analysis of, these proceedings, leaving the public—and creditors— largely in the dark as to the United States’ enforcement of its bankruptcy laws in the crypto context”

In response to the Committee’s Dec. 28 filing, Judge John Dorsey allowed the names and addresses of the customers to be redacted for a further three months on Jan. 11, noting that he “remained reluctant at this point” to disclose the confidential information which may put creditors “at risk.”

Crypto lending platform Celsius had similarly tried to ensure that its customers' names remained redacted during its bankruptcy proceedings but failed to convince the judge, resulting in the personal details of thousands of customers being disclosed on Oct. 5, 2022.

A hearing on the matter is set to occur on April 12 at 1:00 pm Eastern Time.

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February 22, 2023 Bitcoin.com

FTX lawyers: Examiner could cost $100M and ‘provide no benefit’

January 26, 2023 Coin Telegraph

FTX lawyers: Examiner could cost 0M and ‘provide no benefit’

bahamas

FTX lawyers, joint provisional liquidators of FTX.US and the Bahamas and a committee of creditors have all opposed the appointment of an independent examiner.

An investigation into FTX’s collapse by an examiner could cost the firm upwards of $100 million without providing any benefit to creditors or equity holders, argues lawyers representing the bankrupt crypto exchange.

The arguments were part of a Jan. 25 objection to a motion from the United States Trustee in December, which called for the judge to appoint an independent examiner to ensure any investigations are transparent and their findings made public.

This will be fascinating.

4 Senators submitted a letter asking for an Independent Examiner. Will they do more?

Several States have entered the FTX case. Will they lend support for an Examiner?

The SEC asked for the Independent Examiner in Enron. Will they say anything here? https://t.co/KiSZKYonCD
— MetaLawMan (@MetaLawMan) January 26, 2023

FTX lawyers argued that creditors would not benefit from an examiner investigation which duplicates investigations led by FTX’s CEO John J. Ray III, a committee of creditors, law enforcement agencies, and congress, adding:

“The appointment of an examiner, with a mandate to be determined, can be expected to cost these estates in the tens of millions of dollars. Indeed, if history is a guide, the cost could near or exceed $100 million.”

The creditors committee, also known as The Official Committee of Unsecured Creditors, submitted their own objection to the appointment of an independent examiner on Jan. 25, also citing the prohibitive costs involved and the investigations of various parties which are already underway.

In the original motion, the U.S. Trustee had noted if the court was concerned about the duplication of work, it could allow the examiner to access existing work, adding:

“An examiner may also allow for a faster and more cost-effective resolution of these cases by allowing Mr. Ray to focus on his primary duty of stabilizing the Debtors’ businesses while allowing the examiner to conduct the investigation.”

Joint provisional liquidators in the Bahamas and FTX.US also opposed the appointment on Jan. 25, pointing to a section of the bankruptcy code which allows the judge to appoint an examiner “as is appropriate,” and arguing that the unnecessary costs and delays which would accompany the appointment of an examiner renders it “inappropriate.”

The appointment of an independent examiner has been a key topic throughout FTXs bankruptcy trial.

On Dec. 9 a group of four U.S. senators which included Elizabeth Warren wrote an open letter to Judge John Dorsey of the U.S. Bankruptcy Court for the District of Delaware, claiming that FTX’s counsel Sullivan & Cromwell had a conflict of interest in the case and cast doubt over their ability to provide findings which inspire confidence.

However, the judge ruled on Jan. 20 that there were no potential conflicts of interest sufficient to stop the law firm from continuing to act as FTX’s counsel.

The judge will decide whether to accept the appointment of an independent examiner in a court hearing on Feb. 6.

Independent examiners are often appointed by bankruptcy courts to investigate details of complex cases brought before them, and have been appointed in other high-profile bankruptcy cases such as Lehman Brothers during the subprime mortgage crisis and the crypto exchange Celsius.

FTX customers want more info on FTX’s plans to sell subsidiaries

January 6, 2023 Coin Telegraph

Auction

While the group of 18 customers does not want to prevent the sales from occurring, it argued it needs to be involved to ensure that customers’ interests are represented.

A group of FTX customers has filed a limited objection to FTX’s plan to sell four independently operated subsidiaries, arguing that they should be privy to the sales process to ensure thcustomer interests are represented.

The group has also shared concerns that “misappropriated customer funds” may have been used to acquire or keep these firms running.

The limited objection was filed on Dec. 4 by an ad hoc committee of non-U.S. customers, which comprises 18 members who collectively have claims against FTX in excess of $1.9 billion.

In its filing, the committee argued that previous public statements by FTX, the Securities and Exchange Commission and the Commodity Futures Trading Commission make clear that the customer assets on the platform belong to customers and not FTX.

It said there were “significant concerns over the lack of information regarding sale of the businesses,” and also questioned whether the businesses may be “necessary to a potential restart” of FTX.

A limited objection is similar to an objection except it only applies to a specific part of the proceedings. In this instance, the limited objection is due to the exclusion of the ad hoc committee from the sale process.

Ad Hoc Committee is the first I've seen mention a potential FTX restart to the court - one of the reasons they list for filing they limited objection to FTX's planned sales of solvent subunits. pic.twitter.com/7TCW3WwRm0
— FTX Creditor (@AFTXcreditor) January 5, 2023

The committee has asked the judge to allow them to serve as “consulting professionals” so that they can ensure customers’ interests are represented throughout the bidding process, adding:

“The Ad Hoc Committee does not seek to stand in the way of value-maximizing transactions that the Debtors may pursue, so long as the interests of FTX.com customers are protected.”

Under the proposed bid procedures, only consulting professionals will be able to attend the auction and consult with FTX on matters relating to the sale process, and the committee notes that the consultation parties have no control of the process outside of being able to provide counsel.

On Dec. 15, FTX had asked the bankruptcy court to allow them to sell off its European and Japanese branches, in addition to derivatives exchange LedgerX and stock-clearing platform Embed.

LedgerX in particular has been hailed as a success story during the bankruptcy proceedings, with Commodity Futures Trading Commission Chairman Rostin Behnam noting that the firm had essentially been “walled off” from other companies within FTX Group, and “held more cash than all the other FTX debtor entities combined.”

Last week, the same committee asked for customers' names and private information to be redacted from court documents, suggesting that customers could be exposed to identify theft, targeted attack and “other injury.”

SEC files objection to Binance.US’s plans to acquire Voyager Digital

January 5, 2023 Coin Telegraph

Acquisition

The SEC wants to see more information included in the $1.022 billion deal between Binance’s U.S. arm and Voyager Digital before it agrees to the acquisition.

The United States Securities and Exchange Commission (SEC) has filed a “limited objection” to crypto exchange Binance.US’s proposed $1 billion takeover of bankrupt crypto lender Voyager Digital, citing a lack of “necessary information.”

The limited objection was filed on Jan. 4, with the SEC pointing to a lack of detail regarding Binance.US’s ability to fund the acquisition, what Binance.US’s operations would look like following the deal, and how customer assets will be secured during and after the transaction.

A limited objection is similar to a normal objection but only applies to a specific part of the proceedings.

Additionally, the regulator also wants Voyager to provide more detail on what would happen should the transaction not be consummated by Apr. 18.

In its filing, the SEC said it already communicated its concerns with Voyager and the lender intends to file a revised disclosure statement prior to a hearing on the matter.

Some commentators interpreted the objection as the SEC suggesting Binance.US would not be able to afford the acquisition without “some untoward dealing” such as receiving funds from Binance’s global entity.

SEC basically objecting on the grounds that Binance US couldn’t have this size of assets without some untoward dealing (likely with parentco)

Which would mean a commingling of the US entity. So if Binance fights it they risk US exposure… https://t.co/9wW6eRTol7
— Adam Cochran (adamscochran.eth) (@adamscochran) January 4, 2023

While Binance CEO Changpeng Zhao (CZ) has publicly stated that Binance.US was a “fully independent entity,” an Oct. 17 Reuters report alleged that the U.S. entity acts more like a “de facto subsidiary” which was created to “insulate Binance from U.S. regulators.”

In response to the allegations, CZ suggested in an Oct. 17 blog that Binance was committed to complying with regulators, that the author of the article was reporting in a biased manner and had used a presentation provided by an external consultant which was never implemented as evidence for these claims.

Voyager announced on Dec. 19 that it had agreed to Binance.US’s bid to acquire its assets, in a deal worth $1.022 billion in total.

The lender noted in a press release that the bid was the “highest and best bid for its assets,” which would maximize the value returned to customers and creditors “on an expedited timeframe.”

Voyager previously announced on Sep. 27 that FTX.US had won the auction for its assets with an offer of $1.4 billion which would have seen customers recover 72% of their frozen crypto, in a deal that has since fallen through.

objection

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