FTX debtors want to investigate balance sheet holes at FTX US

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—by Protos Staff

The FTX debtors in possession have filed a motion to authorize a second phase of investigation into issues surrounding the collapse of the US crypto exchange.

According to the filing, the investigation would be focused on three major issues, including the complete extent of legal firm Sullivan & Cromwell’s representation of Sam Bankman-Fried, potential claims against “former shareholders of Ledger Holdings” that “sold their interests prepetition” to FTX US, and the “frequency and magnitude of the holes” in the balance sheet at FTX US.

The investigations would apparently take roughly 10 weeks and cost approximately $3 million.

We read the 230-page investigation into FTX so you don’t have to

Read more: Bitcoin is worth $69,000 — unless you’re an FTX creditor

This second phase of the investigation would follow the earlier report, which contained allegations about FTX trying to pay off whistleblowers, using customer funds to fill ‘capital issues’ at their bank, and discussing how some executives seemed to be aware of problems well before the collapse.

This previous report also reiterated that the debtors found evidence of FTX US having insufficient assets at the time, with the former controller of FTX US even highlighting that it had included cash in its reconciliations that wasn’t meant to be included.

Former FTX chief exec Bankman-Fried regularly claimed before his conviction that FTX US was solvent, however, the continuing work of the debtors in possession looks to have turned up evidence that this claim, like many others, was never rooted in reality.

Objections to this motion are due by June 24, and the hearing to discuss it is scheduled for July 17.

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