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    FTX the Genesis of Another Crypto Bankruptcy? Chinese Billionaire Crosses the Line. What’s News, Early Thanksgiving Edition

    What's News
    November 23, 2022

    Below is our initial take on recent bankruptcy-related developments:

    FTX Starts Global Asset Review as Part of Chapter 11 Process | Bloomberg Law

    As part of FTX’s bankruptcy process, the exchange began a review of its global assets and reported that many of the regulated and licensed subsidiaries of FTX are likely viable units for sale.

    FTX Holds $1.24 Billion in Cash Balance Ahead of Bankruptcy Hearing | Reuters

    As FTX bankruptcy hearings kicked off on Tuesday, court filings reported that FTX has a cash balance of $1.24 billion, a number much higher than expected, even as the exchange has about 1 million creditors facing billions in losses.

    NBA Champion Golden State Warriors Are Sued Over FTX Collapse | Reuters

    The NBA’s Golden State Warriors, who named FTX its official cryptocurrency platform last December, were sued in federal court this week by an FTX customer in a class-action lawsuit accusing the team of fraudulently promoting the now-bankrupt exchange.

    S&K Take: The FTX case began in earnest this week, with the debtors’ first day hearing taking place yesterday. Debtors’ counsel walked the court through their evaluation of the debtors’ business, which was largely reflective of what was included in the first day declaration we discussed last week. Basically, the debtors’ books and records are a disaster, and the debtors are tasked with bringing “order to chaos.” Debtors’ counsel noted that assets have either been stolen or are missing, further complicating the situation. As for the day’s agenda, Judge Dorsey granted all of the relief requested, including that customer information remain redacted in filings (at least for the time being). Next up is the recognition hearing for FTX DM, which could have some fireworks if the parties cannot agree to an information sharing protocol.

    Crypto Lender Genesis Says No Plans to File Bankruptcy Imminently | Reuters

    Following FTX’s bankruptcy, cryptocurrency lender Genesis suspended customer redemptions and is now explaining that they are hoping to resolve the situation without filing for bankruptcy in the near term.

    S&K Take: Genesis, according to reports, is on the verge of collapse. They only need $1bn to bail them out. That might not have seemed a tall task in the crypto space in June, but the field of those with the wherewithal to execute on that kind of transaction has thinned in the last 5 months. Despite the denial, a situation that we will keep close tabs on and could be discussing in these pages next week.

    Chinese Billionaire Accused of Harassing Chapter 11 Foes | Law360

    An exiled Chinese billionaire is facing accusations in Connecticut bankruptcy court of harassing a major creditor and trying to disrupt the bankruptcy case.

    S&K Take: An absolutely bizarre case for those that have not been following. Short version. Chinese billionaire with a serious axe to grind against the Chinese communist government transfers all of his assets to his children and other family and claims poverty. Files a US chapter 11. After some very interesting machinations in the case over the course of a few months a chapter 11 trustee is appointed. Said Chinese billionaire (or former billionaire depending on what you believe) is now posting videos alleging that the trustee is an agent of the CCP. Those videos, which include personal information of the trustee and his family, incite protests at the trustee’s home, among other places. The trustee won’t be intimidated and is trying to get the billionaire to appear in the bankruptcy court. That is only part of the story. We will keep you updated on what happens next.

    The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm or its clients, or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

    November 18, 2022

    This Week In Crypto Contagion



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