FTX Recovers $5 Billion, Judge Approves Removal of Branding from Miami Heat Arena, and Senators’ Letter Criticized
The attorney for FTX, Andy Dietderich, has announced that the bankrupt cryptocurrency exchange has regained control of $5 billion in cash and liquid digital currencies. Nevertheless, the company is still working to reconstruct its transaction records and the extent of losses for customers is not yet known.
It is important to note that the assets recovered do not include those that were taken by the Bahamas Securities Commission, which largely consist of the FTX Token (FTT).
According to Cointelegraph, during a court hearing on January 11th in Delaware, Dietderich informed the judge that FTX plans to sell off $4.6 billion worth of non-core assets, including subsidiaries such as LedgerX, Embed, FTX Japan, and FTX Europe. These entities operate independently of FTX with separate accounts.
FTX Japan has already begun to make arrangements to return customer funds. Additionally, FTX will be terminating its sponsorship agreement with the popular online game League of Legends that was set to run from 2021 to 2028.
Nevertheless, the judge overseeing the case, John Dorsey, approved the sale of certain business units including FTX Europe. Dietderich stated that the company will consider offers but has not made a final decision on the sale yet.
FTX has a total of $8.8 billion in liabilities. In fact, the exchange had minimal cash and digital assets, which resulted in a shortfall of around $8 billion in its balance sheet. During the Jan. 11 court hearing, FTX was granted permission to keep the identities of its customers confidential for a period of three months as customers had raised concerns about the potential for identity theft.
Miami-Dade to remove FTX from Heat arena
Miami-Dade County has been given the green light by a Delaware Bankruptcy judge to remove FTX’s branding from the Miami Heat arena.
In 2021, the county had entered into a $135 million deal to name the NBA arena “FTX Arena” until 2040. The arena features several entrances, the court, the roof, security polo shirts, and employee access cards that have the FTX logos.
After FTX filed for bankruptcy, Miami-Dade officials filed a motion on November 22nd to terminate the naming rights agreement. As per the agreement, the Miami Heat team was to receive $2 million annually starting June 2021. The last payment of $5.5 million was due on January 1st.
As a matter of fact, sponsorship deals in sports were a key part of FTX’s marketing strategy. Some of the partnerships included a collaboration with a Mercedes-backed Formula 1 racing team, naming rights to Cal Memorial Stadium in Berkeley, California, and endorsements from NFL quarterback Tom Brady.
Senators’ letter against FTX legal team deemed “inappropriate” by Judge
The judge overseeing FTX’s bankruptcy case has criticized a letter sent by four United States senators calling for an independent examiner in the case.
The senators sent a letter on January 9th expressing concerns about the relationship between FTX and Sullivan & Cromwell LLP, the lead law firm in the bankruptcy proceedings, which would be responsible for investigating any potential past misconduct by the exchange.
During a hearing on January 11th, Judge John Dorsey of the U.S. Bankruptcy Court for the District of Delaware referred to the letter as an “inappropriate ex parte communication” and stated that he would not consider it in his decision. Ex parte refers to a legal action taken by one party in a case without the participation or knowledge of the other party.
“I will make my decisions on the matters based only upon admissible evidence and the arguments presented in open court,” he said during the hearing, according to Cointelegraph.
On January 9th, a letter was sent to Judge Dorsey by a group of senators from both parties, John Hickenlooper, Thom Tillis, Elizabeth Warren, and Cynthia Lummis, raising concerns about the appointment of Sullivan & Cromwell and supporting a motion for the appointment of an independent examiner. The motion was filed by the U.S. Trustee on December 12th.
In the letter, the senators pointed out that the law firm has previously provided legal advice to FTX, and some members of the law firm have moved to positions at FTX, leading one senator to suggest a possible conflict of interest.
The judge’s dismissal of the letter from the senators does not mean that he will automatically reject the motion to appoint an independent examiner or approve Sullivan & Cromwell as FTX’s legal counsel. However, he will still need to evaluate the objection to Sullivan & Cromwell’s appointment from FTX creditor Warren Winter, whose representatives filed an amended objection on January 10th, arguing that the appointment could harm the public’s trust in the bankruptcy process, and that the law firm itself may be “a target for investigation” regarding its own “potential liability.”
Independent examiners are often appointed by bankruptcy courts to investigate the complexities of cases brought before them and present information to the courts from an unbiased perspective.
They have been appointed in other high-profile bankruptcy cases such as Lehman Brothers.
