On Tuesday, November 22nd, the first hearing was held in the bankruptcy case of the cryptocurrency exchange FTX. One of the attorneys representing the company, James Bromley, was blunt. “You have witnessed probably one of the most abrupt and difficult collapses in the history of corporate America,” he told a Delaware courtroom. He described FTX as having been run like “the personal fiefdom” of its co-founder and former chief executive, Sam Bankman-Fried, and said that a significant amount of FTX’s assets had either been “stolen or are missing.” The comments came five days after John J. Ray III, FTX’s new C.E.O., filed a document with the federal bankruptcy court of Delaware in which he echoed the same sentiment. “Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here,” Ray wrote in the filing. “From compromised systems integrity and faulty regulatory oversight abroad, to the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals, this situation is unprecedented.” (“I wish that I had been more careful,” Bankman-Fried wrote in a letter to former employees on the day of the hearing, apologizing for FTX’s collapse. “I deeply regret my oversight failure.” Still, the former C.E.O. argued that, had he not given in to the pressure to file for bankruptcy, he could have saved the company.)

The assessment carries enormous weight coming from Ray, who, throughout the course of his forty-plus-year career, has overseen some of the most high-profile company bankruptcies in recent history. He managed the liquidation of the energy-trading firm Enron after its collapse, in 2001, and supervised the bankruptcies of the Canadian telecom company Nortel and the subprime-mortgage company Residential Capital. His report is a harsh indictment of FTX’s leaders, including Bankman-Fried, but it might also be taken as an indictment of the safeguards that are supposed to keep the markets secure for regular people. It will take months, even years, to fully understand what went wrong at FTX and its related companies, and why. But two things could emerge from the FTX crisis, which might transform a tragic situation into a learning opportunity, and might also make similar corporate collapses less likely to occur in the future. For one thing, investors may, going forward, be more wary of potential crypto investments, and the aggressive marketing and false promises that often accompany them. For another, regulation of digital assets might finally become clearer and more stringent. “Whenever you have a business that fails, as the facts emerge, there are typically lessons learned that can inform other companies in that industry, as well as the broader public, about where risks lie and how similar risks could be avoided in the future,” Deborah Meshulam, a partner at D.L.A. Piper and a former official with the Securities and Exchange Commission, said. “We’re in very early days.”

The crypto industry and its U.S. regulators have been in something of a cold war for several years. Dozens of new digital currencies and companies have launched, and the agencies responsible for policing the markets have struggled to keep up. More than thirteen years after Bitcoin was first released, there is still no centralized regime to regulate the industry. “The state of regulation in the U.S. is multifaceted,” Meshulam told me, sounding diplomatic. “You really have a number of different regulatory regimes that address different aspects of …….

Source: https://news.google.com/__i/rss/rd/articles/CBMiamh0dHBzOi8vd3d3Lm5ld3lvcmtlci5jb20vYnVzaW5lc3MvY3VycmVuY3kvd2lsbC10aGUtZnR4LWNvbGxhcHNlLWxlYWQtdG8tYmV0dGVyLWNyeXB0b2N1cnJlbmN5LXJlZ3VsYXRpb27SAQA?oc=5

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