Back in November of 2022, major cryptocurrency exchange FTX filed for Chapter 11 Bankruptcy. This came after the revelation that the company had significant liquidity problems and that its founders were likely misusing customer funds. Since then it’s been one newsworthy development after another, chief among which was the arrest of FTX CEO, Sam Bankman-Fried, followed by his extradition to the United States. A lot has happened since then, including John Ray III’s appointment as CEO of FTX — a prominent attorney who specializes in corporate reorganization — and the removal of Bankman-Fried as CEO. For today’s conversation, we focus on one of the latest developments in the case, namely FTX’s attempt to claw back over a billion dollars allegedly misappropriated by Sam Bankman-Fried and other executives. Lending his expertise to our discussion is return guest Richard Squire, a bankruptcy scholar and Professor of Law at Fordham Law School. We talk with Richard about the complexity of the FTX bankruptcy case, what the outcomes will be based on, and how he expects it to play out. Richard gets into the details of what constitutes fraudulent transfers and constructive fraudulent transfers, and how these can be proven in bankruptcy. We also discuss Bankman-Fried’s notoriously lax bookkeeping (and the impact this could have on FTX’s claims), along with Richard’s assessment of what FTX will be able to claw back and how this compares to other high-profile bankruptcy cases. If you’re interested in learning more about the FTX debacle or simply want to geek out on bankruptcy law, then look no further than today’s conversation with Richard Squire!

Key Points From This Episode:

•A recap of the events surrounding FTX’s collapse.

•Why FTX is suing its former CEO, Sam Bankman-Fried.

•What makes the FTX bankruptcy filings so complex.

•An overview of what bankruptcy proceedings typically look like (and how they can vary).

•Why John Ray III was brought in to replace Sam Bankman-Fried as CEO.

•How Sam Bankman-Fried managed (and mismanaged) company funds.

•Insight into FTX’s attempt to claw back over a billion dollars.

•A rundown of the various ways that transfers can be recalled.

•What constitutes a fraudulent transfer and how this can be proven.

•Bankman-Fried’s poorly kept financial records and how it impacts the case.

•Details about FTX’s sister company Alameda Research.

•Payments received by Caroline Ellison; Bankman-Fried’s then-girlfriend and former CEO of Alameda Research.

•The definition of a constructive fraudulent transaction and the evidence required to prove it.

•What to expect of payments made for legitimate goods and services in this case.

•Richard’s assessment of what FTX will be able to claw back for creditors.

•How FTX compares to other high-profile bankruptcy cases.

Links Mentioned in Today’s Episode: 

Richard Squire

FTX Trading Ltd.

Who Is Sam Bankman-Fried?

Fordham University School of Law Corporate Law Center