FTX to Subpoena SBF, his Parents, and other Insiders

The bankrupt exchange's management asked for the ruling after saying information about the finances of Sam Bankman-Fried and other former top FTX executives has not been provided.

The former CEO Sam Bankman-Fried and many family members, as well as other former executives of the insolvent cryptocurrency exchange, have given their consent for the current managers of FTX to demand financial data from them.

Both the FTX Group, as the collection of companies is now called, and the Committee of Unsecured Creditors complained last month that few if any core insiders have been willing to meet with the bankruptcy lawyers to turn over details of their assets and any funds that they or others may have received from the company.

This information is required immediately, the court was told, in order to "supplement the Debtors' limited and untrustworthy financial records, to locate and secure estate assets, and to position themselves to recover misappropriated and stolen assets."

Even at Enron, restructuring expert John Ray III testified to the court shortly after assuming the position of CEO, "never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information."

The vast array of records sought includes information about the eight insiders' personal assets, any assets they may have ever received from the company, and communications about those assets.

Being Unhelpful

Some insiders are working together, but others aren't even consenting to schedule meetings, according to FTX.

Bankman-mother, Fried's father, and brother, all trusted advisers, are among the individuals to be deposed. This is in addition to the already scheduled depositions of former FTX group CTO Gary Wang and Alameda Research CEO Caroline Ellison. Each has entered into agreements with federal prosecutors to testify against their former employer in his impending criminal trial after entering into guilty pleas.

It also highlighted the following two: One is Nishad Singh, a co-founder of the FTX firm, who was reportedly negotiating a plea agreement with the prosecution as well. The other is Constance Wang, who served as co-CEO of FTX Digital Markets, the main exchange's Bahamas-based subsidiary, as well as COO of the main exchange.

Sam Bankman-Fried frequently stated in interviews and on social media that he is "looking to be helpful wherever [he] can with any of the global entities that would want [his] help," and that he wants to "be helpful where [he] can to regulators [and] administrators... who are working to help FTX's customers [to] bring a lot more value to those customers," according to the original motion requesting the subpoenas. It read:

"Despite these statements, Mr. Samuel Bankman-Fried has not responded to or complied with the Requests on a voluntary basis."

Bankruptcy Costs Looming

The current FTX management and creditors committee rejected the appointment of an independent examiner to look into the firm's demise and the suspected theft of $10 billion in client funds for being too expensive, with cost estimates as high as $100 million.

However, John Ray III's and the other bankruptcy managers' fees are coming under scrutiny. Initial costs disclosed in court documents already exceed $20 million.

That's sure to rise now that the bankruptcy judge in a separate case involving the failure of the cryptocurrency lender Voyager Digital has agreed to appoint a fee examiner to look into the skyrocketing fees.

The U.S. Trustee's office, a division of the DoJ entrusted with ensuring the complete narrative of significant bankruptcies, as well as Voyager's creditors, made that request.

It is unclear if the U.S. Trustee attorney battling FTX will request the same limited examiner — maybe as a way to get their foot in the door.

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