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Entwistle & Cappucci LLP Announces Investigation into FTX

November 14, 2022

Entwistle & Cappucci LLP, a national firm specializing in complex fraud and bankruptcy litigation, led the recovery of billions of dollars for customers in connection with both the MF Global and Madoff frauds.  MF Global (where customer funds were diverted by senior management to meet failed investment bets by corporate management, ultimately resulting in MF Global’s bankruptcy) and Madoff (where billions of dollars in customer funds were diverted by Madoff in an enormous Ponzi scheme resulting in the bankruptcy of the Madoff entities) bear an uncanny resemblance to the misuse and diversion of customer funds at FTX.

Our early investigation confirms what has been reported by Reuters and other outlets, that insiders confirm billions of dollars of customer funds were wrongly diverted from FTX to Alameda and elsewhere leaving an enormous shortfall in customer accounts.  While sources speculate that the shortfall is between $1-2 billion, review of certain company documents – including the balance sheet recently disclosed by CoinDesk – makes clear the shortfall may be much larger.  Many of those assets are other currencies with significantly lower market values than reflected, include FTT holdings (which may have increased by a recent and questionable new issue by FTX) and involve a number of illiquid investments where there is as yet no confirmation of stated market values.  Liabilities are also certain to be greater than reflected – particularly given that sources have told us that Voyager is seeking to unwind the transaction that would have rolled back into FTX significant exposure to Voyager.

In a normal bankruptcy, significant detail about the bankrupt entities’ holdings and financial condition is revealed in what are called “First Day Filings.”  It is highly unusual for sophisticated entities like FTX and Alameda to file a bare-bones bankruptcy petition.

Company Tweets have suggested that is because the failure was “sudden.”  While certainly this may have appeared sudden from the outside, it is clear that the diversion of customer funds and the even larger corporate and regulatory shell game being played to avoid defaulting on FTX’s enormous debt and to prop up FTT and other holdings has been going on for some time – all with the apparent knowledge of FTX and Alameda officers and directors and other insiders.  The attempted roll up of Voyager is just one example of this shell game in practice and there are any number of others coming to light.

We anticipate that filings in bankruptcy in the coming days will provide at least some transparency, but to be clear, those filings are oriented to the perceived interests of the bankrupt estate – not the interests of customer account holders.  Prompt action in the Bankruptcy proceedings in similar cases – in particular in MF Global – has proven to be critical to protecting customers against the further diversion of assets, to assure necessary transparency into the assets and liabilities of the bankrupt estate, and to marshal assets and protect the priority of customer funds.

If you have information that may be helpful to our ongoing investigation, you or someone you know cannot access their funds in FTX or you are otherwise impacted by the FTX and Alameda bankruptcy filings, please feel free to email us at [email protected].

We also created this form for your convenience as an alternative to email.

Our track record:

  • Through actions taken in the Madoff bankruptcy and related cases Entwistle & Cappucci LLP recovered billions of dollars for customers of Madoff and Madoff feeder funds. Video interview with our managing partner Andrew Entwistle regarding our work in the Madoff fraud.
  • In The MF Global Bankruptcy, Entwistle & Cappucci LLP recovered 100% of the over $1 billion lost by MF Global customers. We invite you to read further.

This release is for informational purposes only and should not be construed as legal advice.