Jan 18 (Reuters) – Cryptocurrency lender Genesis Global Capital is planning to file for bankruptcy as soon as this week, Bloomberg News reported on Wednesday, citing people with knowledge of the situation.
A bankruptcy filing has been expected for weeks, after the company froze customer redemptions on Nov. 16 following the downfall of major cryptocurrency exchange FTX.
The collapse of FTX in November has claimed several victims including crypto lender BlockFi and Core Scientific Inc , one of the biggest publicly traded crypto mining companies in the United States, both of which filed for bankruptcy protection in the following months.
Genesis, its parent Digital Currency Group and creditors have exchanged several proposals, but have so far failed to come to an agreement, the Bloomberg report said, adding that Kirkland & Ellis and Proskauer Rose have been advising groups of creditors.
Genesis did not immediately respond to a Reuters request for comment.
Genesis is also locked in a dispute with Gemini, founded by the identical twin crypto pioneers Cameron and Tyler Winklevoss.
Gemini offered a crypto lending product called Earn in partnership with Genesis, and now says Genesis owes it $900 million in connection with that product.
The U.S. Securities and Exchange Commission last week said it had charged Genesis and Gemini with illegally selling securities to hundreds of thousands of investors through their crypto lending program.
Reporting by Niket Nishant and Mehnaz Yasmin in Bengaluru; Editing by Sriraj Kalluvila
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Jan 17 (Reuters) – Goldman Sachs Group Inc (GS.N) on Tuesday reported a bigger-than-expected 69% drop in fourth-quarter profit as it struggled with a slump in dealmaking, a drop in asset and wealth management revenue and booked losses at its consumer business.
Wall Street banks are making deep cuts to their workforce and streamlining their operations as dealmaking activity, their major source of revenue, stalls on worries over a weakening global economy and rising interest rates.
Goldman is also curbing its consumer banking ambitions as Chief Executive Officer David Solomon refocuses the bank’s resources on strengthening its core businesses such as investment banking and trading.
Solomon confirmed that the bank was cutting 6% of its headcount, or around 3,200 jobs, and was making changes to the consumer business to navigate an uncertain outlook for 2023.
“We tried to do too much too quickly,” he said about the consumer business such as its direct-to-consumer unit Marcus. “We didn’t execute perfectly on some so we’ve taken a hard look at those, and you make adjustments.”
Goldman reported a net loss of $660 million at its platform solutions unit, which houses transaction banking, credit card and financial technology businesses, as provisions for credit losses grew while the business was expanding.
Full-year net loss for the platform solutions business was $1.67 billion, the bank said, even though net revenue of $1.50 billion for 2022 was 135% above 2021.
Goldman on Tuesday confirmed that it is planning to stop making unsecured consumer loans after it moved Marcus into its asset and wealth management arm. The checking account launch for Marcus has also been postponed.
Goldman’s investment banking fees fell 48% in the latest quarter, while revenue from its asset and wealth management unit dropped 27% due to lower revenue from equity and debt investments.
Solomon said the investment banking outlook could be better in the “back half” of 2023, as people are softening their views on the economic outlook for this year.
Shares were down nearly 7% at $347.66 in midday trade.
[1/2] The logo for Goldman Sachs is seen on the trading floor at the New York Stock Exchange (NYSE) in New York City, New York, U.S., November 17, 2021. REUTERS/Andrew Kelly
Reuters Graphics Reuters Graphics
GROWING COSTS
Wall Street’s biggest banks have stockpiled more rainy-day funds to prepare for a possible recession, while showing caution about forecasting income growth in an uncertain economy and as higher rates increase competition for deposits.
Total operating expenses at Goldman rose 11% to $8.1 billion in the quarter. A source told Reuters last week that the bank would lay off 3,000 employees in an attempt to rein in costs.
Goldman Chief Financial Officer Denis Coleman said severance charges will be adjusted in 2023.
The bank reported a profit of $1.19 billion, or $3.32 per share, for the three months ended Dec. 31, missing the Street estimate of $5.48, according to Refinitiv IBES data.
“Widely expected to be awful, Goldman Sachs’ Q4 results were even more miserable than anticipated,” said Octavio Marenzi, CEO of consultancy Opimas.
“The real problem lies in the fact that operating expenses shot up 11% while revenues tumbled. This strongly suggests more cost cutting and layoffs are going to come,” he added.
Goldman’s trading business was a bright spot as it benefited from heightened market volatility, spurred by the Federal Reserve’s quantitative tightening.
Fixed income, currency and commodities trading revenue was up 44% while revenue from equities trading fell 5%.
Overall net revenue was down 16% at $10.6 billion.
Reporting by Niket Nishant and Noor Zainab Hussain in Bengaluru and Saeed Azhar in New York; Additional reporting by Bansari Mayur Kamdar; Editing by Anil D’Silva and Mark Porter
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Jan 17 (Reuters) – Bitcoin is on the charge in 2023, dragging the crypto market off the floor and electrifying bonk, a new meme coin.
The No.1 cryptocurrency has clocked a 26% gain in January, leaping 22% in the past week alone, breaking back above the $20,000 level and putting in on course for its best month since October 2021 – just before the Big Crypto Crash.
Ether has also risen, by 29% this year, helping drive the value of the overall global cryptocurrency market above $1 trillion, according to CoinGecko.
“After a rough year last year for cryptos, we are seeing a form of mean reversion,” said Jake Gordon, analyst at Bespoke Investment Group, referring to the theory of asset prices returning to long-term averages.
Researchers said investor bets on a rosier macroeconomic picture were driving a jump in riskier assets across the board.
Few crypto tokens have benefited more than bonk, which was launched at the end of December on the Solana blockchain and had rocketed 5,000% by early January. It has since fallen back, though remains up 910% since the start of the year.
It is the latest entrant to the hyper-volatile world of meme coins, cryptocurrencies inspired by online memes and jokes, and is modeled after the same grinning Shiba Inu dog as dogecoin – which itself was catapulted to fame by Elon Musk tweets.
Bonk’s a puppy, though.
Even at its peak it was worth just $0.000004873759 with a market capitalization of about $205 million.
Other meme tokens are also up, with dogecoin and Shiba Inu up 19% and 27% respectively in 2023.
But buyers beware.
“Investors need to be especially cautious when it comes to coins like doge, Shiba Inu and bonk,” said Les Borsai, co-founder of digital assets services firm Wave Financial.
“They fall just as hard as they surge.”
Nonetheless, some market players pointed to the relative cheapness of these tokens – doge is worth about eight cents – as a reason why speculators were willing to place bets on them.
“Meme coins belong to crypto, it’s part of the culture,” said Martin Leinweber, digital assets product specialist at MarketVector Indexes. “It just takes a few lines of codes to create a meme token and if you have a community for it, people love that.”
RUMORS OF SOL’S DEATH EXAGGERATED
Bonk is a meme coin with a mission. It was created, in part, to support the Solana blockchain, which has seen an exodus of funds and users since crypto exchange FTX filed for bankruptcy in November, and its native Solana token drop over 37%.
The Solana token has now indeed jumped as bonk has gained traction: it’s up 131% in 2023, the biggest gainer among major cryptocurrencies.
“Rumors of Solana’s death seem to have been greatly exaggerated,” said Tom Dunleavy, senior research analyst at data firm Messari. “Despite the recent price appreciation seemingly being driven by speculation, the underlying ecosystem remains quite strong.”
Reuters Graphics
TOO EARLY TO CALL A CRYPTO REVERSAL
Some researchers chalked the crypto gains up to optimism that inflation had peaked, reducing the need for tighter central bank policy.
“Bitcoin and crypto tend to front-run everything, which is why we’ve seen notable relative strength in this asset class of late,” said Wave Financial’s Borsai.
There’s certainly been an increase in activity.
The dollar value of bitcoin trading volumes on major exchanges over a 7-day period jumped to $151 million, the highest in nearly two months, according to data from Blockchain.com.
Total bitcoin flows – representing all uses including trading and payments – have increased by 13,130 bitcoin on average in the last 7 days, the largest rise in 64 days, Chainalysis data showed.
However, market watchers warned against celebrating too soon, noting trading volumes remained low and the macroeconomic environment uncertain.
“It’s too early to declare a definitive reversal for the crypto market despite the recent strength we’ve seen of late,” said Aaron Kaplan, co-founder of Prometheum, a digital asset securities trading platform.
“If interest rate increases are below what the market expects, then risk assets will benefit and crypto prices will likely continue the uptrend, but there’s just too much uncertainty right now.”
Reporting by Medha Singh and Lisa Mattackal in Bengaluru; Editing by Pravin Char
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Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
WASHINGTON, Jan 15 (Reuters) – House of Representatives Speaker Kevin McCarthy said on Sunday he believes Democrats would agree to cap government spending to avoid a U.S. debt default and he wants to discuss the idea with President Joe Biden.
Republicans now in control of the House have threatened to use the debt ceiling as leverage to demand spending cuts from Biden’s Democrats, who control the U.S. Senate.
This has raised concerns in Washington and on Wall Street about a bruising fight that could be at least as disruptive as the protracted battle of 2011, which prompted a brief downgrade of the U.S. credit rating and years of forced domestic and military spending cuts.
“I want to sit down with him now so there is no problem,” McCarthy said in an interview with Fox News, referring to Biden. “I’m sure he knows there’s places that we can change that put America on a trajectory that we save these entitlements instead of putting it into bankruptcy the way they have been spending.”
McCarthy pointed to the Trump-era agreement by U.S. lawmakers’ in 2019 to suspend the statutory debt limit on Treasury Department borrowing until a later date as evidence that such compromise is possible.
“I believe we can sit down with anybody who wants to work together. I believe this president could be that person,” he said.
House Oversight Committee Chairman James Comer said on Sunday he hoped debt default could be avoided but put the onus on Democrats to agree to spending cuts.
“Republicans were elected with a mandate from the American people in the midterm elections. We campaigned on the fact that we were going to be serious about spending cuts,” Comer said in an interview with CNN’s “State of the Union.”
“So the Senate is going to have to recognize the fact that we’re not going to budge until we see meaningful reform with respect to spending.”
U.S. Treasury Secretary Janet Yellen said on Friday the United States will likely hit the $31.4 trillion statutory debt limit on Jan. 19, forcing the Treasury to start extraordinary cash management measures that can likely prevent default until early June.
Congress created the debt ceiling in 1917 to give the government greater borrowing flexibility, and must approve each increase to ensure that the United States meets its debt obligations and avoids a catastrophic default.
Reporting by Doina Chiacu and Katharine Jackson; Editing by Lisa Shumaker and Grant McCool
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NEW YORK/WILMINGTON, Del., Jan 11 (Reuters) – Crypto exchange FTX has recovered more than $5 billion in liquid assets but the extent of customer losses in the collapse of the company founded by Sam Bankman-Fried is still unknown, an attorney for the company told a U.S. bankruptcy court on Wednesday.
The company, which was valued a year ago at $32 billion, filed for bankruptcy protection in November and U.S. prosecutors accused Bankman-Fried of orchestrating an “epic” fraud that may have cost investors, customers and lenders billions of dollars.
“We have located over $5 billion of cash, liquid cryptocurrency and liquid investment securities,” Andy Dietderich, an attorney for FTX, told U.S. Bankruptcy Judge John Dorsey in Delaware at the start of Wednesday’s hearing.
Dietderich also said the company plans to sell nonstrategic investments that had a book value of $4.6 billion.
However, Dietderich said the legal team is still working to create accurate internal records and the actual customer shortfall remains unknown. The U.S. Commodities Futures Trading Commission has estimated missing customer funds at more than $8 billion.
Dietderich said the $5 billion recovered does not include assets seized by the Securities Commission of the Bahamas, where the company was headquartered and Bankman-Fried resided.
FTX’s attorney estimated the seized assets were worth as little as $170 million while Bahamian authorities put the figure as high as $3.5 billion. The seized assets are largely comprised of FTX’s proprietary and illiquid FTT token, which is highly volatile in price, Dietderich said.
ASSET SALES
FTX could raise additional funds in the coming months for the benefit of customers after Dorsey approved FTX’s request for procedures to explore sales of affiliates at Wednesday’s hearing.
The affiliates — LedgerX, Embed, FTX Japan and FTX Europe — are relatively independent from the broader FTX group, and each has its own segregated customer accounts and separate management teams, according to FTX court filings.
The crypto exchange has said it is not committed to selling any of the companies, but that it received dozens of unsolicited offers and plans to hold auctions beginning next month.
The U.S. Trustee, a government bankruptcy watchdog, opposed selling the affiliates before the extent of the alleged FTX fraud is fully investigated.
In part to preserve the value of its businesses, FTX also sought Dorsey’s approval to keep secret 9 million FTX customer names. The company has said that privacy is needed to prevent rivals from poaching users but also to prevent identity theft and to comply with privacy laws.
Dorsey allowed the names to remain under wraps for only three months, not six months as FTX wanted.
“The difficulty here is that I don’t know who’s a customer and who’s not,” Dorsey said. He set a hearing for Jan. 20 to discuss how FTX will distinguish between customers and said he wants FTX to return in three months to give more explanation on the risk of identity theft if customer names are made public.
Media companies and the U.S. Trustee had argued that U.S. bankruptcy law requires disclosure of creditor details to ensure transparency and fairness.
In addition to selling affiliates, a company lawyer on Wednesday said FTX will end its 19-year $135 million sponsorship deal with the NBA’s Miami Heat and a 7-year about $89 million deal with the League of Legends video game.
FTX’s founder, Bankman-Fried, 30, was indicted on two counts of wire fraud and six conspiracy counts last month in Manhattan federal court for allegedly stealing customer deposits to pay debts from his hedge fund, Alameda Research, and lying to equity investors about FTX’s financial condition. He has pleaded not guilty.
Bankman-Fried has acknowledged shortcomings in FTX’s risk management practices, but the one-time billionaire has said he does not believe he is criminally liable.
In addition to customer funds lost, the collapse of the company has also likely wiped out equity investors.
Some of those investors were disclosed in a Monday court filing, including American football star Tom Brady, Brady’s former wife supermodel Gisele Bündchen and New England Patriots owner Robert Kraft.
Reporting by Dietrich Knauth in New York and Tom Hals in Wilmington, Del.; Editing by Alexia Garamfalvi, Mark Porter, Matthew Lewis and Anna Driver
Our Standards: The Thomson Reuters Trust Principles.
Tom Hals
Thomson Reuters
Award-winning reporter with more than two decades of experience in international news, focusing on high-stakes legal battles over everything from government policy to corporate dealmaking.
Indexes: Dow up 0.6%, S&P 500 up 0.7%, Nasdaq up 1%
NEW YORK, Jan 10 (Reuters) – U.S. stocks ended solidly higher on Tuesday, led by a 1% gain in the Nasdaq, on relief that Federal Reserve Chair Jerome Powell refrained in a speech from commenting on rate policy.
In his first public appearance of the year, Powell said at a forum sponsored by the Swedish central bank that the Fed’s independence is essential for it to battle inflation.
Recent comments by other Fed officials have supported the view that the central bank needs to remain aggressive in raising interest rates to control inflation. Fed Governor Michelle Bowman said on Tuesday the bank will have to raise interest rates further to combat high inflation.
“Everybody hangs on every word from the Fed,” said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York. Powell “didn’t really say anything” about policy, he added.
Investors anxiously awaited the U.S. consumer prices index report Thursday, which is expected to show some moderation in year-on-year prices in December.
Traders are betting on a 25-basis point rate hike at the Fed’s upcoming policy meeting in February.
“There are some indications that inflation is slowing significantly. What investors are really looking for is a gap down in major inflation data that could probably get the Fed’s attention,” Ghriskey said.
Amazon.com Inc. (AMZN.O) shares rose 2.9% and gave the Nasdaq and S&P 500 their biggest boosts.
The Dow Jones Industrial Average (.DJI) rose 186.45 points, or 0.56%, to 33,704.1; the S&P 500 (.SPX) gained 27.16 points, or 0.70%, at 3,919.25; and the Nasdaq Composite (.IXIC) added 106.98 points, or 1.01%, at 10,742.63.
Traders work on the trading floor at the New York Stock Exchange (NYSE) in New York City, U.S., January 5, 2023. REUTERS/Andrew Kelly
Shares of Microsoft Corp (MSFT.O) rose 0.8%, a day after Semafor, citing people familiar with the matter, reported that the tech company was in talks to invest $10 billion in ChatGPT-owner OpenAI.
Communications services (.SPLRCL) was the day’s best-performing sector, while energy (.SPNY) rose along with oil prices.
This week marks the start of the fourth-quarter earnings season for S&P 500 companies, with results from several of Wall Street’s biggest banks due later this week.
Shares of investment bank Jefferies Financial Group (JEF.N) rose 3.8% on Tuesday, a day after it posted its second-best year for investment banking revenue. It also reported a 52.5% slump in fourth-quarter profit.
Analysts expect overall S&P 500 earnings to have declined 2.2% in the fourth quarter from a year ago, according to IBES data from Refinitiv, as worries about rising rates and the economy mounted.
Some investors are hoping for signs that the Fed may soon take a break after raising the federal funds rate seven times in 2022.
The World Bank on Tuesday slashed its 2023 growth forecasts on Tuesday to levels teetering on the brink of recession for many countries as the impact of central bank rate hikes intensifies.
Volume on U.S. exchanges was 10.02 billion shares, compared with the 10.91 billion average for the full session over the last 20 trading days.
Advancing issues outnumbered decliners on the NYSE by a 2.33-to-1 ratio; on Nasdaq, a 2.45-to-1 ratio favored advancers.
The S&P 500 posted four new 52-week highs and no new lows; the Nasdaq Composite recorded 71 new highs and 30 new lows.
Additional reporting by Ankika Biswas, Amruta Khandekar and Johann M Cherian in Bengaluru; Editing by Shinjini Ganguli, Shounak Dasgupta and Richard Chang
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Jan 7 (Reuters) – A U.S. Trustee filed an objection on Saturday to plans by bankrupt crypto exchange FTX to sell its digital currency futures and clearinghouse LedgerX, as well as units in Japan and Europe, according to a court filing.
FTX filed for bankruptcy protection in November and said last month it planned to sell its LedgerX, Embed, FTX Japan and FTX Europe businesses. On Tuesday, FTX founder Sam Bankman-Fried pleaded not guilty to criminal charges that he cheated investors and caused billions of dollars in losses, in what prosecutors have called an “epic” fraud.
The filing by U.S. Trustee Andrew Vara called for an independent investigation before the sale of the units, arguing that the companies may have information related to FTX’s bankruptcy.
“The sale of potentially valuable causes of action against the Debtors’ directors, officers and employees, or any other person or entity, should not be permitted until there has been a full and independent investigation into all persons and entities that may have been involved in any malfeasance, negligence or other actionable conduct,” the filing said.
FTX said in a court filing last month that the companies it planned to sell are relatively independent from the broader FTX group, and that each has its own segregated customer accounts and separate management teams.
Reporting by Anirudh Saligrama in Bengaluru
Editing by Matthew Lewis
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Jan 5 (Reuters) – Bed Bath & Beyond Inc (BBBY.O) is preparing to seek bankruptcy protection in coming weeks, people familiar with the matter said, following poor sales and an inability to compete with large online and big-box retailers.
The U.S. home goods retailer is considering skipping debt payments due Feb. 1, one of the sources said, a typical move distressed companies on the verge of bankruptcy take to conserve cash.
Shares of the retailer, once a category killer in products like small appliances and bed sheets, ended down 30% on Thursday at $1.69 after the company said it expected to report a significant third-quarter loss and that there was substantial doubt about its ability to continue as a going concern.
The company said it was exploring a range of options to address its plunging sales that included declaring bankruptcy. The retailer said it has not made any final decisions on which course to take.
Bed Bath & Beyond had no immediate comment on any bankruptcy preparations beyond its disclosure on Thursday.
The company has interest payments on roughly $1.5 billion of bonds due Feb. 1, according to securities filings. The company is considering skipping the payout to conserve cash, which would likely trigger a 30-day grace period before the company officially defaults, the people said.
Troubled retailers often seek bankruptcy protection following the holiday season to take advantage of the cash cushion provided by recent sales. Should the company seek bankruptcy protection, it would likely seek financing from existing creditors to help it navigate a court restructuring, one of the people said.
The retailer’s fortunes soured after it pursued a strategy focused on its own private label goods. Management has since reversed course to bring in national brands shoppers recognized.
But on Thursday, signs emerged that this strategy too has failed to take off with the company reporting that it expects to post a loss of $385.5 million after sales plunged 33% for the quarter ending Nov. 26, due to lower customer traffic and reduced levels of inventory availability among other factors.
The company is scheduled to report its full third quarter results on Tuesday.
“The turnaround plan put in place last year is not working. … Put bluntly, the business is moving at rapid speed in the wrong direction with bankruptcy the most likely destination,” GlobalData analyst Neil Saunders said.
Bed Bath & Beyond has enlisted turnaround and consulting firm AlixPartners LLP to help advise on options for addressing its financial woes, people familiar with the matter said.
In addition to AlixPartners, the company is being advised by restructuring lawyers at Kirkland & Ellis LLP and investment bankers at Lazard Ltd (LAZ.N), one of the people said.
AlixPartners and Lazard declined to comment. Kirkland did not immediately respond to a request for comment. In a statement to Reuters late on Thursday, Bed Bath & Beyond said it was “working with strategic advisors to evaluate all paths to regain market share and enhance liquidity” but could not comment further on specific relationships.
The company became a meme stock last year when its shares soared more than 400%. Activist investor Ryan Cohen, the chairman of GameStop Corp (GME.N), took a stake in Bed Bath & Beyond, which he later sold, sending shares crashing.
Bed Bath & Beyond in its prior financial update in the fall said it had liquidity of $850 million but had burned through $325 million in the second quarter.
The company had also been asking bondholders to swap out their holdings for new debt to give it more breathing room to turn around its business but canceled the deal on Thursday after not getting much interest from investors, according to filings made with the U.S. Securities and Exchange Commission.
Bed Bath & Beyond had earlier considered selling its valuable buybuy Baby stores that sell goods for infants and toddlers but held off in the hopes it could later fetch a higher price, Reuters reported.
buybuy Baby is the “crown jewel” asset of the company and would likely generate the most interest from buyers in case the parent company decides to sell it as part of its restructuring efforts, Michael Baker, senior research analyst at DA Davidson said, without providing a valuation on the business.
The value of the chain helped the retailer ink a $375 million loan last year, the maximum amount it could borrow.
Reporting by Aishwarya Venugopal in Bengaluru and Siddharth Cavale in New York ; Editing by Shounak Dasgupta, Subhranshu Sahu, Mark Porter and Anna Driver
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Jessica DiNapoli
Thomson Reuters
New York-based reporter covering U.S. consumer products spanning from paper towels to packaged food, the companies that make them and how they’re responding to the economy. Previously reported on corporate boards and distressed companies.
Jan 5 (Reuters) – FTX’s former top lawyer Daniel Friedberg has cooperated with U.S. prosecutors as they investigate the crypto firm’s collapse, a source familiar with the matter said, adding pressure on founder Sam Bankman-Fried who was arrested on criminal fraud charges last month.
Friedberg gave details about FTX in a Nov. 22 meeting with two dozen investigators, the person said. The meeting, held at the U.S. Attorney for the Southern District of New York’s office included officials from the Justice Department, Federal Bureau of Investigation, and the U.S. Securities and Exchange Commission, the source said. Emails between attendees scheduling the meeting with those agencies were seen by Reuters.
At the meeting, he told prosecutors what he knew of Bankman-Fried’s use of customer funds to finance his business empire, the source said. Friedberg recounted conversations he had with other top executives on the subject and provided details of how Bankman-Fried’s hedge fund Alameda Research functioned, the source said.
Friedberg’s cooperation has not been previously reported. He has not been charged and has not been told he is under criminal investigation, the source said. Instead, he expects to be called as a government witness in Bankman-Fried’s October trial, the person said.
Friedberg’s lawyer, Telemachus Kasulis, the FBI and FTX did not respond to requests for comment on his cooperation. The SEC, the Department of Justice and Bankman-Fried’s spokesman declined to comment.
Bankman-Fried is accused of diverting billions of dollars in FTX client funds to Alameda to bankroll venture investments, luxury real estate purchases, and political donations. On Tuesday, he pleaded not guilty in Manhattan federal court.
Manhattan U.S. Attorney Damian Williams, who is leading the criminal case against now bankrupt FTX, said last month: “If you participated in misconduct at FTX or Alameda, now is the time to get ahead of it.”
Two of Bankman-Fried’s closest associates, Caroline Ellison, Alameda’s former chief executive, and Gary Wang, FTX’s former chief technology officer, pleaded guilty to fraud and agreed to cooperate. A lawyer for Ellison didn’t respond to a request for comment. Wang’s lawyer declined to comment.
MEETING WITH PROSECUTORS
FTX filed for bankruptcy protection on Nov. 11. A few days later, on Nov. 14, Friedberg received a call from two FBI agents based in New York. He told them he was willing to share information but needed to ask FTX to waive his attorney-client privilege, according to a person familiar with the matter and emails viewed by Reuters.
Friedberg wrote to FTX the next day asking the company to waive his privilege so he could cooperate with prosecutors, according to the email seen by Reuters. FTX did not do so, but agreed with Friedberg on the points he could disclose to investigators, the person said.
Friedberg then wrote back to the two FBI agents, telling them in an email reviewed by Reuters: “I want to cooperate in all respects.”
The U.S. Attorney’s Office set up a meeting where Friedberg signed so-called proffer letters prepared for him by the SEC and other agencies, according to the source and an email exchanged by participants. Proffer letters typically describe a potential agreement between authorities and individuals who are witnesses or subjects of an investigation.
“THROUGH THICK AND THIN”
Prior to his work advising FTX, Friedberg advised a mix of banking, fintech, and online gaming companies.
One of his previous employers, a Canadian online gaming firm named Excapsa Software, where he was general counsel, also drew controversy due to a cheating scandal involving a poker site it operated called Ultimate Bet. A Canadian gaming commission in 2008 fined Ultimate Bet $1.5 million for failing to enforce measures to prevent fraudulent activities. Excapsa has since dissolved.
According to an audio recording available on the website PokerNews, Friedberg and some other Ultimate Bet associates privately discussed that year how to handle the scandal and minimize the amount of refunds owed to players. Friedberg previously told NBC News that the audio was illegally recorded but NBC’s article did not say that Friedberg challenged its authenticity.
Friedberg first represented Bankman-Fried in 2017 as outside counsel while at U.S. law firm Fenwick & West, where he chaired its payment systems group, the source familiar with the matter said. At the time, the source said Friedberg advised Bankman-Fried on running Alameda, which he founded that year.
In 2020, when Bankman-Fried launched a separate exchange for U.S. customers called FTX.US, Friedberg moved in-house as FTX’s chief regulatory officer.
In a now-deleted blog post published that year on FTX’s website, Bankman-Fried wrote that Friedberg was FTX’s legal advisor “from the very beginning,” noting he had been “with us through thick and thin.”
Friedberg resigned from his position on Nov. 8, a day after Bankman-Fried disclosed to top executives that FTX was almost out of money, according to the source and three other people briefed on the talks, along with text messages his legal team exchanged at the time.
Additional reporting by Hannah Lang; editing by Megan Davies and Anna Driver
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NEW YORK, Dec 28 (Reuters) – Sam Bankman-Fried is expected to enter a plea next week to criminal charges he defrauded investors and looted billions of dollars in customer funds at his failed FTX cryptocurrency exchange.
The 30-year-old is expected to be arraigned on the afternoon of Jan. 3, 2023, before U.S. District Judge Lewis Kaplan in Manhattan federal court, court records on Wednesday showed.
Kaplan was assigned to the case on Tuesday, after the original judge recused herself because her husband’s law firm had advised FTX before its collapse.
Prosecutors have accused Bankman-Fried of engaging in a years-long “fraud of epic proportions,” by using customer deposits to support his Alameda Research hedge fund firm, buy real estate and make political contributions.
Bankman-Fried is charged with two counts of wire fraud and six counts of conspiracy, including to launder money and commit campaign finance violations, and if convicted could spend decades in prison.
Before his Dec. 12 arrest, Bankman-Fried acknowledged risk-management failures at FTX, but said he did not believe he was criminally liable.
Two of his associates, former Alameda chief executive Caroline Ellison and former FTX chief technology officer Gary Wang, have pleaded guilty over their roles in FTX’s collapse and agreed to cooperate with prosecutors.
A lawyer for Bankman-Fried did not immediately respond to requests for comment.
Bankman-Fried was released on Dec. 22 on a $250 million bond and ordered to stay with his parents in Palo Alto, California, where they teach at Stanford Law School. He is subject to electronic monitoring.
FTX filed for bankruptcy protection on Nov. 11. Its new chief executive, John Ray, told Congress on Dec. 13 that the exchange lost $8 billion of customer money while being run by “grossly inexperienced, non-sophisticated individuals.”
Reporting by Jonathan Stempel in New York
Editing by Matthew Lewis
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