According to a new bankruptcy filing from embattled crypto exchange FTX, its total number of creditors may be over a million.
This is just a hint of the massive impact that the collapse of the crypto exchange would have on traders in the crypto market.
Last week, when FTX first filed for bankruptcy, it had disclosed that its total creditors with claims could be around 100,000.
However, a new filing was made by lawyers on Tuesday, which showed that the Chapter 11 cases could have more than 1 million creditors.
The lawyer said that in these cases, debtors are usually asked provide a list of the addresses and names of the largest 20 unsecured creditors.
But, since FTX’s debts are on a much bigger scale, its lawyers are planning on providing a list of 50 of its biggest creditors and they intend to submit it by Friday.
The filing also said that each of the parent companies of the FTX crypto exchange had appointed five independent directors.
The lead independent director will be Joseph J. Farnan, who is the former district judge from Delaware.
The lawyers of the company said that FTX had reached out to ‘dozens’ of regulatory authorities overseas and in the US in the last 72 hours.
These include the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) as well as the US Attorney’s Office.
There have been a number of crypto companies that have collapsed this year, including Voyager Digital and Celsius Network.
Most of these firms suffered due to the fall in crypto prices, which resulted in a liquidity crisis. In other similar bankruptcy cases, traders using these platforms are dubbed as ‘unsecured creditors’.
This means that they have a long line ahead of them of those seeking repayment, which includes employees and suppliers.
Before FTX collapsed, the exchange had been offering spot crypto investing services to professional traders, along with complex derivative trading.
The platform had more than 1 million users and was valued at over $32 billion at its peak. Its failure has come as a shock for the entire industry, prompting people to remove funds from exchanges and sell their positions.
Due to these reactions, other exchanges, such as Crypto.com as well as the biggest one in the market i.e. Binance, have had to reassure their investors about the financial health of their respective businesses.
Changpeng Zhao of Binance said that they had only seen a slight uptick in withdrawals, while Kris Marszalek of Crypto.com said that their balance sheet was robust.
It was due to concerns about the company’s financial health that saw FTX filed for bankruptcy eventually. The value of its FTT token dropped and there was a surge in withdrawals, resulting in a liquidity crunch.
Sam Bankman-Fried stepped aside from his position and a new CEO was appointed named John J. Ray III, who is now going to oversee the bankruptcy proceedings of the exchange.