FTX Disputes Court Approval for Backpack’s Acquisition of EU Arm

Jimmy Aki
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Bankrupt cryptocurrency exchange FTX has issued a statement refuting claims that crypto exchange Backpack’s acquisition of its European subsidiary, FTX EU, was approved by the U.S. Bankruptcy Court. FTX also clarified that Backpack has not been authorized to manage creditor repayments.

Backpack’s Acquisition of FTX EU Disputed by FTX

Backpack, founded by Solana developer Armani Ferrante, announced on January 7 that it had acquired FTX EU.

In its statement, Backpack claimed it would oversee creditor repayments for EU customers as part of the bankruptcy process. Backpack founder Armani Ferrante stated that Backpack would refrain from operating in the EU until all creditor obligations were settled, potentially as early as February.

However, FTX countered this announcement on January 8, asserting that Backpack’s claims were premature. According to FTX, “Backpack’s Press Release was issued without the knowledge or involvement of FTX.”

FTX emphasized that the acquisition had not been approved by the Delaware Bankruptcy Court, which oversees the exchange’s proceedings.

The defunct exchange further explained that FTX EU had previously been earmarked for sale to former insiders of FTX Europe as part of a court-supervised settlement.

FTX stated that it was only recently that these insiders had arranged for an indirect transfer of FTX EU to Backpack.

FTX Retains Responsibility for Creditor Repayments

FTX stated, “Neither FTX nor the U.S. Bankruptcy Court was made aware of the indirect sale of FTX EU to Backpack prior to this week.” It added that Backpack has no authority to manage creditor distributions. The exchange clarified that it remains solely responsible for returning funds to its former customers.

The reorganization plan for FTX, which took effect on January 3, outlines the repayment structure for creditors. The plan indicates that repayments for a specific group of creditors, including those with claims of $50,000 or less, are expected to begin within 60 days.

Backpack’s connection to FTX dates back to its inception. In 2022, the company reportedly received $20 million in funding from FTX and Jump Crypto. Co-founder Tristan Yver, a former FTX executive, departed from the company in May 2022.

During FTX’s collapse in late 2022, Backpack faced significant financial setbacks. It lost $14.5 million, which accounted for 88% of its operational funds. Despite these losses, the company managed to maintain minimal operations.

FTX’s legal and financial troubles have led to significant scrutiny of its operations and asset sales.

In a related development, Three Arrows Capital (3AC), a now-bankrupt crypto hedge fund, has filed a motion to increase its claim against FTX from $120 million to $1.5 billion.

3AC alleges that FTX unfairly liquidated over $1.3 billion of its assets shortly before the hedge fund’s collapse, causing significant harm to its creditors. A court hearing on November 20 will determine whether 3AC’s revised claim will proceed.

About Jimmy Aki PRO INVESTOR

Based in the UK, Jimmy is an economic researcher with outstanding hands-on and heads-on experience in Macroeconomic finance analysis, forecasting and planning. He has honed his skills having worked cross-continental as a finance analyst, which gives him inter-cultural experience. He currently has a strong passion for regulation and macroeconomic trends as it allows him peek under the global bonnet to see how the world works.