HSF x SBF seemed such a sick collab at the time.
Don't feel too despondent if your adventures in crypto currency have ended in disaster - Herbert Smith Freehills has also been stung.
The firm was left out of pocket to the tune of $120,304 after it was stiffed on fees by Alameda Research, the trading firm closely linked to entrepreneur Sam Bankman-Fried's bankrupt FTX crypto currency exchange.
Customers of FTX were under the impression their cryptocurrency funds were being safely stored on the exchange, but, despite promising it would never lend out investor funds, FTX sent an estimated $10 billion to Alameda, which Bankman-Fried co-founded.
Although the 30-year-old stepped down as Alameda's CEO to give the impression it was unrelated to FTX, his replacement was his girlfriend, Caroline Ellison, and both companies worked out of his Bahamanian penthouse.
Alameda spent much of the money which belonged to FTX's customers buying up FTT, a crypto coin minted by FTX. The purchases served to buoy the value of FTT and FTX, even as a slide in the value of crypto currencies was driving other blockchain businesses towards collapse.
Bankman-Fried poured cash into promoting his exchange, which included purchasing the rights to rename the Miami Heat basketball team's stadium 'FTX Arena'. When crypto markets tumbled in early 2022, he was credited as the sector's white knight after FTX spent hundreds of millions bailing out troubled competitors and associated crypto companies.
But in November the CoinDesk website revealed that Alameda was holding over $5 billion in FTT, raising questions about its solvency on the basis that FTT was a self-created currency with little value on the open market. Once rival exchange Binance announced it was dumping its £529m investment in FTT tokens, customers rushed to withdraw $6 billion stored on FTX. Only the money wasn't there, and FTX was plunged into a liquidity crisis as it became apparent it had not maintained reserves to cover customers' deposits. FTT became worthless, FTX's valuation plummeted from $32 billion to zero, and Alameda fell with it.
Alameda's bankruptcy filings revealed that Herbies was the second largest unsecured Alameda creditor who was not an insider at the business, and was owed $120,304. Amazon Web Services was the number one creditor with an unsecured claim for $4.6m.
Other named creditors included Australian firm Piper Alderman Law ($48k) and US singer Jimmy Buffet's Margaritaville resort in the Bahamas, where Alameda racked up a tab of $55k.
Bankman-Fried was capable of covering drinks bills at the time - he took a personal loan of $1 billion from FTX, while his director of engineering, Nishal Singh, borrowed $543 million - although his personal fortune has now dwindled somewhat from a high of $16 billion to circa one Dogecoin, plus any embarrassingly-traditional fiat money he squirrelled away.
MaxLaw Global, a UK employment law business run via an Ince Gordon Dadds' correspondence address, also made an appearance on the list of creditors. The company was owed $33,975.
HSF declined to comment and MaxLaw did not respond, but a victim who is trying to pull out his remaining $7,000 in crypto told RollOnFriday, "I had funds in FTX, which I'm now forever unable to withdraw. It's the third Crypto exchange that this has happened with. Instead of ever investing in Crypto I probably would have been better off just putting it in the bank, but it's been an exciting ride".
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Bit of a msleading headline - its an unpaid bill by a client thats gone under. Crypto isnt really the reason but then I suppose that wouldnt make for much of a "story".
I approve of their choice of holiday location. Fins Up!
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Crypto is precisely the reason. The client was a crypto biz. The bills weren't paid because the crypto biz crashed, because of crypto fraud. It couldn't really be more to do with crypto unless HSF had agreed to be paid in FTT.
You don't just have to be a buyer of crypto to be suckered by it.
HSF banked on SBF's crypto biz being solid, just like the investors, and it wasn't. It's not HSF's fault: they took a punt on a sexy client. Who wouldn't.
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Oh silly me. So nothing to do with rampant mismanagement and diverting cash all over the place or treating the business like a personal piggy bank. Just #crypto.
I suppose that’s why Bitcoin went under the same time.
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Gannicus, I'm guessing you have some investments in...crypto?
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Just some chump change. I dont invest in things I dont understand.
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..Meh. A century ago, "respectable" banks and law firms on Wall Street wouldn't deal with shady upstart tech companies like Ford Motor Company. They changed their tune. In the 1990s, same with upstart tech companies like Google, involved in something called "the Internet". They changed their tune.
They'll change their tune about crypto too. FTX showed what was possible in terms of buying politicians and legitimacy - from nothing to flagbearer of the space in 2-3 years. Too bad it turned out to be a Madoff style fraud, but money and success always buy power, influence and credibility over time and crypto is no exception.
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Bored Ape might as well say “finance” was precisely the reason for the Madoff fraud, because it was a “finance business” and a “finance fraud”.
It makes about as much sense as saying crypto is at fault because FTX was a crypto business.
Newsflash: fraud is fraud - the industry doesn’t matter.
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Sounds like the esteemed Digital Law Group at HSF strikes again at the good stuff.
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"FTX - high returns, nice and safe." Or so the ad went.
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If people used DeFi on the decentralised networks and exchanges (DEX) rather the centralised exchanges (CEX) then none of this would happen.
What's the common denominator with all these centralised crypto exchange failures? ... People ! Usually incomptetent CEO'S.
This can't happend with DeFi. Granted there might be hacks, but code can be shored up over time.
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I would agree that fraud is a fraud, no matter of area. Law firms that supports crypto and business help to built a new reality and crypto is no harm itself. Obviously, by its nature it's quite tricky and that is what such ppl as SBF use to play with others. But we shouldn't close the opportunities for all businesses, many of them are trustworthy and do not lie to their client.
I doubt, HSF as any other law firm could predict a fraud from Alameda and SBF in charge. As well, as nobody from investors in FTX could predict they will simply loose their money.
What is interesting to me, is how would author know about the way HSF got their invoices or not. Not quite clear to me. But anyway, whatever happens in crypto it is still brings an attention and helps many of people.
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Lina - I assume it’s all in the bankruptcy filing