FTX's bankruptcy hearing is underway and the details are wild. Here's what to know.
Happy Thanksgiving eve, readers. I'm Phil Rosen. If you happen to be in New York without Thursday morning plans, you could swing by the Macy's Thanksgiving Day Parade, where you can be hugged by thousands of people at once and still be cold.
But if you aren't in New York, don't sweat it — Macy's is also hosting a parade in the metaverse this year.
Personally, I'd rather see the giant Snoopy balloon in real life, but you could probably get away with a lighter coat if you go digital.
Before we get to the news, I want to highlight the story behind the story of FTX.
The collapse of Sam Bankman-Fried's empire put the spotlight on crypto news outlets like CoinDesk and The Block. Those trade publications have been able to not only capitalize on the moment with smart scoops, but fend off a broader ad slump that's plagued digital media of late.
Read the full story from Insider's Reed Alexander and Steven Perlberg.
Programming note: The Opening Bell newsletter will be off on Thursday and Friday. We'll see you on Monday.
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1. FTX kicked off its bankruptcy hearing on Tuesday, and the initial statements give Sam Bankman-Fried and company little to cheer.
James Bromley, counsel to FTX's new management, had choice words during the first day in the Delaware hearing. He spoke of the events leading up to the crypto exchange's swift implosion, its suspect leadership and associated entanglements.
"FTX was in the control of inexperienced and unsophisticated individuals, and some or all of them were compromised individuals," Bromley said.
Notable, too, was how the lawyer likened FTX, a global organization, to Bankman-Fried's "personal fiefdom."
Before the hearing began, new CEO John J. Ray III — who famously oversaw the liquidation of Enron in 2001, the worst financial scandal of its time — had this to say:
"Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here."
Ray and his new management team's estimate of FTX's cash holdings has nearly doubled, a Saturday filing showed.
The discovery of an additional $564 million brings the company's total holdings to $1.24 billion — and furnishes Ray with more ammo to criticize FTX's lack of transparency and record keeping.
The appointment of Ray is meant to steer FTX out of what Bromley called "one of the most abrupt and difficult collapses in the history of corporate America and the history of corporate entities around the world."
Consider this tidbit from the initial bankruptcy filing: This company that, just weeks ago, was valued at $32 billion, did not have an accounting department.
Losses for FTX investors and customers are expected to go well into the billions, and experts say repercussions are going to be pervasive and long-lasting.
Company leadership now expects to have "millions of creditors" when the dust ultimately settles, though they plan to keep the identities of those parties secret for now.
All this is to say that as these bankruptcy hearings continue in Delaware, keep your eyes peeled for more details that redefine what it means to mismanage a multi-billion entity.
Thoughts or feedback? Let me know on Twitter (@philrosenn) or email me (prosen@insider.com).
In other news:
2. US stock futures rise early Wednesday, as investors brace for the minutes from the latest Federal Reserve meeting, which could shed light on the path of rate hikes. Here are the latest market moves.
3. On the docket: Nordstrom Inc, Xiaomi, and more, all reporting.
4. Avoid stocks and make these investments instead. As a recession approaches and interest rates peak, markets are set for more turmoil in 2023. PIMCO gave seven alternative places to put your money.
5. Sam Bankman-Fried issued an apology in a letter to former FTX employees. In the letter, seen by the Financial Times, Bankman-Fried said excessive borrowing by Alameda Research was responsible for FTX's collapse. "You were my family," he wrote. "I've lost that, and our old home is an empty warehouse of monitors. When I turn around, there's no one left to talk to." Read more here.
6. Larry Summers doesn't predict US interest rates will top 5%. The dual threats of high inflation and low economic growth mean it's likely that rates will stay between 2% and 5%, the former Treasury Secretary said. In his view, policymakers are juggling a "two-sided risk."
7. Russia's Gazprom threatened to halt gas flows to Europe via a pipeline in Ukraine. That would be the continent's last pipeline source of Russian gas — and Moscow could take it offline as soon as next week.
8. A senior economist said home prices will fall by 25%. Supply and demand dynamics in the housing market have created perfect conditions for declines, Jose Torrés explained. "At some point early next year, homeowners who need to sell will have to lower their prices to compete with prices of new homes."
9. FTX's swift downfall has led experts to forecast a choppy environment for digital assets. "This feels like chemotherapy, killing the cancer, and if the industry doesn't die with it, then we will only come out stronger," one investor said. Here's what five VCs expect in the years ahead for a faltering crypto industry.
10. Tesla has lost $670 billion of market value in the past year. Elon Musk's EV maker has seen its market cap plunge from a high of $1.2 trillion. Tesla's total losses are roughly equivalent to three Disneys, four Nikes, or six Starbucks.
Keep up with the latest markets news throughout your day by checking out The Refresh from Insider, a dynamic audio news brief from the Insider newsroom. Listen here.
Curated by Phil Rosen in New York. Feedback or tips? Tweet @philrosenn or email prosen@insider.com
Edited by Max Adams (@maxradams) in New York and Hallam Bullock (@hallam_bullock) in London.