Turnarounds & Workouts: FTX Fallout: More Regulatory Action and ... Turf War?

November 20, 2022

O’Melveny partners William K. Pao and Daniel Shamah suspect that regulators may be more inclined to take action in the crypto industry following the sudden collapse of FTX. “Regulators will be active as never before. They will investigate FTX, Sam Bankman-Fried and everything he has touched,” said Pao, who heads the firm’s fintech group. “For years, we’ve been talking about jurisdiction and which agency will be responsible for what. Regulators will be aggressive in expanding their jurisdiction now. American consumers and investors have been significantly affected by the FTX collapse. A lot of people lost a lot of money. No agency is going to wait to investigate.” Shamah, who is co-head of O’Melveny bankruptcy litigation group, noted that “bankruptcy court is a fishbowl. Every decision FTX made in recent weeks will be highly scrutinized by a litany of players - committees, potentially an examiner or a trustee, other investors - with a range of tools at their disposal. Expect this to be a long, expensive process that will take years to play out.”

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