Good day and welcome to WSJ Pro Bankruptcy's Daily Briefing. It's Wednesday, November 23. Today's newsletter recaps FTX's explosive first appearance in Delaware bankruptcy court, complete with its new managers' searing allegations against its former leader, Sam Bankman-Fried.

We will be taking a brief hiatus for the Thanksgiving holiday and will return to your inboxes on Monday.

FTX says substantial assets stolen or missing. A “substantial amount” of failed crypto exchange FTX’s assets are either missing or stolen, its lawyer said in court, as a run on customer deposits led the highflying firm to a rapid collapse.

Lawyers for the new managers of FTX vowed at a bankruptcy-court hearing to cast a wide net to identify and secure funds that passed through FTX, which they called the “personal fiefdom” of its co-founder, Samuel Bankman-Fried.

Tuesday’s hearing marked an inflection point for FTX’s bankruptcy case as its new leaders begin chasing down what assets they can salvage and building a case against whoever might be responsible for the loss of customers’ money.

“FTX was in the control of inexperienced and unsophisticated individuals, and some or all of them were compromised individuals,” said James Bromley, counsel to FTX’s new management, at its first appearance in Delaware bankruptcy court after filing the largest-ever crypto chapter 11 case earlier this month.

The size of the gap between FTX’s obligations to its customers and available assets it could use to help pay them still isn’t known, though Mr. Bromley said its individual and institutional customers number in the millions.

FTX, now controlled by a new chief executive and his appointed directors after Mr. Bankman-Fried stepped down, faces the daunting task of using bankruptcy laws to secure customer funds and other assets. Some FTX assets are outside the U.S., including in the Bahamas, where FTX’s inner circle ran its doomed operation.

FTX’s lawyers on Tuesday also presented their most searing allegations yet against the platform’s past leaders, especially Mr. Bankman-Fried, and their lack of professionalism in managing billions of dollars in customers’ cryptocurrency assets.

• Sequoia Capital Apologizes to Its Fund Investors for FTX Loss
• FTX Customers' Names Will Be Redacted for Now
• Bankman-Fried Apologizes To FTX Colleagues
• Crypto Exchange FalconX Restarts Silvergate Account Transfers
• Crypto Entrepreneur Justin Sun Eyes FTX Assets

Digital Currency Group says revenue will fall this year. Digital Currency Group Inc. said 2022 revenue is on track to reach $800 million, down about 20% from what the cryptocurrency-focused conglomerate expected to generate last year.

DCG is the parent company of Genesis Global Capital, a crypto lending firm that paused redemptions and loan originations earlier this month. DCG also owns Grayscale, which manages the world’s largest bitcoin fund.

DCG owes Genesis around $575 million that is due in May 2023, in addition to a $1.1 billion promissory note to Genesis due in June 2032, DCG Chief Executive Barry Silbert said in a letter to investors that was viewed by The Wall Street Journal.

Other crypto companies are on track for revenue declines larger than DCG’s, but intercompany loans in crypto are under increased scrutiny following revelations about the credit FTX extended to its affiliated trading firm, Alameda Research.

Biden administration extends student loan payment pause again. The Biden administration is extending a pause on federal student loan payments following legal challenges that have halted President Biden’s plan to forgive up to $20,000 in student debt for many borrowers.

Payments were set to resume Jan. 1, but they now will resume 60 days after litigation over the loan-forgiveness program is resolved or the program is implemented. A federal appeals court last week blocked the administration from moving ahead with its loan-forgiveness program in response to a lawsuit brought by officials in six states.

The legal wrangling has left the largest student loan forgiveness program in U.S. history in limbo, with borrowers uncertain about whether they will see the relief Mr. Biden said the government would provide.

Bankrupt crypto mining host to sell three data centers. A Texas bankruptcy judge on Tuesday approved the sale of three crypto mining data centers and equipment owned by bankrupt Compute North Holdings Inc. to a creditor.

Judge Marvin Isgur of the U.S. Bankruptcy Court in Houston granted approval for Compute North’s asset sale to Foundry Digital LLC, a subsidiary of Digital Currency Group.

Compute North owes Foundry about $8.97 million, and Foundry will use the credit to purchase Compute North’s data centers in Big Spring, Texas; North Sioux City, S.D.; and Minden, Neb.; according to the court filing.

In addition to a credit bid, Foundry will pay $4 million in cash at the closing of the Big Spring and North Sioux City deals. Foundry may defer the purchase of the Minden facility until the end of March next year, with an option to not buy it, according to the agreement. If Foundry moves forward with the acquisition, it will pay an additional $1.17 million in cash, the filing said.

Compute North filed for chapter 11 in September after a liquidity crisis in the ongoing cryptocurrency downturn, aiming to sell all of its assets out of bankruptcy. —Akiko Matsuda

City of Chester resumes governance lawsuit. A bankruptcy judge agreed to let a lawsuit proceed involving the bankrupt city of Chester, Pa.'s elected officials and its the state-appointed receiver.

Chester, which filed for bankruptcy earlier this month under the leadership of Receiver Michael Doweary, requested that its lawsuit proceed alleging Chester’s elected officials’ lack of cooperation for its recovery planning.

Judge Ashely Chan with the U.S. Bankruptcy Court in Pennsylvania said the automatic stay should be lifted because the lawsuit involves the city’s governance, which is outside of the bankruptcy court’s jurisdiction. From the judge's point of view, she said, both the receiver and elected officials represent the city of Chester.

“You each have your own responsibilities and duties, and the state court’s job is to try and make sure that you’re a cohesive group moving forward,” the judge said. — Akiko Matsuda

Share your tips, suggestions and feedback with the WSJ Pro Bankruptcy team: Soma Biswas; Alexander Gladstone; Jodi Xu Klein; Akiko Matsuda; Jonathan Randles; Alexander Saeedy; Andrew Scurria; Becky Yerak. 

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