Good day and welcome to WSJ Pro Bankruptcy's Daily Briefing. It's Monday, November 21. The emerging picture of FTX's collapse suggests the firm was a mess from the start, with few boundaries, financial or personal. Our team also unravels all the latest news from the largest crypto bankruptcy in history, including its new management's jursidictional dispute with the Bahamas. And elsewhere, a look at Carvana's cash crunch and Twitter's travails.

FTX was troubled from the start. The emerging picture suggests FTX wasn’t simply felled by a rival, or undone by a bad trade or the relentless fall this year in the value of cryptocurrencies. Instead, it had long been a chaotic mess. From its earliest days, the firm was an unruly agglomeration of corporate entities, customer assets and founder Sam Bankman-Fried. 

To the outside world, Mr. Bankman-Fried was the mayor of cryptoland, the man charged with convincing lawmakers, investors and enthusiasts that he had built a new kind of finance. But behind the scenes, he was taking huge risks himself, aided by Caroline Ellison, the 28-year-old CEO of his trading firm, Alameda Research.

Though FTX claimed that Alameda was just a regular user on the exchange, the firm ran up a bill of $8 billion buying stakes in startups, trading on credit that no other user could get. Much of that money, much of which belonged to FTX’s customers, is likely gone.
 

• Bahamas regulator clashes with FTX over assets. The collapse of FTX has put its new managers at odds with regulators in the Bahamas over who should control the sparsely documented cash and cryptocurrency assets spread across FTX's global business. It isn’t clear how much in assets the Bahamas regulator now has under its control, but the dispute over customers’ deposits may determine how and when they may get their money back, and whether their path to repayment will run through a bankruptcy court in Delaware or through a liquidation in the Bahamas.
   
• FTX cleans house. The firm's new management terminated three top executives, including Ms. Ellison, who knew that FTX had sent customer money to its affiliated trading firm.
   
• Bankers looks to sell salvageable units. FTX’s management also hired an investment bank to help viable parts of the crypto exchange and discovered there were more than 200 accounts containing positive cash balances. The statement by John J. Ray, the firm's new CEO, struck a slightly more optimistic tone about the possibility of recovering assets compared with his previous sour assessment.
   
• FTX founder cashed out $300 million during funding spree. When FTX raised money from big-name investors last year, nearly three-quarters of the money, $300 million, went instead to Mr. Bankman-Fried, who sold some of his personal stake in the company. His cashout was large by startup-world standards, and he told investors it was a partial reimbursement of money he spent to buy out rival Binance’s stake in FTX a few months earlier. 
   
• Pension funds struggle to gauge crypto exposure. Public pensions in the U.S. have mostly shied away from digital assets, yet many have exposure to the cryptocurrency asset class anyway through investments in venture-capital funds that backed crypto firms.
   
• FTX team was among top political donors. Mr. Bankman-Fried and members of his team rose from relative obscurity in Washington to be among the biggest donors in U.S. politics. He personally gave $40 million to politicians and political-action committees ahead of the 2022 midterm elections, mostly to Democrats and liberal-leaning groups. With FTX’s contributions, crypto became one of the biggest-spending industries in politics during the most-recent election cycle.
   
• Customers worry their crypto is gone for good. Customers of FTX are losing hope they'll ever see their money again, soured not just on crypto but on the people who hyped it.

Celsius examiner says it commingled funds. Bankrupt cryptocurrency firm Celsius Network LLC failed to set up proper accounting and operational controls to ensure that customer funds in certain deposit accounts were set aside from the rest of its crypto holdings, an independent examiner said.

As a result, Celsius customers now face uncertainty over which assets belong to them as of the date of the bankruptcy filing, according to a report filed by examiner Shoba Pillay, who has been tasked with investigating the firm's handling of customer funds.

Celsius created its custody and withhold programs last year, requiring U.S. customers to make any new deposits into those new accounts. But Celsius failed to develop robust controls for the custody programs, only planning to do so later, according to the report.

Few companies have been hit harder by rising interest rates than Carvana. The company’s interest expense nearly doubled early this year when it paid up to get financing for an acquisition. Its cost to finance car purchases is up by three-quarters this year, and some of its real estate has lost value. Car buyers, meanwhile, are holding off purchases in the hope that rates fall.

• Carvana will lay off 1,500 employees. The workforce reductions come as the online used-car retailer faces economic headwinds and an uncertain future, Chief Executive Ernie Garcia said in a Friday memo to staff. 

• Twitter faces World Cup test. Some Twitter employees who recently left the company said that recent staff cuts will challenge the ability of those remaining to maintain the platform. Its heavily downscaled staff will face one of its biggest tests so far with the kickoff of soccer’s World Cup.
   
• Moody's withdraws Twitter rating. Moody’s Investors Service said it is withdrawing Twitter Inc.’s credit rating “due to insufficient information." Twitter was previously rated B1 by Moody’s—four notches below investment-grade status. It had also been on review for a downgrade, as the ratings firm considered the fallout from the debt-funded buyout.
   
• Twitter reinstates Trump's account. The move to reinstate the former president underscored how Mr. Musk has made himself the principal decider on all things Twitter after buying the platform for $44 billion last month.

Behind the rally are softer-than-expected consumer-price data that gave investors hope that the Federal Reserve will soon begin slowing the pace of its interest-rate increases. Housing is perhaps the industry most affected by the central bank’s efforts to cool the economy.

Honeywell buys out its asbestos liabilities. Honeywell International agreed to pay $1.325 billion to end its obligation to fund asbestos claims against a former unit. The industrial conglomerate signed the proposed deal with the asbestos trust established by former subsidiary North American Refractories Co., bankrupted in 2002 by mass asbestos claims.

Honeywell sued the trust last year, alleging it waved through payments for years that weren’t supported by competent and credible evidence of exposure to a Narco product. The trust denied the allegations and argued that Honeywell filed litigation to renegotiate its pledge to fund asbestos related claims in perpetuity.

Under the settlement, which required bankruptcy-court approval, Honeywell would end its obligation to provide evergreen funding to the trust or cover its operating expenses. — Andrew Scurria

• Earlier: Honeywell at Odds With Asbestos Trust Over Bankruptcy Deal

Elizabeth Holmes sentenced to more than 11 years in prison for defrauding Theranos investors. The founder of Theranos Inc. was sentenced for defrauding investors, capping the extraordinary downfall of a onetime Silicon Valley wunderkind. The sentence falls in the midrange of those received by a dozen white-collar criminals with similar offenses cited by the government in its sentencing memorandum.

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