FTX recovers $5 billion but the extent of the damage is still unknown | Business and economic news
Cryptocurrency exchange FTX has recovered more than $5 billion in liquid assets but the extent of customer damage in the collapse of the company founded by Sam Bankman-Fried remains unknown, a lawyer said. of the company told the US bankruptcy court.
The company, valued a year ago at $32 billion, filed for bankruptcy protection in November and US prosecutors Defendant Bankman-Fried staged an “epic” scam that could cost investors, customers, and lenders billions of dollars.
“We have identified more than $5 billion in cash, liquid crypto, and liquid investment securities,” Andy Dietderich, an attorney for FTX, told U.S. Bankruptcy Judge John Dorsey in Delaware when The hearing began on Wednesday.
Dietderich also said the company plans to sell non-strategic investments with a book value of $4.6 billion.
However, Dietderich said the legal team is still working to create an accurate internal profile and the true amount of client shortfall is unknown. The U.S. Commodity Futures Trading Commission has estimated the client’s shortfall to be more than $8 billion.
Dietderich said the $5 billion recovered does not include assets seized by the Securities Commission of the Bahamas, where FTX is headquartered and Bankman-Fried lives.
FTX attorneys estimate the forfeited assets to be worth at least $170 million while Bahamian authorities put the figure as high as $3.5 billion. Dietderich said the seized assets largely consisted of FTX’s proprietary and illiquid FTT token, which is highly volatile in price.
Sale of property
FTX may raise additional funds in the coming months for the benefit of its customers after Dorsey approved FTX’s request for affiliate sales discovery procedures at a hearing Wednesday.
The affiliates – LedgerX, Embed, FTX Japan and FTX Europe – are relatively independent from the broader FTX pool and each has separate customer accounts and separate management groups, according to court filings. FTX.
The cryptocurrency exchange said it is not committed to selling any companies but it has received dozens of unsolicited offers and plans to hold an auction early next month.
The US Trustee Program, a government bankruptcy watchdog, opposed the sale of affiliates before the extent of the alleged FTX fraud was fully investigated.
Partly to preserve the value of its business, FTX also asked Dorsey’s permission to keep FTX’s 9 million customer names secret. The company says privacy is necessary to prevent competitors from poaching users, but also to prevent identity theft and to comply with privacy laws.
Dorsey allows names to be kept secret for only three months, not the six months that FTX wants.
“The difficulty here is that I don’t know who the customers are and who aren’t,” Dorsey said. He has scheduled a hearing for January 20 to discuss how FTX will differentiate between customers and said he wants FTX back in three months to further explain the risk of identity theft. calculated if the customer’s name is public.
Media companies and the U.S. Trust Program have argued that U.S. bankruptcy law requires the disclosure of creditor details to ensure transparency and fairness.
In addition to selling affiliates, a company attorney on Wednesday said FTX will conclude a 19-year, $135 million sponsorship deal with the NBA’s Miami Heat and a seven-year deal worth about $89 million. dollars with the video game League of Legends.
Bankman-Fried, 30, was indicted on two counts of wire fraud and six counts of conspiracy last month in Manhattan federal court for allegedly stealing customer deposits to pay off debt from his hedge fund. ta, Alameda Research, and lied to equity investors about FTX’s financial position. He has plead not guilty.
Bankman-Fried has acknowledged shortcomings in FTX’s risk management practices but the one-time billionaire said he doesn’t believe he should be held criminally responsible.
In addition to lost customer funds, the collapse of the company also has the potential to wipe out equity investors.
Some of those investors were revealed in court filings Monday, including US soccer star Tom Brady, Brady’s ex-wife, supermodel Gisele Bündchen and New England Patriots owner Robert Kraft .