Failed cryptocurrency exchange FTX made more than $5 billion, lawyer says


  • FTX 32 billion a year ago
  • More than $8 billion missing in FTX client funds
  • Plan to sell FTX affiliates filed in court

NEW YORK/WILMINGTON, Del., Jan 11 (Reuters) – Cryptocurrency exchange FTX has recovered more than $5 billion in liquid assets, but the extent of customer losses from the collapse of the company founded by Sam Bankman-Fried is still unknown, a lawyer for the company said on Wednesday in the U.S. told the bankruptcy court.

The company, valued at $32 billion a year ago, filed for bankruptcy protection in November, and US prosecutors accused Bankman-Fried of “epic” fraud that could have cost investors, customers and lenders billions of dollars.

“We found over $5 billion in cash, liquid cryptocurrency and liquid investment securities,” FTX attorney Andy Dietderich told U.S. Bankruptcy Judge John Dorsey in Delaware at the start of Wednesday’s hearing.

Dietderich also said the company plans to sell its non-strategic investments, which have a book value of $4.6 billion.

However, Dietderich said the legal team is still working to establish accurate internal records and the actual customer shortage remains unknown. The US Commodity Futures Trading Commission estimated the lost client funds at more than $8 billion.

Dietderich said the $5 billion recovered did not include the company’s headquarters and assets seized by the Securities and Exchange Commission of the Bahamas, where Bankman-Fried resides.

A lawyer for the FTX estimated the seized assets to be worth $170 million, while Bahamian authorities put the figure at $3.5 billion. Dietderich said the seized assets mainly consist of FTX’s proprietary and illiquid FTT token, which is highly volatile in price.

ASSET SALE

After Dorsey approved FTX’s request for procedures to investigate branch sales at Wednesday’s meeting, FTX could raise additional funds in the coming months to benefit customers.

The affiliates — LedgerX, Embed, FTX Japan and FTX Europe — are relatively independent from the broader FTX group and each has its own client accounts and separate management teams, according to FTX’s court filings.

The cryptocurrency exchange said it is under no obligation to sell any of the companies, but has received dozens of unsolicited offers and plans to hold auctions starting next month.

The U.S. Trustee, the government’s bankruptcy watchdog, opposed the sale of the branches without a full investigation into the extent of the alleged FTX fraud.

In part to protect the value of their businesses, FTX asked Dorsey for permission to keep 9 million FTX customer names private. The company said privacy is necessary to prevent competitors from poaching users, while also preventing identity theft and complying with privacy laws.

Dorsey allowed the names to remain secret for only three months, not the six months the FTX had requested.

“The challenge here is that I don’t know who was a customer and who wasn’t,” Dorsey said. He scheduled a hearing for Jan. 20 to discuss how FTX will differentiate customers and said he wants FTX to come back in three months to explain more about the risk of identity theft if customer names are released.

Media companies and the US Attorney argued that US bankruptcy law requires disclosure of creditor details to ensure transparency and fairness.

In addition to selling the affiliates, FTX will end its 19-year, $135 million sponsorship deal with the NBA’s Miami Heat and its nearly seven-year, $89 million contract with the League of Legends video game, a company lawyer said Wednesday.

Bankman-Fried, the 30-year-old founder of FTX, was indicted in federal court in Manhattan last month on two counts of fraud and six counts of conspiracy, accused of stealing client deposits to pay off debts from hedge fund Alameda Research and lying to shareholders about FTX’s cash holdings. driven. the financial condition. He pleaded not guilty.

Bankman-Fried acknowledged shortcomings in FTX’s risk management practices, but once said he did not believe the billionaire would face criminal charges.

In addition to lost customer funds, the company’s collapse likely wiped out equity investors.

Some of those investors, including American football star Tom Brady, Brady’s ex-wife supermodel Gisele B√ľndchen and New England Patriots owner Robert Kraft, were named in Monday’s lawsuit.

Dietrich Knauth in New York and Wilmington, Del. Reports by Tom Hals; Edited by Alexia Garamfalvi, Mark Porter, Matthew Lewis and Anna Driver

Our standards: Thomson Reuters Trust Principles.

Tom Hals

Thomson Reuters

Award-winning reporter with more than two decades of experience in international news, focusing on high-stakes legal battles on everything from government policy to corporate deals.



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