The collapsed cryptocurrency exchange, FTX, has recovered more than $5 billion in cash and easily sellable crypto assets. These can be used to repay investors and customers. The firm’s attorney, Andy Dietrich, updated the case Wednesday during the FTX bankruptcy court hearing in Delaware bankruptcy court.
Andy Dietderich stated:
We have located over $5 billion of cash, liquid cryptocurrency and liquid investment securities measured at petition date value. Our holdings are so large relative to the total supply that our positions cannot be sold without substantially affecting the market for the token.
The recovered assets do not include cryptocurrency seized by the Securities Commission of the Bahamas, where Bankman-Fried resided. The company’s lawyer estimated the seized assets at $170 million, while Bahamian authorities estimated it at $3.5 billion. These holdings mainly consist of FTT, FTX’s native token, which is highly volatile in price, he said.
FTX’s legal team wants approval from U.S. Bankruptcy Judge John Dorsey in Delaware to sell $4.6 billion worth of non-strategic investments, consisting of Europe and Japan FTX, LedgerX, and Embed. These companies are independent of FTX and have separate accounts. The judge allowed the firm to sell its business units.
Also, the exchange is set to close its 2021–2028 sponsorship deal with the League of Legends video game, Dietderich said.
In addition, the firm is still working to rebuild its transaction history, as amounts owed to customers are still missing and unknown.
“We know all this has left a shortfall in the value to repay customers and creditors. The amount of the shortfall is not yet clear. It will depend on the size of the claims pool and our recovery efforts.”
On behalf of investors who raised concerns about potential identity theft, FTX also received court approval to keep their names secret for three months.
The FTX Failure
The crypto exchange was valued at $32 billion a year ago. In November, the FTX filed for bankruptcy. U.S. prosecutors said in December that Bankman-Fried committed a serious fraud that cost consumers, investors, and lenders billions of dollars.
The U.S. Commodities Futures Trading Commission has estimated that FTX clients lost more than $8 billion. FTX’s newly appointed CEO, John J. Ray III, said to regulators last month that the exchange would not be able to recover all of its losses and estimated that the process would take months, not weeks.
Bankruptcy expert John Ray said the main problem with Alameda Research and FTX is that they collected consumer funds, which enabled Alameda to use FTX users’ money and make risky financial bets. Although they were believed to operate as separate companies.
On Wednesday, Dietderich also emphasized in bankruptcy court that they already know how Alameda spent all the funds.
“It [Alameda] bought planes, houses, threw parties, made political donations. It made personal loans to its founders. It sponsored the FTX Arena in Miami, a Formula 1 team, the League of Legends, Coachella and many other businesses, events and personalities.”
Former FTX boss Sam Bankman Fried pleaded not guilty in Manhattan federal court last week to eight criminal charges of fraud and money laundering. Now the company’s advisers and lawyers are trying to return the funds to repay the creditors.
The Office of the Southern District of New York has established an “FTX Task Force” to track and recover lost customer assets, as well as manage legal actions related to exchange crashes.