Failed Crypto Exchange FTX Recovered Over $5 Billion, Lawyer Says

[ad_1]

FTX valued a year ago at $32 billionOver $8 billion in FTX client funds missingFTX subsidiary sale plan presented to court

NEW YORK/WILMINGTON, Delaware, Jan 11 (Reuters) – Crypto exchange FTX has recovered more than $5 billion in liquid assets, but the scale of customer losses in the collapse of the company founded by Sam Bankman-Fried is still unknown, an attorney for the company told a US bankruptcy court on Wednesday.

The company, which was valued a year ago at $32 billion, filed for bankruptcy in November and US prosecutors accused Bankman-Fried of orchestrating an ‘epic’ fraud that allegedly cost billions dollars to investors, customers and lenders.

“We have located over $5 billion in cash, liquid cryptocurrency and liquid investment securities,” FTX attorney Andy Dietderich told U.S. Bankruptcy Judge John Dorsey in Delaware earlier this month. hearing 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 was still working to create accurate internal records and the actual shortfall to clients remained unknown. The U.S. Commodities Futures Trading Commission estimated missing client funds at more than $8 billion.

Dietderich said the $5 billion recovered did not include assets seized by the Securities Commission of the Bahamas, where the company was headquartered and where Bankman-Fried resided.

FTX’s attorney estimated that the seized assets were worth just $170 million, while authorities in the Bahamas put the figure at $3.5 billion. The seized assets are largely made up of FTX’s proprietary and illiquid FTT token, which is highly volatile in price, Dietderich said.

ASSET SALES

FTX may raise additional funds in the coming months to benefit clients after Dorsey approved FTX’s request for proceedings to explore affiliate sales at Wednesday’s hearing.

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

The crypto exchange said it is not committing to selling any of the companies, but has received dozens of unsolicited offers and plans to hold auctions starting next month.

The US trustee, a government bankruptcy watchdog, opposed the sale of the affiliates before the extent of the alleged FTX fraud was fully investigated.

Partly to preserve the value of its business, FTX also sought Dorsey’s approval to keep the names of 9 million FTX customers secret. The company said the privacy was necessary to prevent rivals from poaching users, but also to prevent identity theft and to comply with privacy laws.

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

“The difficulty here is that I don’t know who is a customer and who isn’t,” Dorsey said. He set a hearing for January 20 to discuss how FTX will distinguish between customers and said he wanted FTX to come back in three months to give more explanation about the risk of impersonation if the names of the clients are made public.

The media companies and the US trustee had argued that US bankruptcy law requires the disclosure of creditor contact details to ensure transparency and fairness.

In addition to selling affiliates, an attorney for the company said Wednesday that FTX would end its 19-year, $135 million sponsorship deal with the NBA’s Miami Heat and an $89 million, 7-year contract. years with the League of Legends video game.

FTX founder Bankman-Fried, 30, was charged with two counts of wire fraud and six counts of conspiracy last month in Manhattan federal court for allegedly stealing customer deposits to pay debts to his hedge fund, Alameda Research, and lying to equity investors about FTX. financial condition. He pleaded not guilty.

Bankman-Fried acknowledged flaws in FTX’s risk management practices, but the former billionaire said he does not believe he is criminally responsible.

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

Some of those investors were disclosed in a court filing on Monday, including American football star Tom Brady, Brady’s former wife, model Gisele Bndchen, and New England Patriots owner Robert Kraft.

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

Our standards: The Thomson Reuters Trust Principles.

Tom Hall

Thomson Reuters

Award-winning journalist with more than two decades of international news experience, focusing on high-stakes legal battles on everything from government policy to business negotiation.

[ad_2]