Failed Crypto Exchange FTX Has Recovered Over $5 Billion, Lawyers Say

NEW YORK/WILMINGTON, Del., Jan. 11 (Reuters) – Cryptocurrency exchange FTX has recovered more than $5 billion in liquidity, but the extent of its customer losses from its collapse is still unknown, it says. Lawyer for bankruptcy firm founded by Sam Bankman, Freed said Wednesday.

The company, valued at $32 billion a year ago, filed for bankruptcy protection in November, and U.S. prosecutors said it could have cost investors, customers and lenders billions of dollars in losses. Bankman-Fried was accused of orchestrating a “grand” fraud.

“We found more than $5 billion in cash, liquid cryptocurrencies and liquid investment securities,” FTX attorney Andy Dietrich said at the start of Wednesday’s hearing in Delaware. told the bankruptcy judge.

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

But Dietderich said the legal team was still working to create an accurate internal record and the actual customer shortage remained unknown. We estimate client funding to exceed $8 billion.

Dietderich said the $5 billion recovered does not include assets seized by the Bahamas Securities Commission, where Bankman-Fried is located.

FTX’s attorneys estimate the value of the seized property at just $170 million, while Bahamian authorities put the figure at $3.5 billion. Dietderich said most of the seized assets consisted of FTX’s own illiquid FTT token, whose price is highly volatile.

Customer privacy

On Wednesday, Delaware US Bankruptcy Judge John Dorsey granted FTX’s request to keep the names of its 9 million FTX customers confidential. However, he only allowed his name to remain hidden for three months instead of the six months FTX wanted.

“The difficulty here is that you don’t know who the customers are and who aren’t,” Dorsey said. He will hold a public hearing on his January 20th to discuss how FTX distinguishes between customers and to provide more clarification on the risk of identity theft if customer names are made public. , he said he hopes FTX will be back in three months.

Media companies and the U.S. Trustee, the government’s bankruptcy watchdog that is part of the Justice Department, say U.S. bankruptcy law requires the disclosure of creditor details to ensure transparency and fairness. was insisting. FTX says disclosing customer names could allow competitors to lure users and undermine the value of the business FTX is trying to market.

FTX’s legal team on Wednesday also sought approval for the sale of affiliates LedgerX, Embed, FTX Japan and FTX Europe.

According to FTX court filings, affiliates are relatively independent from the broader FTX group, each with their own separate customer accounts and separate management teams.

The cryptocurrency exchange has said it has no intention of selling either company, but has received dozens of unsolicited offers and plans to hold an auction starting next month.

The US Trustee is against selling affiliates before the scope of the alleged FTX scam has been fully investigated.

In addition to the affiliate sale, company lawyers said Wednesday that FTX will end its seven-year sponsorship deal with the League of Legends video game, which began in 2021.

FTX founder Bankman-Fried, 30, was accused last month of stealing customer deposits to pay debts from his hedge fund Alameda Research and lying to equity investors about FTX. He was indicted in Manhattan federal court on two counts of wire fraud and six counts of conspiracy. financial position. he pleaded not guilty.

Bankman-Fried acknowledges shortcomings in FTX’s risk management practices, but the former billionaire says he doesn’t consider himself criminally liable.

In addition to the loss of customer funds, the company’s collapse may have wiped out stock investors.

Among those investors are American football star Tom Brady, Brady’s ex-wife supermodel Gisele Bündchen, and New England Patriots owner Robert Kraft, all of whom are expected to head to court Monday. clarified in the filing.

Reporting by Dietrich Knout of New York and Tom Hulls of Wilmington, Delaware.Edited by Alexia Garamfalvi, Mark Porter and Matthew Lewis

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