FTX says it has found $5 billion to repay customers
US prosecutors accuse crypto boss Sam Bankman-Fried of orchestrating an ‘epic’ fraud
Failed crypto exchange FTX has recovered more than $5 billion in assets after initially claiming it could only find $1 billion in the wake of its collapse last year.
A US bankruptcy court heard that the company, which was valued at $32 billion a year ago, is still trying to figure out how much is owed to customers. The US Commodities Futures Trading Commission has estimated missing customer funds at more than $8 billion.
“We have located over $5 billion of cash, liquid cryptocurrency and liquid investment securities,” FTX lawyer Adam Landis told US Bankruptcy Judge John Dorsey in Delaware during Wednesday’s hearing.
“[It] just does not ascribe any value to holdings of dozens of illiquid cryptocurrency tokens, where our holdings are so large relative to the total supply that our positions cannot be sold without substantially affecting the market for the token.”
Prosecutors have accused founder and former CEO Sam Bankman-Fried of orchestrating an “epic” fraud that may have cost investors, customers and lenders billions of dollars.
The $5 billion recovered does not include assets seized by the Securities Commission of the Bahamas, where the company was headquartered and Mr Bankman-Fried resided.
FTX’s attorney estimated the seized assets were worth as little as $170 million while Bahamian authorities put the figure as high as $3.5 billion. The seized assets are largely comprised of FTX’s proprietary and illiquid FTT token, which is highly volatile in price, lawyers said.
FTX could raise additional funds in the coming months for the benefit of customers after Judge Dorsey approved FTX’s request for procedures to explore sales of affiliates at Wednesday’s hearing.
The affiliates – LedgerX, Embed, FTX Japan and FTX Europe – are relatively independent from the broader FTX group, and each has its own segregated customer accounts and separate management teams, according to FTX court filings.
The crypto exchange has said it is not committed to selling any of the companies, but that it received dozens of unsolicited offers and plans to hold auctions beginning next month.
In part to preserve the value of its businesses, FTX also sought Judge Dorsey’s approval to keep secret 9 million FTX customer names. The company has said that privacy is needed to prevent rivals from poaching users but also to prevent identity theft and to comply with privacy laws.
Dorsey allowed the names to remain under wraps for only three months, not six months as FTX wanted.
“The difficulty here is that I don’t know who’s a customer and who’s not,” Dorsey said. He set a hearing for 20 January to discuss how FTX will distinguish between customers and said he wants FTX to return in three months to give more explanation on the risk of identity theft if customer names are made public.
A court filing earlier this week revealed the name of some of the investors, which included NFL star Tom Brady and New England Patriots owner Robert Kraft.
Additional reporting by agencies
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