Failed crypto exchange FTX has recovered over $5 bln, attorney says

FTX was valued a year ago at $32 billion, over $8 billion in FTX client funds missing Plan to sell FTX subsidiaries filed in court

NEW YORK/WILMINGTON, Del., Jan 11 (Reuters) – Crypto exchange FTX has recovered more than $5 billion in liquid assets, but the extent of customer losses in its collapse is still unknown, a lawyer for the bankrupt company said. founded by Sam Bankman, Fried said Wednesday.

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

“We have found over $5 billion in cash, liquid cryptocurrencies and liquid investment securities,” Andy Dietderich, an attorney for FTX, told a Delaware bankruptcy judge at the start of Wednesday’s hearing.

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

However, Dietderich said the legal team is still working to establish accurate internal records and the client’s actual whereabouts remain unknown. The US Commodity Futures Trading Commission has estimated the missing customer funds at more than $8 billion.

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

FTX’s lawyer estimated that the seized assets were worth $170 million, while Bahamian authorities put the figure at $3.5 billion. The seized assets consist primarily of FTX’s proprietary and illiquid FTT land, which is highly volatile in price, Dietderich said.

CUSTOMER PRIVACY

U.S. Bankruptcy Judge John Dorsey in Delaware on Wednesday granted FTX’s request to keep 9 million FTX customer names secret. But he allowed the names to remain withheld 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 is not,” Dorsey said. He set a hearing for Jan. 20 to discuss how FTX will differentiate between customers and said he wants FTX to come back in three months to provide more explanation on the risk of identity theft if customers’ names are made public.

Media companies and the US Trust, a government bankruptcy watchdog that is part of the Justice Department, had argued that US bankruptcy law requires disclosure of creditor details to ensure transparency and fairness. FTX said disclosing customer names could allow rivals to poach users, undermining the value of the business FTX is trying to sell.

FTX’s legal team is also seeking approval on Wednesday for procedures to sell subsidiaries LedgerX, Embed, FTX Japan and FTX Europe.

The subsidiaries are relatively independent from the broader FTX group, and each has its own separate 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 has received dozens of unsolicited bids and plans to hold auctions starting next month.

The US trustee has objected to the sale of the subsidiaries before the extent of the alleged FTX fraud is fully investigated.

In addition to selling the subsidiaries, a company lawyer said on Wednesday that FTX will end its seven-year sponsorship deal with the video game League of Legends, which began in 2021.

FTX founder Bankman-Fried, 30, was indicted on two counts of wire fraud and six counts of conspiracy last month in Manhattan federal court for allegedly stealing client deposits to pay off debts from his hedge fund. , Alameda Research, and to lie to equity investors about FTX. Financial situation. He has pleaded not guilty.

Bankman-Fried has acknowledged shortcomings in FTX’s risk management practices, but the billionaire has previously said he does not believe he is criminally liable.

In addition to lost customer funds, the company’s collapse is likely to wipe out equity investors as well.

Some of those investors were revealed in a court filing Monday, including football star Tom Brady, Brady’s ex-wife, supermodel Gisele Bündchen, 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 and Matthew Lewis

Our Standards: The Thomson Reuters Trust Principles.

Tom Hals

Thomson Reuters

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