Failed cryptocurrency exchange FTX has recovered over $5 billion, lawyer says

  • FTX valued a year ago at $32 billion
  • Over $8 billion of FTX client funds are missing
  • Plan to sell FTX affiliates filed in court

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

The company, valued at $32 billion a year ago, filed for bankruptcy 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 identified over $5 billion in cash, liquid cryptocurrency and liquid investment securities,” Andy Dietderich, an attorney for FTX, told a U.S. bankruptcy judge in Delaware 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 create accurate internal records, and the actual client shortage remains unknown. The US Commodities Futures Trading Commission estimated the missing customer at more than $8 billion.

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

FTX’s attorney estimated the seized assets were worth just $170 million, while Bahamian authorities put the figure up to $3.5 billion. The seized assets are largely composed of FTX’s proprietary and illiquid FTT token, which has a highly volatile price, Dietderich said.

SALES AFFILIATES

The FTX legal team went to court Wednesday to seek approval of the sale proceedings of LedgerX, Embed, FTX Japan and FTX Europe affiliates. FTX also wants approval from US bankruptcy judge John Dorsey in Delaware to keep client names secret for at least six months.

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

The four companies that FTX intends to sell are relatively independent of the larger FTX group and each have their own separate client accounts and separate management teams, according to FTX court filings.

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

The US Trustee, a bankruptcy watchdog that is part of the Justice Department, has opposed the sale of the affiliates before the extent of the alleged FTX fraud is fully investigated.

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

Bankman-Fried acknowledged shortcomings in FTX’s risk management practices, but the former billionaire said he did not believe he was criminally liable.

In addition to lost client funds, the company’s collapse likely wiped out equity investors as well.

Some of those investors were disclosed in a court filing on Monday, including American football star Tom Brady, Brady’s wife’s former 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, Matthew Lewis and Mark Porter

Our standards: the Thomson Reuters Trust Principles.

Tom Hals

Thomson Reuters

Award-winning reporter with more than two decades of international news experience specializing in high-stakes legal battles on everything from government policy to corporate settlements.

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