FTX assets missing, stolen; This fund sees Bitcoin at $1 million

FTX’s bankruptcy team is struggling to track down all of the cryptocurrency exchange’s assets after it collapsed and filed for Chapter 11 on November 11. In a bankruptcy court hearing Tuesday, an FTX attorney said a significant amount of assets are either missing or stolen. The Wall Street Journal reports.

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The company’s new management is trying to chase down and recoup at least some of the billions of dollars that went through FTX and sister trading firm Alameda Research.

Inexperienced, unsophisticated, compromised

“What we have here is a worldwide, international organization, but one that was run as a personal fiefdom by (company co-founder and former CEO) Sam Bankman-Fried,” FTX attorney James Bromley said in a Delaware bankruptcy court filing Tuesday. “FTX was in the control of inexperienced and unsophisticated individuals, and some or all of them were compromised.”

Bromley described the fall of FTX as “one of the most abrupt and difficult collapses in the history of corporate America and the history of corporate entities around the world.”

FTX attracted millions of individual and institutional customers. Lawyers are uncertain whether the recoverable assets will be enough to meet the obligations. Court papers show the 50 largest creditors are owed more than $3 billion. FTX’s team said it will take months to sort through customer claims and Alameda’s risky trades. Meanwhile, customer funds on the exchange remain frozen.

And in further testimony to SBF’s mismanagement, court papers last week revealed that one of FTX’s entities spent $300 million in company funds on houses in the Bahamas for the former senior staff and Bankman-Fried’s parents.

Now newly appointed CEO John J. Ray III, who oversaw Enron’s bankruptcy, is tasked with saving whatever funds he can for investors and customers. It could be his toughest test yet. “Never in my career have I seen such a complete failure of corporate controls and such a complete absence of reliable financial information,” he previously said.

Beyond FTX: Battle Testing Bitcoin

But while Bankman-Fried seems to have flown too close to the sun, Cathie Wood still thinks Bitcoin is going to the moon.

Wood, founder and CEO of ARK Investment Management, maintains her Bitcoin price target of $1 million per coin by 2030, she told Bloomberg Businessweek on Tuesday night. Although the world’s largest crypto hit a two-year low on Monday.

“Sometimes you have to battle-test. You have to go through crises to see the survivors, to test the infrastructure and the thesis. We think Bitcoin will come out of this smelling like a rose,” Wood said.

“If you look at the blockchain … infrastructure, the technology has not skipped a beat throughout this crisis,” she said. Wood points to Bitcoin’s hash rate, at an all-time high, as evidence of security. And Ethereum’s total staked value is at an all-time high of $24 billion.

Ark invests

Wood puts her money where her mouth is, picking up battered shares Coin base (COIN) stocks and Grayscale Bitcoin Trust (GBTC).

The funds Ark Next Generation Internet ETF (ARKW) and ARK Innovation ETF (ARKK) bought a combined nearly 177,000 shares of GBTC worth $1.5 million on Monday. That’s after ARKW bought more than 315,000 shares of GBTC worth about $2.8 million last Monday, Bloomberg reported.

Since Nov. 9, the two funds have bought about 1.3 million COIN shares, worth $56 million based on Tuesday’s closing price, bringing their total holdings to 8.37 million shares.

“I think Coinbase is going to come out of this very strong, it just lost a very big competitor in FTX,” Wood said in the Bloomberg interview.

Coinbase’s current stock prices are likely lower due to fear and a lack of crypto understanding, she said. Still, crypto is unlikely to face a “Lehman moment” because the scale is much smaller. And while the FTX situation “was a fraud,” Wood suggested that the claims will ultimately be much smaller than those from Bernie Madoff’s scandal.

Meanwhile, decentralized financial platforms, which use secure, distributed ledgers similar to cryptocurrencies, will take off due to increased transparency and lower counterparty risk, says Wood.

COIN and GBTC now make up ARK’s 14th and 41st largest holdings, across all funds, according to the firm’s latest data.

Bitcoin reversed below $16,500 early Wednesday. COIN stock was up 3.6% early Wednesday after jumping 5.2% on Tuesday. And GBTC shares rose 4.7% after gaining 2% on Tuesday.

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