FTX Crypto filing shows deficit of $8.6 billion

If FTX was founder Sam Bankman-Fried’s alleged personal piggy bankit was not refilled.

Newly archived legal documents introduced last week (March 2) reveals what John J. Ray III, FTX’s current CEO, has called a “massive shortfall” of “highly mixed assets” at the hollowed-out cryptocurrency firm, which represents over $8.6 billion in total commitment across all customer wallets and business accounts. Bankman-Fried has pleaded guilty to charges in connection with the case.

The bankruptcy filing notes that “related party debt and receivables” include $9.3 billion in net borrowings by Alameda from FTX.com.

Overall, more than $2.15 billion in assets were found on FTX.com, and an additional $191 million was raised on FTX.US, compared to a total deficit of $8.69 billion.

“Both exchanges typically held digital assets in sweep wallets that were not segregated for individual clients,” the report said.

The discovery process finds highly mixed assets and incomplete record books

The law firm Sullivan & Cromwell (S&C) and the restructuring advisory firm Alvarez & Marsal have so far invoiced FTX tens of millions of dollars for their work in untangling the mess Bankman-Fried left behind at the hugely popular digital asset platform he founded, which at one point was the world’s third-largest crypto exchange by transaction volume.

Their second stakeholder presentation is a preliminary analysis of the decommissioned switchboard’s shortcomings. It highlights that while $2.2 billion in assets have been identified in FTX.com account wallets, only about a third of those assets, $694 million, are liquid.

This $694 million of “Category A Assets” is composed of fiat, stablecoins and liquid cryptocurrencies such as bitcoin or Ethereum, while “Category B Assets” which make up the bulk of the funds found include illiquid tokens and certain other assets, including equity in FTX and its affiliates, which do not have an active trading market.

“The stock exchange’s assets were very mixed up, and their books and records are incomplete and in many cases entirely absent,” wrote CEO John Ray, adding that he believes it is more important to provide transparency to stakeholders by releasing the information about assets now than to wait until the FTX debtors have obtained security.

With regard to what this means for the crypto exchange more than one million creditors if hard-earned money is missing, FTX Debtors emphasized in its presentation that “it is not possible to calculate or predict customer recoveries based on the preliminary information in this presentation.”

Among reasons given was it “[the] the presentation does not attempt to adjust for commingling of assets or insider access to assets, which may be subject to future material adjustments, as well as a “lack of record keeping and documentation resulting in challenges in locating crypto assets.”

The review of FTX customer balances was initiated on 6 December by FTX Debtors, with an initial analysis completed on 29 December finding “significant balance issues”, which reported at that time of PYMNTS.

This latest presentation updates these findings with specific numbers.

“This is the second in what the FTX debtors expect will be a series of presentations as we continue to uncover the facts of this situation,” so John J. Ray III.

Pressure is increasing on FTX colleagues to prove legitimacy

The collapse of FTX and its ripple effects across the digital landscape continue to bring further scrutiny to those of its peers still standing, chief among them opaque crypto exchange Binance.

As reported by PYMNTS Sunday (March 5), Binance reportedly created its US platform as a shield from regulators.

Last Thursday (March 2), US Senators Elizabeth Warren (D-Mass.), Chris Van Hollen (D-Md.) and Roger Marshall (R-Kan.) sent a two-part letter to Binance, asking for answers about the company’s finances, risk management and regulatory compliance as the global exchange faces investigations into potential wrongdoing.

“Binance and its related entities have purposefully evaded regulators, moved assets to criminals and sanctions evaders, and concealed basic financial information from its customers and the public,” the senators wrote, alleging that Binance facilitated the laundering of at least $10 billion.

The letter’s 59 footnotes underscore the press investigation and negative speculation Binance’s operations have been under.

The senators are giving Binance and Binance.US two weeks to respond, asking the exchanges to release their balance sheets and compliance policies and respond to a set of questions by March 16.

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