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FTX recover over $5 Billion in assets amidst bankruptcy and customer losses

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Crypto exchange FTX has announced that it has recovered over $5 billion in liquid assets, but the extent of customer losses in its collapse is still unknown, according to an attorney for the bankrupt company. The company, which was valued at $32 billion a year ago, filed for bankruptcy protection in November and U.S. prosecutors have accused the founder, Sam Bankman-Fried, of orchestrating an “epic” fraud that may have cost investors, customers and lenders billions of dollars.

“We have located over $5 billion of cash, liquid cryptocurrency and liquid investment securities,” Andy Dietderich, an attorney for FTX, told a U.S. bankruptcy judge in Delaware during a hearing. Dietderich also said that the company plans to sell non-strategic investments that had a book value of $4.6 billion. However, he added that the legal team is still working to create accurate internal records, and the actual customer shortfall remains unknown. The U.S. Commodities Futures Trading Commission (CFTC) has estimated missing customer funds at more than $8 billion.

Dietderich also mentioned that the $5 billion recovered does not include assets seized by the Securities Commission of the Bahamas, where Bankman-Fried was located. He 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 composed of FTX’s proprietary and illiquid FTT token, which is highly volatile in price, Dietderich said.

During the hearing, U.S. Bankruptcy Judge John Dorsey in Delaware granted FTX’s request to keep secret 9 million FTX customer names. However, he allowed the names to remain under wrap for only three months, not six months as FTX had requested. Dorsey stated that “the difficulty here is that I don’t know who’s a customer and who’s not” He set a hearing for January 20th 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.

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

In addition to selling affiliates, a company lawyer also announced during the hearing that FTX will end its seven-year sponsorship deal with the League of Legends video game, which started in 2021. FTX’s legal team was also seeking approval on Wednesday for procedures to sell affiliates LedgerX, Embed, FTX Japan, and FTX Europe. The affiliates 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.

However, the US trustee has opposed selling the affiliates before the extent of the alleged FTX fraud is fully investigated. The 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.

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

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