FTX Confirms $9 Billion in Customer Funds Vanished
FTX Founder Sam Bankman-Fried is currently facing 12 federal charges alongside other investigations into him funneling customer funds to hedge fund Alameda Research.
Those involved in the ongoing FTX collapse admitted on Thursday that $9 billion of client funds are still at stake, which cannot be found among the tangle of funds left over from the stock market crash.
A company called "FTX.com Preliminary Defect Analysis" said it had finally listed all wallets linked to FTX.com and said there was a "large gap" as less than $2.2 billion had been identified. client's wealth, but only $694 million of that can be considered real liquid currency. Compare that to the remaining $11.2 billion locked up in customer accounts and another $9 billion lost due to the machinations of former FTX bosses.
The filing reveals that former FTX CEO Sam Benkman-Fried initiated an alleged plan to move client funds from FTX to his hedge fund Alameda Research. The presentation showed that Alameda net borrowed $9.3 billion from FTX.com wallets and accounts, but it wasn't clear how much of the shortfall was due to a lack of client funds. The US Securities and Exchange Commission previously claimed that Alameda had more than $8 billion in FTX client funds in its accounts.
The numbers are based on cryptocurrency prices at the time the company filed for bankruptcy in November, but this is the first time the bankrupt exchange has confirmed how much of its unprocessed funds it holds. Of the $2.2 billion the company has raised, only $880 million is in cash holdings in dollars, stablecoins, or other major cryptocurrencies. $1.5 billion in additional "non-cash" assets are things like FTT tokens. After all, the company has huge billions of dollars in losses across multiple tokens, including Bitcoin and Ethereum, and small holdings in coins like FTX, FTX's parent token.
Court documents filed in January by the FTX-run law firm revealed $5.5 billion in crypto and cash assets in client accounts and elsewhere within the company. Proponents argue that these digital currencies should be easily converted into monetary assets, but it is unclear how much of these identified funds are accounted for in this latest presentation.
John J. Ray III, the man who led the stock through Chapter 11 bankruptcy, said in a news release that information is still preliminary, but that FTX's ledgers are full of holes, "in many cases none at all." Ray has been open about the crazy things that happened right before the FTX collapse. He called the company a "complete failure" of corporate governance.
FTX customers have been on needles and needles for months, but the company said it released the information because it wanted "transparency." The company said it was impossible at this point to determine how many customers might recover from the disruption, as debt, shareholders and outstanding creditors shadowed the company demanding repayment. Bankman-Fried's reorganization of the "100+ companies" that make up the former West Realm Shires cryptocurrency empire.
Last month, FTX Japan finally released its clients' funds and allowed some clients to access their (now presumably written off) funds. It is not clear if you will be able to access your account again. In its presentation, the company said it will continue to update clients on the progress, except that "information may include, but is not limited to, recovery estimates in the FTX Obligor's Chapter 11 filings. He should not be trusted for any purpose. "
Federal prosecutors initially charged Bankman-Fried with eight counts of fraud and conspiracy, but recently increased that to 12 and charged hundreds more with illegal political donations. The failed FTX founder pleads guilty. His trial will be held on October 2.