FTX recovers $5bn but extent of losses still unknown

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The legal team is still working on creating accurate internal records; the actual shortage of customers remains unknown.

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Cryptocurrency exchange FTX has recovered more than $5 billion in liquid assets, but the size of customer losses from the collapse of the company founded by Sam Bankman-Freed is still unknown, a company lawyer said in a US bankruptcy court.

The company, valued at $32 billion a year ago, filed for bankruptcy protection in November, and U.S. prosecutors accused Bankman-Fried of orchestrating a “grand” fraud that could cost investors, customers and creditors billions of dollars.

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“We found more than $5 billion in cash, liquid cryptocurrencies, and liquid investment securities,” Andy Dietderich, an FTX lawyer, told U.S. Bankruptcy Judge John Dorsey in Delaware at the start of the hearing on Wednesday.

Dietderich also said the company plans to sell non-strategic investments with 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 Commodity Futures Trading Commission estimated the missing customer funds at more than $8 billion.

Dietderich said the $5 billion returned does not include assets seized by the Bahamas Securities Commission, where FTX was headquartered and Bankman-Freed lived.

An FTX lawyer estimated the seized assets at just $170 million, while Bahamian authorities put the figure at $3.5 billion. According to Dietderich, the seized assets mainly consist of own and illiquid FTT FTX tokens, the price of which is highly volatile.

Sale of assets

FTX may raise additional funds in the coming months on behalf of clients after Dorsey approved FTX’s request for affiliate sales review procedures at a hearing on Wednesday.

The affiliates – LedgerX, Embed, FTX Japan and FTX Europe – are relatively independent from the wider FTX group, and each have their own separate customer accounts and separate management teams, according to FTX court documents.

The cryptocurrency exchange has said it does not intend to sell any of the companies, but has received dozens of unsolicited offers and plans to hold auctions starting next month.

The U.S. Trustees Program, the government’s bankruptcy watchdog, opposed the sale of the branches pending a full investigation into the extent of the alleged FTX fraud.

Partly to preserve the value of their business, FTX also requested permission from Dorsey to keep 9 million FTX customer names secret. The company said that privacy is necessary to prevent competitors from poaching users, as well as to prevent identity theft and to comply with privacy laws.

Dorsey only allowed names to be kept under wraps for three months, not six months as FTX wanted.

“The difficulty here is that I don’t know who is a client and who is not,” Dorsey said. He scheduled a hearing for Jan. 20 to discuss how FTX would differentiate between customers and said he wanted FTX back in three months to give more explanations about the risk of identity theft if customer names were made public.

Media companies and the US Trustee Program have argued that US bankruptcy law requires disclosure of creditors to ensure transparency and fairness.

On Wednesday, a company lawyer said that in addition to selling affiliates, FTX will end a 19-year, $135 million sponsorship deal with the NBA’s Miami Heat and a seven-year, roughly $89 million deal with video game League of Legends.

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

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 losing client funds, the company’s collapse also likely wiped out equity investors.

Some of those investors were disclosed in a court filing Monday, including American football star Tom Brady, Brady’s ex-wife, supermodel Gisele Bündchen and New England Patriots owner Robert Kraft.

Credit: www.aljazeera.com /

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