FTX Uncovers $5 Billion in Cash and Liquid Cryptocurrency, Considers Sale

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Last Updated on January 12, 2023 by Bitfinsider

Two months after the ailing cryptocurrency exchange sought bankruptcy protection, FTX’s new management claims to have found $5 billion in cash, liquid cryptocurrencies, and liquid financial assets.

The assets were discovered, according to FTX attorney Andy Dietderich, at a bankruptcy court hearing in Delaware on Wednesday morning. According to Dietderich, the $425 million in cryptocurrency held by the Bahamas Securities Commission is not included in the $5 billion. The attorney did not clarify on whether it included Sam Bankman-Fried’s roughly $450 million worth of Robinhood stock, which the US government claimed last week while the former FTX CEO is awaiting trial on fraud allegations.

“We are engaged in a complex effort now to recreate petition date claim values for every customer. We are building financial statements from the ground up using the general ledger and bank transaction records rather than the previous incomplete and unreliable financial statements of the debtors,” Dietderich stated. He further added: “This will put us in the position to describe the financial results of the debtors accurately for the first time.”

In a protracted hearing before Judge John Dorsey, attorneys discussed the potential sale of FTX businesses as well as whether or not to redact the names of the nine million clients of the company.

According to Kevin Cofsky of Perella Weinberg Partners, a partner of FTX’s proposed investment bank, FTX may be able to sell its core exchange during the bankruptcy process.

Cofsky stated: “We have already initiated a review of a reorganization of the core exchange, and that process is ongoing.”  Four companies that FTX claims are largely independent from the crypto behemoth and could lose value if sold later are being sold first. LedgerX, Embed, FTX Japan, and FTX Europe are those companies mentioned above.

Following discussions regarding the redacted customer list, Dorsey made the decision to keep the majority of customer and creditor identities secret for at least another three months on the grounds that such individuals or organizations may have privacy issues if their information is made public. Major investors in FTX, including venture capitalist Peter Thiel, Tom Brady, Gisele Bundchen, and Kevin O’Leary, have already had their names made public in court.

Dorsey added, “I want to make sure I’m doing the right thing. We have a list of people who may be customers, may be creditors, may be both, and I don’t know which is which.”

Cofsky asserted during the hearing that disclosing the identities of FTX consumers may lower the company’s worth because such customers might be courted by rival cryptocurrency businesses. The U.S. trustee monitoring the bankruptcy’s counsel, Juliet Sarkessian, disagreed that poaching is the primary cause of customers leaving FTX.

According to Sarkessian, “I think they may be leaving the platform for reasons other than poaching,” noting that former FTX executives had been charged for combining client assets with the company’s sister cryptocurrency trading firm, Alameda Research.

For a period of six months, FTX lawyer Brian Glueckstein requested that the judge redact customer names and addresses. He cited the recent bankruptcy proceeding for failing cryptocurrency lender Celsius, when the names of the clients were made public. Glueckstein declared: “That decision is an outlier and certainly should not be wholesale adopted here.” 

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