In search of FTX assets, lawyers find billions in cash and crypto

In search of FTX assets, lawyers find billions in cash and crypto

Two months after FTX filed for bankruptcy, lawyers at the once skyrocketing cryptocurrency exchange are in a rush to determine how much they can recover to pay back billions of dollars lost to their lenders and customers. , we began to identify and value that asset. .

In Tuesday’s court filing, lawyers at Sullivan & Cromwell’s New York office face their own controversy related to work they did for FTX before bankruptcy, but held in client accounts. Said to have tracked down $5.5 billion in assets…or hidden elsewhere in the company.

As lawyers uncovered more details about the nature of the assets associated with FTX, the scope of the challenges involved in unraveling and recovering them became clearer. Over the course of three years, he quickly funded a hodgepodge of assets, from arcane cryptocurrencies to investments in hundreds of other companies.

Approximately $1.7 billion of the $5.5 billion is cash on FTX’s books. Another $3.5 billion or so is in crypto assets, a pool that includes more established coins like Bitcoin and other coins of more questionable value. Lawyers say digital currencies are relatively easy to trade, so you can turn your stash of digital currency into cash.

The total includes $268 million in Bitcoin and $245 million in so-called stablecoins, or cryptocurrencies designed to maintain a constant value of $1. But it also includes holdings of hundreds of millions of dollars worth of lesser-known coins that may not sustain their value over the long term.invented as a joke undulation Temporary price.

The crypto recovered by FTX also includes another $1.2 billion in various digital currencies held on other exchanges. A small amount of approximately $300 million is invested in investment funds related to the cryptocurrency market.

Besides $5.5 billion, FTX has substantial positions in 20 digital assets, which lawyers call “illiquid tokens” that are difficult to convert into cash. Understanding their value can take a long time.

Despite the vast collection of assets its attorneys have identified, FTX said in a statement accompanying the filing that both the major offshore exchange based in the Bahamas and its U.S. arm had more assets than it hoped to discover. said they found fewer digital assets. FTX attorneys said they shared information earlier in the day With committee members representing customers, lenders, etc.

When FTX collapsed in November, initial reports said $8 billion was lost from customer accounts, including money held in some of the 9 million accounts customers opened on the exchange. was suggested. Exact amounts owed to lenders, including other major cryptocurrency exchanges, have not been disclosed.

As lawyers continue to delve into FTX’s finances, the ultimate explanation of what the exchange owes, holds, and can recover is subject to change. The task is complicated by the fact that he did not keep full financial records. claim it for yearsMr. Bankman-Fried treated customers’ deposits like money in a piggy bank, as he saw fit.

FTX lawyers say Bankman-Fried and two other people have received more than $1 billion in loans from FTX.

Prosecutors have charged FTX with regularly misappropriating customer deposits to facilitate trading and cover Alameda Research’s losses. crypto trading company It was owned by Mr. Bankman-Fried. FTX executives used customer money to acquire luxury real estate in the Bahamas and made political contributions to both Democrats and Republicans, according to federal officials.

Mr. Bankman-Fried pleaded not guilty He is charged with fraud, money laundering, and campaign finance violations.and he denies stealing customer money.

Federal officials say Bankman-Fried used billions of dollars in customer deposits to invest in hundreds of other cryptocurrency companies. Last week, FTX lawyers said Bankman-Fried’s business had at least $4.6 billion of his investments in about 300 other companies, and those funds could be recovered through litigation or negotiations. said. That amount doesn’t count towards the $5.5 billion total.

Reclaiming or valuing more esoteric digital assets identified by FTX lawyers from the exchange’s holdings, including millions of dollars worth of serum, Sol/Ethereum, and a lesser-known coin called Trump Ross. even becomes difficult.

Many of these unusually named coins were born or became popular in 2020 and 2021, when the crypto market boomed. I tried to use But now many of these coins are depreciating. In some cases, the number of coins FTX holds is so large that it is difficult for the company to sell digital currency without lowering its price.

FTX also plans to raise cash by selling certain operations in the Bahamas, Japan and Europe. The company also plans to work with Bahamian officials to sell properties it owns. In total, 36 properties value him $253 million.

However, it is unclear how much all these assets will sell for and how quickly they will sell. In short, FTX customers and lenders will have to confirm their money returns as they prepare for years of legal drama, and they are likely to suffer huge losses, experts say.

“Creditors could be given the option to acquire digital coins or cash. said Kenneth Marshall, a financial advisor who specializes in working with investors. “This could go on for a long time.”

The latest disclosures about FTX assets also spotlight the work of Sullivan & Cromwell, one of the world’s most prestigious corporate law firms. , also did the legal affairs of the exchange before going bankrupt.

On Friday, Andrew R. Valla, the U.S. trustee in bankruptcy proceedings, challenged FTX’s decision to retain Sullivan & Cromwell, arguing that its work before bankruptcy created a potential conflict of interest. I filed. The trustee also insists on appointing an independent examiner to investigate the matter.

Law firm bankruptcy proceedings are not cheap. According to previous court filings, Sullivan & Cromwell Partner’s charges range from $1,575 per hour to $2,165 per hour for him.

A representative for Sullivan & Cromwell pointed to a court filing Tuesday that said the law firm had “worked tirelessly” to recover the company’s assets. Attorney Andrew Dietrich defended the company’s previous work on FTX and its ability to investigate the events surrounding the exchange’s collapse.

Dieterich disputed Bankmann-Fried’s earlier allegations that he had been pressured to bankrupt the company. In his filing, Mr. Bankman-Fried said that after consulting with his father and three of his other attorneys, restructuring attorney John J. Ray he named Mr. III as chief executive officer. said to have appointed

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