February 4, 2023

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Lawyer says failed cryptocurrency exchange FTX has recovered more than $5 billion

  • FTX was valued a year ago at $32 billion
  • More than $8 billion in FTX client funds are missing
  • Submission of a plan to sell FTX affiliates in court

New York/Wilmington, Del. Jan. 11 (Reuters) – Cryptocurrency exchange FTX has recovered more than $5 billion in liquid assets, but the scale of customer losses in its collapse remains unknown, attorney for the bankrupt company founded by Sam Bankman-Makkali said Wednesday.

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

“We have identified more than $5 billion in cash, liquid cryptocurrency, and liquid investment securities,” Andy Dittderich, an attorney for FTX, told a US bankruptcy judge in Delaware at the start of Wednesday’s hearing.

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 is still unknown. The US Commodity Futures Trading Commission estimated the lost customer funds at more than $8 billion.

The $5 billion recovered does not include assets seized by the Securities Commission in the Bahamas, where Bankman-Fried was headquartered, Dietderich said.

An FTX lawyer estimated that the assets seized were worth less than $170 million, while the Bahamas authorities put the figure at up to $3.5 billion. The seized assets consist largely of FTT’s illiquid and illiquid FTT token, which is a highly volatile price, Dietderich said.

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Customer privacy

US Bankruptcy Judge John Dorsey in Delaware on Wednesday approved FTX’s request to keep 9 million FTX customer names confidential. But he only allowed the names to remain confidential for three months, not six months as FTX wanted.

“The difficulty here is that I don’t know who the customer is and who isn’t,” said Dorsey. He set a hearing for January 20 to discuss how FTX will discriminate between customers and said he wants FTX back in three months to provide more clarity about the risks of identity theft if customer names are made public.

The media companies and the US Trustee, a government bankruptcy monitor that is part of the Department of Justice, have argued that US bankruptcy law requires creditor details to be disclosed to ensure transparency and fairness. FTX said revealing customer names could allow competitors to poach users, undermining the value of the business FTX is trying to sell.

FTX’s legal team was also seeking approval on Wednesday for actions to sell subsidiaries such as LedgerX, Embed, FTX Japan and FTX Europe.

The subsidiaries are relatively independent of the broader FTX group, and each have separate client accounts and separate management teams, according to FTX court filings.

The cryptocurrency exchange said it is not committed to selling any of the companies, but it has received dozens of unsolicited bids and plans to hold auctions beginning next month.

The US trustee opposed the sale of the subsidiaries before fully investigating the extent of FTX’s alleged fraud.

In addition to selling subsidiaries, the company’s attorney said Wednesday that FTX will end its seven-year sponsorship deal with the League of Legends video game, which began in 2021.

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

Bankman-Fried has acknowledged deficiencies in FTX’s risk management practices, but the once-billionaire said he did not believe he was criminally liable.

In addition to losing customer money, the company’s collapse also likely wiped out equity investors.

Some of those investors were revealed in a lawsuit Monday, including NFL star Tom Brady, Brady’s ex-wife model Gisele Bundchen and New England Patriots owner Robert Kraft.

(Reporting by Dietrich Knuth in New York and Tom Hales in Wilmington, Del. Editing by Alexia Garamfalvi, Mark Porter and Matthew Lewis

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