FTX, the cryptocurrency exchange that collapsed amid a liquidity crisis earlier this month, owes creditors at least $3 billion, it said in a new court filing.
And 10 of its creditors are owed at least $100 million.
The revelations, which came in a filing to U.S. Bankruptcy Court in Delaware late Saturday, offer a striking portrait of the sheer number of entities that had considerably invested in, loaned money to or otherwise engaged with a three-year-old company that had done little to demonstrate it could properly safeguard the assets entrusted to it. Its top 50 creditors are owed a total of $3.1 billion, the filing showed, with the largest due $226 million.
The names of the creditors were redacted. But what is known is that over its short history, FTX had received capital from a slew of investment firms, including Sequoia Capital, BlackRock and Tiger Global, as well as entities such as the Ontario Teachers’ Pension Plan.
It also entered a number of paid sports sponsorships with parties including National Basketball Association teams and Major League Baseball. And the crypto research firm Chainalysis has said it did business with FTX and is owed money.
In a separate filing Saturday, new FTX chief executive John J. Ray said the company will seek sales and other forms of capitalization to ensure that as many creditors as possible get their money. He noted that some of the subsidiaries of FTX “have solvent balance sheets, responsible management and valuable franchises,” which could facilitate that process. Some 130 FTX sister companies are part of the bankruptcy filing.
When FTX filed for bankruptcy protection on Nov. 11, it marked a stunning fall for a former powerhouse and its 30-year 0ld co-founder Sam Bankman-Fried. At one time valued at $32 billion, FTX had become a public symbol of crypto, its ubiquitous commercials and sports sponsorships signaling to ordinary people that cryptocurrency was a safe and accessible investment. Bankman-Fried’s frequent appearances at global conferences and on Capitol Hill sought to do the same with legislators and thought leaders.
The filing shows just what kind of effect those efforts had, as a large number of parties placed their money with FTX – money they will now fight to reclaim in bankruptcy court.
Scores of retail customers will join the creditors in waiting for the court to divvy up the assets; many have now seen their accounts frozen. In a filing last week FTX revised the number of potential creditors from 100,000 to 1 million.
Untangling the company’s obligations could be tricky, however. In a separate Delaware court filing Thursday, Ray, a longtime insolvency expert who outlined a pattern of inadequate documentation.
“The main companies in the Alameda Silo and the Ventures Silo did not keep complete books and records of their investments and activities,” Ray wrote, referring to some of Bankman-Fried’s entities, adding, “One of the most pervasive failures of the FTX.com business in particular is the absence of lasting records of decision-making.”
Ray also noted that Bankman-Fried and many of his employees used software that would auto-delete many of their internal communications.
Even where the proceedings will happen is a question. The Delaware court’s jurisdiction is being challenged by regulators in the Bahamas, where FTX was based. Those authorities want the proceedings to move forward under a different form of bankruptcy in New York.
In his filing Thursday, Ray described a system of “cash management procedural failures” that led to FTX lacking an “accurate list of bank accounts and account signatories” with whom the company was doing business.
And he noted a “potential commingling” of assets between Bankman-Fried firms, including possibly his trading arm Alameda Research and FTX.com, which is supposed to operate as a neutral platform for consumers to buy and sell crypto assets. Alameda lent $1 billion to Bankman-Fried personally, Ray said.
That commingling is expected to be one of the chief focal points for investigators and regulators as they probe potential malfeasance by the former chief executive. Congress is turning up the heat, too. The House Financial Services Committee will hold a hearing next month probing the company’s collapse.
Ray—who has decades of experience overseeing corporate restructures, including Enron’s—said Thursday there would be much for everyone to investigate.
“Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here,” he wrote.
He said that FTX appeared to be run by a “very small group of inexperienced, unsophisticated and potentially compromised individuals.”
“This situation is unprecedented,” he wrote.