FTX says it owes more than $3 billion to creditors

Keywords Bankruptcy / Finance

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.

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16 thoughts on “FTX says it owes more than $3 billion to creditors

    1. The crypto fraud has supporters on both sides, and, reminder, the crypto bros were salivating over Republicans taking control as they thought less regulation would be good for their “business” because those Democrats want to regulate cryptocurrencies.

      If someone can explain to me how crypto is any different than the Dutch Tulip Mania of the 1600’s, I’m all ears. But until then I’ll keep my money out of it.

    2. Scam Bankman-Fraud (SBF) was the second highest Democrat donor, shy of George Soros. He did not donate to Republicans.

      So you’re wrong, the scam was a Democrat operation.

    3. All crypto is a fraud, is the point I’m making. I also can’t square how it’s a Democrat thing with Democrat legislators who want to regulate crypto … shouldn’t they be in on the scam?

      If you’re saying that Peter Thiel and Steve Bannon are running purely legit crypto operations, that’s fine. I just don’t think a quote like that will age well.

    4. A fugitive Chinese billionaire claims this cryptocurrency will overthrow Beijing. Experts say it has the ‘hallmarks of a scam’

      “ The digital token was being promoted by a global anti-Chinese government movement founded by fugitive Chinese businessman Guo Wengui and former Trump adviser Steve Bannon.”

      “An ABC investigation, through analysing financial documents, private chat rooms and blockchain wallets, has unravelled a sophisticated cryptocurrency operation endorsed by Mr Guo and Mr Bannon’s political movement.

      The scheme has raised alarm bells for financial crime and cryptocurrency experts, who said it had the hallmarks of a scam.“

      https://www.abc.net.au/news/2022-04-18/guo-wengui-steve-bannon-back-hcoin-cryptocurrency/100991522

    5. Peter Thiel-backed ‘crypto’ lending platform Vauld bankrupt

      “ Thiel probably isn’t directly concerned that the greenback will lose its status as the world’s reserve currency, only that the deed might be done by an entity not aligned with his narrowly conservative worldview. Consider Thiel protégé Mark Zuckerberg’s (ultimately unsuccessful) efforts to create an in-house digital currency for use within Facebook, Instagram and WhatsApp. Diem theoretically could have posed a threat to the U.S. dollar’s pre-eminence, at least online, but that would be in keeping with Thiel’s advocacy for corporate power—particularly corporations run by his friends—over government control.

      Thiel made his ‘maximalist’ comments in 2021, shortly before BTC’s rapid descent from its $67,000 peak began in earnest. Anyone who took Thiel’s advice to “go long” on BTC following those comments has since lost 2/3 of their investment. ”

      https://coingeek.com/peter-thiel-backed-crypto-lending-platform-vauld-bankrupt/

    6. Joe:

      FTX wanted regulation for the industry so that FTX could sell legitimate securities and expand his reach to legitimate banking. He also wanted to eliminate his competition. He sided with the Democrats to push the regulation because they were the cronies who would back his plan.

    7. You’re telling me that people give to politicians and those politicians then try to use the govt to favor the donors?

      I am shocked. Get me to the fainting couch!

      Spare me the “it’s only a Democrat” thing. It’s bad regardless who does it or whatever context they do it. There’s a reason that some of us want ALL campaign contributions to ALL parties to be banned.

    8. Joe, name one other former billionaire scam donation organization, but to the Republicans.

      *crickets*

  1. “He said that FTX appeared to be run by a “very small group of inexperienced, unsophisticated and potentially compromised individuals.” I can’t wait to read about how a group like this pulled off this scam. How did they get so many people and companies to give them their money to the tune of billions?

    1. This 100%, it’s going to be interesting if we ever find out. Either way most of that money is gone. Vanished into thin air.

    2. It didn’t just vanish into thin air…it is in someone’s pocket strategically. $32B doesn’t just go poof…unless you are talking the Pentagon!! We do know they $40M is in the DNC. Go get it!!

  2. Why was this kid funding research papers to deny effectiveness of Covid treatments and value of lockdowns? These biased papers were then quoted by NYT and CDC and potentially killed thousands by denying Covid treatments that are now pushed by CDC.
    How can a 20 something kid fool so many people?

    1. He’s a Democrat who pledged to give $1,000,000,000 to the Democrat party.

      Whatever it took to get his team to win so that they could regulate crypto to favor himself and screw his competition.

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