Relief as FTX Recovers $5bn Assets in Customer Funds

By Adedapo Adesanya

FTX has recovered at least $5 billion of liquid assets, including cash, crypto, and securities, lawyers told a Delaware bankruptcy judge on Wednesday.

The crypto exchange was once valued at $32 billion but imploded after reports of financial impropriety, which ultimately gave way to criminal and regulatory probes, culminating in the arrest of its founder.

FTX’s new CEO, Mr John J. Ray, previously attested that at least $8 billion of customer assets were unaccounted for in the “worst” case of corporate control he’d ever seen.

The news comes after federal prosecutors announced plans to seize at least $500 million worth of FTX-connected assets in connection with their ongoing prosecution of FTX co-founder, Mr Sam Bankman-Fried.

The recovery will be a welcome relief to FTX customers, which are collectively owed at least $8 billion in missing assets after the crypto exchange imploded in November 2022.

The $5 billion figure regards “any value to holdings of dozens of illiquid cryptocurrency tokens, where our holdings are so large relative to the total supply that our positions cannot be sold without substantially affecting the market for the token,” FTX attorney, Mr Adam Landis told the court.

“We know what Alameda did with the money. It bought planes, and houses, threw parties and made political donations. It made personal loans to its founders. It sponsored the FTX Arena in Miami, a Formula One team, the League of Legends, Coachella and many other businesses, events and personalities,” the lawyer said.

He explained that this has led to a shortfall in value to repay customers and creditors.

“The amount of the shortfall is not yet clear. It will depend on the size of the claims pool and our recovery efforts. But every week, we come closer to completing the work necessary to estimate recoveries for the purposes of a plan of reorganization,” Mr Landis added.

FTX’s collapse was connected, among other things, to a failure to mark illiquid assets to market correctly. FTX executives, including Mr Bankman-Fried and Alameda Research CEO Ms Caroline Ellison, borrowed against the value of the FTX-issued token FTT.

Alameda controlled the vast majority of FTT coins circulating, similar to a publicly traded companies float, and could not have liquidated their position at full book value.