Debtors Identify $5.5B But Confirm Major Shortfalls Affecting FTX and FTX US

On Tuesday, January 17th, FTX shared an update with customers and stakeholders. According to the company, the debtors have identified $5.5 billion in liquid assets, but have also confirmed that both the US and the international branch of the exchange are facing significant material shortfalls.

FTX Identified $5.5 Billion of Liquid Assets

According to the update provided by FTX Debtors, the exchange has successfully identified $5.5 billion in liquid assets since filing for bankruptcy. At a court hearing last week, Adam Landis, a lawyer representing the company, revealed the recovery of $5 billion of assets and specified that no “illiquid” cryptocurrencies are included in the amount.

Tuesday’s release specified that the recovered assets are constituted of $1.7 billion in cash, $3.5 billion in liquid cryptocurrencies, and around $300 million in securities. The current CEO of the exchange, John J. Ray III called the endeavor to identify these funds a “Herculean Effort”, but added that the provided numbers are a preliminary assessment.

We are making important progress in our efforts to maximize recoveries, and it has taken a Herculean investigative effort from our team to uncover this preliminary information. We ask our stakeholders to understand that this information is still preliminary and subject to change. We will provide additional information as soon as we are able to do so.

FTX has been facing major issues when it comes to asset recovery since it filed for bankruptcy. In late 2022, the exchange hired forensic investigators to help find the missing funds. The funds have been caused by questionable behavior of the previous management—like the misappropriation of users’ assets to prop up Alameda Research—and exacerbated by atrocious record-keeping practices.

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FTX and FTX.US Facing Substantial Shortfall of Digital Assets

While the recovery of $5.5 billion worth of liquid assets is no small feat, the exchange also shared that both FTX International and FTX.US are facing “a substantial shortfall of digital assets”. According to the update, the debtors have uncovered $1.6 billion associated with the international branch but state that $323 million of the amount “was subject to unauthorized third-party transfers after the bankruptcy filing”.

$181 million worth of digital assets associated with FTX.US was also identified though nearly half—$90 million—was transferred without authorization by third parties after the bankruptcy. $742 million of international assets and $88 million of US assets are currently in cold storage under the control of the current management. Another $121 million and $3 million are pending transfers to cold storage of the two branches.

The update also revealed that $426 million worth of FTX International digital assets have already been transferred to cold storage controlled by the Bahaman Authorities. The island nation has served as the headquarters for the exchange for most of its existence and has played an active role in its bankruptcy.

Shortly before the bankruptcy filing, Bahaman Authorities froze the assets of FTX International and around a week after Sam Bankman-Fried announced the chapter 11 bankruptcy, Bahamas-appointed liquidators filed for chapter 15 protection.

For his part, Sam Bankman-Fried—arrested by Bahaman Authorities late last year and released to home detention in early 2023—has maintained that FTX.US is fully funded and could make all of its customers entirely whole. The claim was first made in a controversial Twitter thread started on November 10th, and maintained as recently as mid-January when it was repeated in a Substact article.

Do you think FTX will identify and recover all of its missing assets? Let us know in the comments below.