Will FTX Dump Its Crypto Holdings?
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Will FTX Dump Its Crypto Holdings?

5m
2 months ago

A breakdown of crypto assets under the FTX bankruptcy estate.

Will FTX Dump Its Crypto Holdings?

Tabla de contenidos

What Happened to FTX?

In case anyone needs a reminder, here's what happened during FTX’s collapse, which occurred over a ten-day period in November 2022. The crisis began on November 2 after Coindesk published an article claiming that SBF’s hedge fund Almeda Research owned a significant portion of the native FTX token (FTT) on its balance sheets. This caused serious concerns about FTX’s liquidity.

It became apparent that both FTX’s and Almeda Research’s liquidity were heavily dependent on the price of FTT, which had sunk in price along with the wider crypto market at the same time. Neither company was properly diversified, and they were far too closely tied together: most of Almeda’s funding came directly from FTX’s customer deposits. What’s more, the balance sheets showed $9 billion in liabilities with only $900 million in assets, which equaled a negative $8 billion in balance.

FTX customers began withdrawing their funds as fast as they could, which led to the crypto equivalent of a bank run. In an attempt to stem the bleeding, FTX blocked its customers from withdrawing their money. Even so, within a matter of days FTX, Almeda, and the FTT token had completely collapsed. Binance swooped in to buy the flailing firm, but backed out shortly thereafter once it had taken a closer look at FTX's books.
Reuters News Agency then reported that SBF had secretly moved $10 billion in funds to Almeda Research, and that between $1-2 billion in client funds were unaccounted for. This led to further panic and outcry, with many calling for SBF’s arrest.

How Much Crypto Does FTX Still Control?

The list of cryptocurrencies in the FTX bankruptcy estate can be found on the CMC category page.
Meanwhile, on Arkham, the FTX entity currently has over $403M in crypto tokens in its wallet.
According to recently filed restructuring documents, FTX, FTX US and Almeda Research together still held $3.4 billion in crypto assets, out of a total of $7 billion assets in recovery.

According to the report, the bankrupt exchange estate consists of:

Other smaller crypto assets that FTX controls are considered “Category B Tokens,” which are tokens that “fail to meet liquidity thresholds and/or are largely controlled by the estate.” These comprises of over 1,300 tokens, including:
According to FTX bankruptcy filings, the exchange is seeking approvals from the court to sell $100 million worth of coins and tokens weekly, with the amount potentially increasing to $200 million. This is to minimise market disruption while also maximising returns for its defrauded customers. The hearing is scheduled for September 13.

What Other Assets Does FTX Still Control?

FTX’s non-crypto assets consist of three different asset classes: brokerage investments, venture capital investments, and real estate.

FTX controls $529 million in brokerage investments, made up of:

  • Grayscale Bitcoin Trust: $417M (79% of total)
  • Grayscale Ethereum Trust: $70M (13% of total)
  • Bitwise 10 Crypto Index Fund: $36M (7% of total)
  • Grayscale Litecoin, Ethereum Classic, and Large Cap Trusts: $6M (1% of total)
  • Blackrock Equity Fund: <$0.1M (<0.1% of total)

FTX’s Venture Portfolio is valued at $4.5 billion, and includes:

  • Equity investments in 213 companies valued at $2.93B (65% of total)
  • Limited partnerships with 40 companies valued at $732M (16% of total)
  • Investments in 174 tokens valued at $507M (11% of total)
  • Loans to 11 companies worth $368M (8% of total)

A breakdown of FTX’s pre and post-ICO token investments is below:

FTX’s Real Estate Assets includes 38 properties valued between $185 million and $214 million, as shown below:

*It’s important to remember that ‘book prices’ for property don’t necessarily represent the recoverable value, only what an appraiser believes they are worth.

What Has Happened To FTX Since SBF Was Arrested?

SBF was quickly replaced as CEO by John J. Ray III, a corporate restructuring specialist who oversaw Enron’s liquidation after it too was found to have carried out a massive fraudulent scheme.

The investigation into SBF and FTX is ongoing, but US law enforcement have already discovered that SBF used customer deposits to support FTX and Almeda’s operations and investments, to fund speculative investments, to donate to charity, to lobby for positive crypto regulation, and to enrich himself.

Accordingly, he now faces new charges related to commodities fraud and for violating campaign finance laws. He has so far pleaded not guilty to all charges. SBF’s bail was revoked after accusations of interfering with witnesses, and is currently held in jail until his trial starts in October.
FTX co-founder Gary Wang and Almeda CEO Caroline Ellison both pleaded guilty to fraud and other charges in December 2022; both are cooperating with the US attorney’s office against SBF and FTX. Meanwhile, FTX executive Ryan Salame has pleaded guilty to campaign finance charges, and will be forfeiting $1.5 billion as part of his plea deal.

The FTX fallout is already being compared to the Enron scandal, while SBF himself is now considered one of the great investment fraudsters, alongside the likes of Bernie Madoff.

What Happened to FTX’s Customer’s Money?

When you lend or invest your money with a bank, the money is insured by the US government up to a certain limit. But that’s not the case with crypto. Whenever you hand cash over to an exchange or crypto company like FTX, nobody will bail you out if the company pulls the rug out from under investors’ feet – or in the case of FTX, collapses completely. So when FTX blocked customer withdrawals to try and save itself, the prevailing narrative was that investors would never get their money back.

As is often the case in these kinds of events, however, the prevailing narrative wasn’t quite right. By January 2023, just three months after the peak of the crisis, about $5 billion of the $8.7 billion shortfall in cash and liquid assets had been recovered by FTX’s bankruptcy lawyers. The lawyers also found FTX owed money to more than 9 million creditors.

Even though FTX’s lawyers have recovered substantial sums of money, the exchanges implosion is expected to wipe out the investments of most of its larger investors, including celebrities like all-star quarterback Tom Brady, and supermodel Gisele Bundchen.

By April 2023, FTX lawyers managed to find a further $2.8 billion in cash and liquid assets, increasing the total recovered to $7.3 billion. Commenting on the newly found funds, lead FTX lawyer Andy Dieterich told Reuters that FTX had benefited from increased crypto prices. ‘The situation has stabilized, and the dumpster fire is out,’ he said. Even with this newfound money, however, FTX is still wrestling with a $1.5 billion shortfall.

So far, only investors from Japan have been able to withdraw their money from FTX, thanks to the country’s strong crypto regulations.

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