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FTX recovers $5 billion in cash and crypto to repay customers

Collapsed exchange has found more than 9 million accounts; unclear how many will be made whole

FTX co-founder Sam Bankman-Fried arrives at court in New York last week. (Stephanie Keith/Bloomberg)
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Collapsed cryptocurrency exchange FTX says it has recovered more than $5 billion worth of cash and crypto assets it may be able to sell to help repay customers and investors, an attorney for the company told a Delaware bankruptcy court on Wednesday.

Company advisers have identified a significant amount of crypto that will be more difficult to sell without depressing the market price of those digital tokens, FTX attorney Andrew Dietderich said. The company is also trying to sell off other “nonstrategic investments” made by FTX that have a book value of $4.6 billion, he said.

It is not yet clear how much of a shortfall FTX’s creditors will face as company advisers continue working to salvage what they can from the crypto giant’s shocking implosion in November. But the company, once one of the world’s largest cryptocurrency exchanges, has identified more than 9 million customer accounts, Dietderich said, suggesting there will be a long line of people looking to be made whole.

Federal regulators have estimated that FTX customer losses exceed $8 billion. John J. Ray III, the corporate wind-down expert now leading the company, told lawmakers last month the company will not be able to recover all of its losses and expects the process to take “months, not weeks.”

FTX co-founder Sam Bankman-Fried pleaded not guilty to eight criminal charges of fraud and money laundering in federal court in Manhattan last week. Federal prosecutors and regulators have accused him of orchestrating a years-long scheme to defraud the company’s customers by diverting their deposits to his affiliated investment firm, Alameda Research, and then using the funds as a personal piggy bank.

“We know what Alameda did with the money,” Dietderich told the bankruptcy court on Wednesday. “It bought planes, houses, threw parties, made political donations. It made personal loans to its founders. It sponsored the FTX Arena in Miami, a Formula 1 team, the League of Legends, Coachella and many other businesses, events and personalities.”

Bankman-Fried and his inner circle also made risky cryptocurrency bets, “often unsuccessfully,” Dietderich said, and invested in various businesses. “We know all this has left a shortfall in the value to repay customers and creditors,” he said. “The amount of the shortfall is not yet clear. It will depend on the size of the claims pool and our recovery efforts.”

But FTX’s creditors have scored a surprising win with the amount that the company’s new leadership has recovered to date, said Mark Pfeiffer, a bankruptcy attorney with Buchanan Ingersoll & Rooney.

“The results so far seem to be phenomenal,” Pfeiffer said. “Typically unsecured creditors can expect about 5 cents on the dollar. Here it looks like it will be much greater. It’s amazing that they’ve gotten their arms around this so quickly.”

Different authorities are already competing to lay claim to FTX’s holdings. The Justice Department last week told the bankruptcy court that the federal government had seized nearly $500 million worth of shares in online stock trading company Robinhood tied to Bankman-Fried. And authorities in the Bahamas, where FTX was based, have seized a stash of the company’s crypto. It includes a large amount of FTT, the highly volatile digital token issued by FTX, and is worth about $170 million, Dietderich told the court on Wednesday.

Meanwhile, Miami-Dade County officially terminated a 19-year, $135 million sponsorship deal with FTX that gave the company naming rights to the arena where the Miami Heat play basketball. The bankruptcy court on Wednesday signed off on an agreement between the county and FTX’s new leaders to end the deal, which was inked in 2021. But the two sides could have more to settle, according to the Miami Herald: Miami-Dade officials argue the company breached a requirement in the contract that carries a penalty worth three years of rent.