FTX Businesses Owe More Than $3bn to Largest Creditors

https://chof360.com/ftx-businesses-owe-more-than-3bn-to-largest-creditors/

Sam Bankman-Fried’s business owes more than $3 billion to its largest creditors, according to court filings, as the cryptocurrency group’s massive bankruptcy process begins.

Cryptocurrency exchange FTX and associated companies founded by Bankman-Fried provided a list of its 50 largest creditors on Sunday, all of whom are clients with more than $20 million, two of which are owed more than $200 million. The companies’ total liabilities are estimated at more than $10 billion, according to past filings, and they may have more than 1 million creditors.

Publication of the list has been delayed as part of Chapter 11 bankruptcy proceedings in Delaware as bankruptcy practitioners struggled to find reliable records at FTX Group, which collapsed earlier this month after a liquidity crisis and accusations that it mishandled client funds.

John Ray III, the bankruptcy expert who took over the company and oversaw the liquidation of Enron, said in previous filings that he had never seen “such a complete failure of company controls and such a complete absence of trustworthy financial information.”

FTX said it may need to update the list of creditors as it “investigates.”[s] Continuation in respect of amounts listed, including payments that may have been made but not yet reflected on [company’s] Books and records.

Filings show 10 clients owe more than $100 million to FTX. The 50 largest creditors, whose names were redacted in the filing, all owe more than $20 million. FTX has said in previous court filings that disclosing the names of large account holders would be detrimental to competitiveness.

FTX’s clients included large financial groups that trade cryptocurrencies, such as hedge funds. Unlike traditional exchanges, cryptocurrency trading venues usually take customers’ money. Customers who were unable to withdraw their funds before the company withheld payments now face a long wait to get their assets back.

In recent cryptocurrency-related bankruptcies involving Voyager Digital and Celsius Networks, a key legal question has been whether the account holders are unsecured creditors or have a higher priority status in determining who gets redemption payments first. Another question that is likely to arise is whether account holders who withdrew their funds prior to filing for bankruptcy are subject to a refund.

The collapse of the exchange, which until this month was widely seen as one of the most reliable digital asset locations, has fueled fears that other companies are at risk of being exposed to FTX and a crisis of confidence in the market.

Shares of Silvergate, a US bank known for its involvement in cryptocurrencies, fell about 30 percent last week. The bank said it had “liquidity and capital ratios to support volatility”.

Hedge fund Galois Capital told clients earlier this month that “nearly half of our capital is stuck in FTX.” Based on Gallois assets under management as of June, that could be around $100 million.

In another statement on Saturday, FTX said the company has 330 workers around the world but is experiencing “extraordinary attrition.” She asked the court for permission to continue paying the remaining employees she said were important to the bankruptcy case.

FTX revealed in court papers that new CEO Ray bills his time at $1,300 an hour and has been paid a $200,000 retainer fee. It also retained three new executives to assist with the bankruptcy including its chief financial officer.

A preliminary court hearing is scheduled for Tuesday morning in federal bankruptcy court in Delaware before Judge John Dorsey.