FTX says it has recovered over $5 billion, but customer losses are still unknown

Cryptocurrency exchange FTX recovered more than $5 billion, but the amount of customer losses from its collapse is still unknown, a lawyer for the bankrupt company founded by Sam Bankman-Freed said Wednesday.

The company, which was valued at $32 billion a year ago, filed for bankruptcy in November, and U.S. prosecutors accused Bankman-Fried of orchestrating a “grand” fraud that could have cost investors, customers and creditors billions of dollars.

“We found over $5 billion in cash, liquid crypto and liquid investment securities,” Andy Dietderich, an FTX attorney, told U.S. Bankruptcy Judge John Dorsey in Delaware at the start of the hearing on Wednesday.

Dietderich also said the company plans to sell non-strategic investments with a book value of $4.6 billion.

However, Dietderich said the legal team is still working to create accurate internal records and the actual client shortage remains unknown. The Commodity Futures Trading Commission estimated the missing customer money at more than $8 billion.

Dietderich said the $5 billion returned did not include assets seized by the Bahamas Securities Commission, where Bankman-Fried was located.

An FTX lawyer estimates the seized assets are worth just $170 million, while Bahamian authorities put the figure at $3.5 billion. According to Dietderich, the seized assets mainly consist of own and illiquid FTT FTX tokens, the price of which is highly volatile.

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Asset sales

FTX may raise additional funds in the coming months on behalf of clients after Dorsey approved FTX’s request for affiliate sales review procedures at a hearing on Wednesday.

The affiliates – LedgerX, Embed, FTX Japan and FTX Europe – are relatively independent from the wider FTX group, and each have their own separate customer accounts and separate management teams, according to FTX court documents.

The cryptocurrency exchange has said it does not intend to sell any of the companies, but has received dozens of unsolicited offers and plans to hold auctions starting next month.

The US trustee opposed the sale of the affiliates pending a full investigation into the extent of the alleged FTX fraud.

Dorsey also on Wednesday granted FTX’s request to keep the names of 9 million FTX customers secret. But he only allowed the names to remain secret for three months, not six months as FTX wanted.

“The difficulty here is that I don’t know who is a client and who is not,” Dorsey said. He scheduled a hearing for Jan. 20 to discuss how FTX would differentiate between customers and said he wanted FTX back in three months to give more explanations about the risk of identity theft if customer names were made public.

Media companies and the US Trustee, a government bankruptcy watchdog affiliated with the Department of Justice, have argued that US bankruptcy law requires disclosure of creditors to ensure transparency and fairness. FTX said that revealing customer names could allow competitors to poach users, undermining the value of the business FTX is trying to sell.

On Wednesday, a company lawyer said that in addition to selling affiliates, FTX will end its seven-year sponsorship deal with video game League of Legends, which began in 2021.

FTX founder Sam Bankman-Fried, 30, was charged last month in federal court in Manhattan with two counts of wire fraud and six counts of conspiracy for allegedly stealing customer deposits to pay off debts from his Alameda hedge fund. Research and lie to equity investors about FTX’s financial health. He pleaded not guilty.

Bankman-Fried acknowledged shortcomings in FTX’s risk management practices, but the former billionaire said he did not believe he was criminally liable.

In addition to losing client funds, the company’s collapse also likely wiped out equity investors.

Some of those investors were disclosed in Monday’s court filing, including football star Tom Brady, Brady’s ex-wife, supermodel Gisele Bündchen, and New England Patriots owner Robert Kraft.