Debtors Claim a “Massive Shortfall” in FTX Assets; FTX.US Also in the Negative

The magnitude of the shortfalls discovered in the fiat bank accounts and digital asset wallets connected to the FTX.com and FTX.US exchanges was revealed by a concerted effort to identify and inventory the remaining assets of defunct cryptocurrency exchange FTX, according to a presentation submitted by FTX Debtors in the company’s Chapter 11 bankruptcy cases on Thursday.

According to the presentation, assets totaling $2.2 billion have been found, of which only $694 million are the most liquid currencies, such as fiat, stablecoins, BTC, or ETH. Alameda Research has borrowed $9.3 billion net against these holdings and an additional $385 million in customer receivables.

And FTX CEO John J. Ray III issued a caution that not all the information is yet available.

Ray stated in a news statement that it had taken a lot of work to get this far.

The exchanges’ assets were heavily mixed together, and their books and records are frequently lost entirely.

The presentation explicitly warns that the data is preliminary and “should not be relied upon for any purpose.” However, Ray, who also works as the FTX Debtors Group’s Chief Restructuring Officer, stated that it was crucial to communicate the most recent facts. He added:

We think it is more crucial to give stakeholders transparency by making this information public right away rather than waiting until we can be certain.

Sam Bankman-Fried, the discredited founder of FTX, has consistently asserted that FTX US is “totally solvent,” but the debtor group’s investigation indicates otherwise.

The group reports that there are $191 million in total assets in the wallets of the accounts connected to the FTX.US exchange, as well as $28 million in customer receivables and $155 million in related party receivables. “This compares to $283 million in related party claims payable and $335 million in customer claims.”

Illegal transfers also removed an additional $293 million and $139 million from wallets that were initially sourced to the FTX.COM and FTX.US exchanges, respectively, according to the presentation.

The presentation also provided an update on the amount of liquid assets that have been collected and are being held by the debtors group, which increased from $5.5 billion to $6.1 billion since its January report. The group also recovered $202 million stored at Alameda, $125 million in stablecoins, and $57 million in various cryptocurrencies kept at subsidiaries, however the rise is mostly due to increased digital asset pricing.

FTX Debtors Group included numerous disclaimers to its report, including that “it is not possible to assess or estimate customer recoveries based on the preliminary information in the presentation,” despite the data that has been acquired so far. Variable valuations, insider access, fund mixing, other unspecified accusations, and the sale of “more than a hundred companies composing the FTX group globally” are among the reasons mentioned.

The committee continues, “The study is further hampered by the incompleteness of the books and records and financial information held by pre-petition management.” The actions of “a very small group of highly incompetent and naive persons” that oversaw FTX have already been criticized by Ray.

In the 90 days prior to the start of the chapter 11 cases for the exchanges, the debtors group provided further details on daily deposits and withdrawals from both exchanges. Unsurprisingly, the numbers show a jump in withdrawals right before FTX filed for bankruptcy, but they also show an increase in deposits that can be attributed to deposits from Alameda. Ray wrote:

The presentation and filings from today are merely the most recent development in the still-evolving FTX drama. This is the second presentation in a series that the FTX Debtors expect to make as they continue to learn more about the circumstances.

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