FTX Unearths More Than $5B in Cash and Assets

FTX has found more than $5 billion in cash and liquid assets, company attorneys said.

In a hearing Wednesday (Jan. 11) in U.S. Bankruptcy Court in Wilmington, Delaware, lawyers for the failed cryptocurrency company said FTX hopes to sell hundreds of other holdings valued at north of $4.6 billion, The Wall Street Journal (WSJ) reported.

Those assets do not include the $425 million being held by Bahamian authorities, the report said.

The attorneys told Judge John Dorsey that the size of the shortfall in FTX customer funds has yet to be determined, according to the report.

Attorney Andrew Dietderich said, per the report, the company’s new management is “building financial statements from the ground up,” instead of relying on previous statements.

The company is also “well underway on plans to monetize over 300 other non-strategic investments, with a book value over $4.6 billion,” Dietderich said in the report.

Last month, new FTX CEO John J. Ray III told the House Financial Services Committee that the company’s corporate infrastructure and record-keeping before his arrival had been “near-zero.”

“Although our investigation is ongoing and detailed findings will have to await its conclusion, the FTX Group’s collapse appears to stem from the absolute concentration of control in the hands of a very small group of grossly inexperienced and unsophisticated individuals who failed to implement virtually any of the systems or controls that are necessary for a company that is entrusted with other people’s money or assets,” Ray said in the prepared testimony.

PYMNTS wrote earlier this week that the implosion of the cryptocurrency company “provides a master class in caveat-emptor crypto industry risk management and accounting failures.”

Court documents show that the company was set up from the beginning so that customer funds could be commingled without their owners’ knowledge or permission.

Disgraced FTX founder Sam Bankman-Fried had called risk management “probably the most important thing we do at FTX.”

But in reality, and as a result of the specific manner in which the company was centralized to support the activities of sister hedge fund Alameda Research with “limitless credit,” there were no internal risk controls to prevent the uncollateralized use of funds.

Meanwhile, Wednesday also saw reports that the Securities and Exchange Commission (SEC) is investigating what sort of due diligence blue-chip financial firms and other investors performed before giving money to FTX.

As PYMNTS noted, the SEC probe does not suggest wrongdoing on the investors’ part, but the investigation does address the question of whether the venture capital and investment funds upheld their fiduciary responsibilities to their own limited partners and investors.