FTX Debtors Report $8.9B Shortfall in Customer Funds and "Highly Commingled" Assets in Latest Presentation
On March 2, 2023, FTX debtors released their second stakeholder presentation, which contains a preliminary analysis of the now-defunct cryptocurrency exchange’s shortfalls. The latest presentation reveals a significant shortfall, as approximately $2.2 billion of the company’s total assets were found in FTX-related addresses, but only $694 million is considered “Category A Assets,” or liquid cryptocurrencies such as bitcoin, tether, or ethereum. In addition, John J. Ray III, FTX’s current CEO, stated that the debtor’s effort had been significant, and he added that the exchange’s assets were “highly commingled.” A Preliminary Summary of What Contributed to FTX’s $8.9 Billion Shortfall
FTX debtors and CEO John J. Ray III have released a comprehensive presentation documenting FTX’s shortfalls. The preliminary report mentions the cyber attack that occurred the day after FTX filed for Chapter 11 bankruptcy protection on November 11, 2022. In a now-deleted Telegram chat channel, FTX US general counsel Ryne Miller described the exchange being hacked and that the platform was unsafe. The preliminary shortfall analysis refers to this specific cyber attack throughout. Screenshot of the latest FTX debtors presentation.
The report also mentions that both FTX and FTX US typically held digital assets in sweep wallets that were not segregated for individual customers. The debtors noted that due to the cyber attack, the company’s computing environment was secured and “remains subject to certain restrictions,” limiting access to crucial data. The report categorizes FTX’s holdings into two groups: “Category A Assets,” which have larger market caps and trading volumes, and “Category B Assets,” which do not meet the liquidity requirements of Category A Assets. Screenshot of the latest FTX debtors presentation. The public presentation reveals an alarming $8.9 billion shortfall in customer funds, much of which can be traced back to Alameda Research, which had leveraged $9.3 billion in total from customers. FTX has only been able to identify an estimated $2.7 billion of such funds, and some funds are illiquid or considered “Category B Assets.”
However, despite identifying all the assets, an $8.9 billion shortfall remains. “There is a substantial shortfall at the FTX.com exchange at the time of the petition, defined as the difference between digital asset claims on the FTX.com ledger and digital assets available to satisfy those claims,” the report states. “The shortfall is particularly significant for Category A Assets. Only a small amount of cash, stablecoin, [bitcoin], [ethereum], and other Category A Assets remain in wallets preliminarily associated with the FTX.com exchange.” Screenshot of the latest FTX debtors presentation.
The report also notes that while the shortfall at FTX US was substantial, it was smaller than that of the international exchange. In a press release, CEO Ray shared his thoughts on the presentation and mentioned that funds were commingled and record-keeping was inadequate.
“This is the second in what the FTX Debtors anticipate will be a series of presentations as we continue to uncover the facts of this situation,” Ray said in a statement. “It has taken a huge effort to get this far. The exchanges’ assets were highly commingled, and their books and records are incomplete and, in many cases, totally absent.” He stressed that the information provided by the debtors was preliminary and subject to change.
One interesting aspect of the latest debtors’ presentation is that ftx token (FTT), the company’s exchange coin, is classified as a Category B Asset. While BTC and ETH are Category A Assets, SOL, MATIC, UNI, SHIB, PAXG, WBTC, and WETH are also considered A-class assets. The report also highlights the daily deposits and withdrawals made 90 days prior to the bankruptcy petition date. Screenshot of the latest FTX debtors presentation.
Additionally, the exchange’s shortfall does not include Alameda Research assets, which consist of $956 million worth of solana (SOL) and aptos (APT), $820 million held at third-party exchanges, $185 million in stablecoin assets held in cold storage, and $169 million in bitcoin (BTC) held in cold storage. Tags in this story $8.9 billion, $8.9B, Alameda Research, Bankruptcy, Bitcoin, BTC, Category A Assets, Category B Assets, ceo, commingled assets, Cryptocurrency Exchange, Cyber Attack, Digital Assets, ETH, Ethereum, FTT, ftx, international exchange, Market Caps, matic, PAXG, preliminary report, press release, record keeping, shib, shortfall, shortfalls, SOL, Solana, Stablecoin, sweep wallets, trading volumes, UNI, WBTC, WETH
What do you think the fallout of FTX’s significant shortfall will be for stakeholders? Let us know what you think about this subject in the comments section below. Jamie Redman
Jamie Redman is the News Lead at Bitcoin.com News and a financial tech journalist living in Florida. Redman has been an active member of the cryptocurrency community since 2011. He has a passion for Bitcoin, open-source code, and decentralized applications. Since September 2015, Redman has written more than 6,000 articles for Bitcoin.com News about the disruptive protocols emerging today. Avalanche Sees Surge in BTC Bridged to Its Network With Over $44 Million in Bitcoin Ported on Thursday NEWS | 4 hours ago Bitcoin"s Price Drop Causes Over $200 Million in Long Liquidations Across Crypto Derivative Exchanges NEWS | 6 hours ago
Image Credits: Shutterstock, Pixabay, Wiki Commons, Sergei Elagin Previous articleAvalanche Sees Surge in BTC Bridged to Its Network With Over $44 Million in Bitcoin Ported on Thursday Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article. Read disclaimerShow comments More Popular NewsIn Case You Missed ItRipple CEO: SEC Lawsuit Over XRP "Has Gone Exceedingly Well"
The CEO of Ripple Labs says that the lawsuit brought by the U.S. Securities and Exchange Commission (SEC) against him and his company over XRP "has gone exceedingly well." He stressed: "This case is important, not just for Ripple, it’s ... read more.Tony Hawk"s Latest NFTs to Come With Signed Physical Skateboards Fed"s Bullard Wants to Raise Bank Rate to 3.5% by Year"s End, Hints at 75 Basis Point Rate Hike Survey: Adoption in Argentina Grows, With 12 out of 100 Adults Having Invested in Crypto Digital Ruble ‘Much Needed,’ Russia’s Central Bank Says, Won’t Delay Testing