Bankrupt cryptocurrency exchange FTX owed $8.7 billion to its customers—approximately 74%, or $6.4 billion, of that was misappropriated fiat currency and stablecoins, according to a report released on Monday.
Key Takeaways
- A new report from the FTX debtors team indicates the failed crypto exchange owes customers $8.7 billion worth of assets.
- The vast majority of misappropriated assets, roughly $6.4 billion, are denominated in either fiat currency or stablecoins.
- The report also reveals that FTX and its associated debtors have already been able to recover around $7 billion worth of assets, with the recovery process still ongoing.
What Does This Mean For FTX Customers?
The report from the FTX bankruptcy team led by new CEO John J. Ray III, the second report on the exchange's financial condition since its collapse last November, now quantifies what the failed exchange owes its customers—a staggering $8.7 billion.
The investigation uncovered instances of commingling and misuse of customer deposits, with approximately $6.4 billion of the owed amount in the form of misappropriated fiat currency and stablecoins.
So far, $7 billion in liquid assets have been recovered, and efforts are underway to identify additional recoveries. However, the report also adds, "It is important to recognize that this analysis is ongoing, incomplete and subject to change."
Fund Misuse and Comingling Was By Design
The report paints a damaging picture of the company's management and senior lawyers who knowingly mishandled customer funds, engaging in deceptive practices such as falsifying documents and evading detection by relocating the FTX Group across different jurisdictions.
Specifically, it disclosed that FTX Group had provided false information about the nature of related trading firm Alameda Research's bank account, which was used to process customer funds.
In a statement, Ray, leading the recovery efforts, emphasized that the image of FTX as a customer-focused industry leader was nothing more than a facade from the earliest stages.
"The FTX Senior Executives did not commingle and misuse customer deposits by accident," Ray said in the report. "Commingling and misuse occurred at their direction, and by their design."
The findings from the report come after an initial examination conducted in April, which exposed various instances of improper activity under the watch of founder and former CEO Sam Bankman-Fried, who is currently facing criminal charges scheduled for an October trial in New York.
Amid bankruptcy proceedings in Delaware, Ray has been working to resolve the affairs of the exchange since its collapse in November. There have been indications that FTX's operations could potentially be relaunched as FTX 2.0, but the focus remains on addressing the financial obligations and seeking restitution for creditors.
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