FTX will sell or restructure global empire, CEO says

FTX’s new CEO said Saturday that the bankrupt cryptocurrency exchange is looking to sell or restructure its global empire, even as Bahamian regulators and FTX squabble over court documents and press releases over whether the bankruptcy filing should proceed in New York or Delaware.

“Based on our review last week, we are pleased to learn that many of FTX’s licensed and regulated subsidiaries, inside and outside the United States, have strong balance sheets, responsible management and valuable franchises,” said FTX Director John Ray. in a sentence.

investment related news

Bank of America Downgrades Coinbase, Says FTX Collapse Increases 'Contagion Risk' for Crypto Platform

CNBC professional
Bank of America Downgrades Coinbase, Says FTX Collapse Increases ‘Contagion Risk’ for Crypto Platform

Ray, who replaced FTX founder Sam Bankman-Fried when the company filed for Chapter 11 bankruptcy protection on November 11, added that it is “a priority” in the coming weeks to “explore sales, recapitalizations or other strategic transactions regarding these subsidiaries and others that we identify as our work continues.”

Ray’s plea came with a series of filings Saturday morning in Delaware bankruptcy court. In those filings, FTX requested permission to pay third-party providers, consolidate bank accounts, and establish new ones.

The exact timing of a possible sale is unclear. FTX indicated that it has not set a specific timeline for completion of this process, saying that it “does not intend to disclose further developments unless and until it determines that further disclosure is appropriate or necessary.”

Securities regulators for FTX and the Bahamas seek jurisdiction over the bankruptcy proceedings in two different US courts. Bahamian regulators last week moved potentially hundreds of millions of “digital assets” from FTX’s custody to their own, acknowledging the deed in a press release after FTX’s lawyers accused them of doing so in a emergency court filing.

Ray singled out some of the company’s healthiest subsidiaries for praise. One example was LedgerX, a derivatives platform regulated by the Commodity Futures Trading Commission. LedgerX was one of the few FTX-related properties not part of its bankruptcy proceedings and is still in business today. The platform, which FTX acquired in 2021, allows traders to buy options, swaps, and futures on bitcoin and ethereum.

FTX’s new CEO called for government employees, suppliers, customers, regulators and stakeholders to “bear patience” with them.

FTX said in a filing that there could be more than a million creditors in these Chapter 11 cases.

FTX and its accountants identified 216 bank accounts, at 36 banks, with positive balances globally. Cash balances across all entities totaled about $564 million, of which $265.6 million is in LedgerX’s restricted custody.

FTX’s lawyers also want to employ a “cash pool system,” merging all of the cash assets of each disparate FTX entity into one consolidated statement and into new bank accounts, which FTX is currently in the process of opening.

In particular, FTX’s lawyers wrote that they were “working and will continue to work closely with [existing FTX banks] to ensure that prior authorized signatories do not have access” to any prior FTX accounts that will continue to be used. Previous reports and court filings have indicated that Sam Bankman-Fried had near-absolute control over cash management and account access.

FTX bank accounts reflect the global influence of the crypto asset empire. Institutions in Cyprus, Dubai, Japan, and Germany had a wide range of global currencies. FTX subsidiaries had more than a dozen accounts at Signature Bank, a US institution that made an aggressive foray into servicing crypto clients in 2021. With the exception of a Bank of America account for Blockfolio, major US banks are not listed. on the list. Blockfolio was acquired by FTX in the summer of 2020.

In another petition, FTX lawyers moved to access $9.3 million for payments from vendors that FTX called “critical.” No list was provided, but FTX’s motion established criteria for “critical vendor” status.

In good news for clients, FTX’s attorneys have requested permission from the court to redact “certain confidential information,” including the names and “all associated identifying information” of FTX clients. “Public dissemination of [FTX’s] client list could give […] competitors an unfair advantage to contact and steal from their customers,” the filing said, which could jeopardize FTX’s ability to sell assets or businesses.

FTX’s attorneys want the process to continue in Delaware. Bahamian regulators, on the other hand, say they do not recognize the authority of those Chapter 11 proceedings and want to pursue a Chapter 15 proceeding in New York.

Chapter 15 bankruptcy is the route the defunct hedge fund Three Arrows Capital has followed. The Three Arrows implosion launched a spiraling crisis that brought down Voyager, Celsius, and ultimately FTX.

The Chapter 11 process that FTX is seeking would allow the company to be restructured or sold to the highest bidder, though it is unclear who that might be. Rival exchange Binance initially made an offer before pulling it down. That change deepened a liquidity crisis at FTX and revealed a multi-billion dollar hole.

FTX’s first hearing in its bankruptcy court case is scheduled for Tuesday in Delaware.

Leave a Comment