FTX said yesterday that a probe of its balance sheet showed holdings of customer funds were lower than the exchange’s internal accounts had indicated, acknowledging for the first time there was a shortfall of funds at the U.S. exchange, WSJ Pro Bankruptcy reported. It also disclosed that a hack two days after the company’s bankruptcy filing in November led to the theft of around half of the crypto assets stored on the U.S.-based exchange, valued at about $90 million before the company’s collapse. The same hacker took about $323 million of crypto from FTX’s international exchange, representing about 20% of that exchange’s total crypto assets. FTX also said that it found that a small group of individuals at the company had the ability to remove digital assets from the exchange without any record-keeping. “It has taken a herculean investigative effort from our team to uncover this preliminary information,” said FTX Chief Executive John J. Ray III, who has been leading the company since its bankruptcy filing. “We ask our stakeholders to understand that this information is still preliminary and subject to change. We will provide additional information as soon as we are able to do so.” The company said on Tuesday it identified $5.5 billion of liquid assets across its businesses, including $265 million of unrestricted cash — money that isn’t pledged as collateral or kept in custody for customers — at its U.S. businesses and around $273 million of unrestricted cash at the international exchange. It also identified around $3.5 billion of crypto assets as of Nov. 11, the day it filed for bankruptcy. Read more.
In related news, indicted FTX founder Sam Bankman-Fried later challenged aspects of the company's report in a blog post, Reuters reported. Bankman-Fried, who has been accused of stealing billions of dollars from FTX customers to pay debts incurred by his crypto-focused hedge fund, Alameda Research, pushed back against FTX's calculations late Tuesday, saying that the company's lawyers at Sullivan & Cromwell had presented an "extremely misleading" picture of the company's finances. Bankman-Fried said FTX has more than enough money to repay U.S. customers, whom he says are owed between $181 million and $497 million based on his "best guess." Bankman-Fried has not had access to FTX records since stepping down as CEO in November. Read more.
