- The new FTX management has revealed that the platform has $720 million in cash and are working to bring back customer funds.
- The exchange’s Chief Financial Officer has noted that some funds are locked up in Japan due to regulatory ringfencing.
- The affected customer funds may take a couple of months before being released due to procedures involved in a bankruptcy filing.
On December 20, reportedly in a creditors hearing, the new management of the defunct crypto exchange FTX announced that the beleaguered platform has over $1 billion in assets identified. In a word to creditors, the FTX executives are trying to recover hundreds of millions of dollars in cash from various bank accounts as they try to resolve the position of FTX.
John Ray III and Mary Cecilia, among others in the exchange, took over the new management role after the founder of the company Sam Bankman-Fried stepped down in early November after it faced liquidity issues. However, the new CEO, Mr. Ray, has repeatedly stipulated that the task could be more straightforward because the company needs better record keeping by its auditors.
The exchange has about $720 in cash assets, which the company has to consolidate in U.S. financial institutions authorized to hold funds by the U.S. Department of Justice (DoJ). Additionally, Ray and his associates stated that other U.S. institutions already have custody of another $500 million.
FTX’s new Chief Financial Officer, Mary Cecilia, speaking under oath during part of the bankruptcy proceedings, noted:
“We are reaching out to all of those banks and changing signatories on the accounts so that we can gain access to the accounts and move the cash as much as we can to an authorized depository institution,”
Funds Breakdown Update
Cecilia further stated that around $130 million of cash is locked up in Japan due to ringfenced regulations funds for local users. However, FTX Japan was reportedly one of the secure places to be a patron during the company’s regular operations to be close to paying customers in total.
On December 13, the subsidiary East Asian branch of FTX released a statement stating:
“We have put together a structure for the resumption of withdrawal service, which has been shared with and approved by the new FTX Trading management team. Development work for this has already resumed, and our engineering teams are working to allow FTX Japan users to withdraw their funds.”
Apart from FTX Japan, Cecilia noted that another $6 million of the firm’s funds remains for operational expenses such as employee salaries. The remaining $423 million is in unauthorized U.S. institutions, primarily at a single broker she didn’t identify. However, she has noted that $485 million in funds are already in an authorized deposit institution.
During the procedural hearing, Steve Coverick, a senior director at FTX’s financial advisors Alvarez & Marsal, revealed that there are “ongoing efforts” to identify the exchange’s international crypto assets and move them to cold wallets, using custodial providers, including Bitgo.
Coverick added that the company’s new management was having some review of the user’s terms and conditions that were stored in various places on Google Drive and Slack. The bankruptcy proceedings aim to wind up the crypto exchange but have been complicated by what is perceived to be poor governance and poor record keeping during the reign of SBF.
Regardless of its recent recoveries and SBF’s allegations that the exchange platform has sufficient funds to compensate its users, the affected customers’ funds may take a while before being released due to the hectic procedures involved during the bankruptcy filing.
