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Crypto exchange FTX gets nod to sell $873M of assets to repay creditors

November 30, 2023 Coin Telegraph

Crypto exchange FTX gets nod to sell 3M of assets to repay creditors

Bitwise

Nearly $700 million of the $873 million trust assets allowed to be sold by FTX comes from Grayscale’s flagship product, the Grayscale Bitcoin Trust, or GBTC.

Bankrupt crypto exchange FTX has been given the green light to sell around $873 million of trust assets, with proceeds used to repay creditors impacted by the exchange’s collapse in 2022, according to a Nov. 29 filing in a Delaware bankruptcy court.

The $873 million in assets will be sourced from FTX’s stakes in various trusts issued by crypto asset manager Grayscale Investments, valued at $807 million, and custody service provider Bitwise — valued at $66 million.

While the court document references a total of $744 million in assets — this is due to the valuation figure being as of Oct. 25, 2023. The assets have increased in value since.

*Order authorizing FTX Trading to sell trust assets. Source: Kroll*

The approval comes nearly four weeks after FTX debtors filed a motion to Judge John Dorsey on Nov. 3 requesting the sale of the six cryptocurrency trusts — including the Grayscale Bitcoin Trust (GBTC), Grayscale Ethereum Trust (ETHE), and Bitwise 10 Crypto Index Fund (BITW).

FTX currently owns over 22 million units of GBTC, Grayscale’s flagship Bitcoin product, now worth $691 million, while its 6.3 million shares of ETHE are now worth around $106 million.

Grayscale’s Ethereum Classic Trust (ETCG), Litecoin Trust (LTCN) and Digital Large Cap Trust (GDLC) are the three other trusts that FTX can now sell to recoup funds for impacted FTX customers.

*FTX's shares in Grayscale and Bitwise were worth $744 million as of Oct. 25, but the valued has increased since. Source: Kroll*

FTX’s administrators, headed by John. J Ray III, has been working to recover assets since Sam Bankman-Fried’s former empire collapsed in November 2022.

So far, around $7 billion in assets has been recovered, with nearly half of that coming in the form of cryptocurrencies ($3.4 billion).

In June, FTX’s debtors estimated the total amount of customer assets misappropriated was $8.7 billion.

Meanwhile, Bankman-Fried was convicted on seven fraud-related charges on Nov. 2 and is set to be sentenced on March 28.

He remains in Brooklyn’s Metropolitan Detention Center for the time being, where he recently paid four mackerels in exchange for a haircut.

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FTX customers could get $9B shortfall claim payout by mid-2024

October 17, 2023 Coin Telegraph

FTX customers could get B shortfall claim payout by mid-2024

Bankruptcy Plan

A proposed settlement could see creditors receive a shortfall claim of $8.9 billion for FTX.com and $166 million for FTX US.

Customers of bankrupt crypto exchange FTX and FTX US could see over 90% of assets returned to them by the end of the second quarter of 2024 after a proposed settlement was reached between FTX creditors and debtors.

On Oct. 17, FTX debtors said they reached a “major milestone” in their Chapter 11 case after “extensive discussions” with the unsecured creditors' committee, a committee of non-US customers, and class action plaintiffs regarding customer property disputes.

FTX ebtors filed a notice of the proposed settlement to a Delaware-based United States Bankruptcy Court on Oct. 16 (for information purposes). However, they need to submit an official filing by Dec. 16 seeking the court’s approval.

(1/4) The FTX Debtors have announced another major milestone in their chapter 11 cases.
— FTX (@FTX_Official) October 17, 2023

Part of the amended plan consists of the “Shortfall Claim,” in which FTX debtors estimates that customers of FTX.com and FTX US would collectively receive 90% of assets available for distribution.

The Shortfall Claim is estimated to be approximately $8.9 billion for FTX.com and $166 million for FTX US. If approved by the Bankruptcy Court, FTX expects these funds to be disbursed by the end of the second quarter of 2024.

John. J. Ray III, CEO and chief restructuring officer of the FTX, was pleased with the terms of the settlement:

"Together, starting in the most challenging financial disaster I have seen, the debtors and their creditors have created enormous value from a situation that easily could have been a near-total loss for customers.”

The amended plan involves FTX dividing the assets into three pools — assets segregated for the benefit of FTX.com customers, U.S. customers and a general pool of other assets. However, only the first two groups are included in the Shortfall Claim.

The Plan Term Sheet is a compromise between the Committee, the Debtors, the ad hoc customer committee and other representatives on a range of issues that balance the rights of customer and non-customer creditors across the U.S. and foreign debtors.
— Official Committee of Unsecured Creditors of FTX (@FTX_Committee) October 17, 2023

FTX debtors however anticipate that customers of both exchanges will not be paid in full and that FTX.com would likely see a greater percentage of losses.

FTX customer clawbacks

Meanwhile, observers noted a part of the proposed plan sees to it that customers that withdrew over $250,000 from the exchange within nine days of bankruptcy would have their claim reduced by 15% of the amount.

However, claims under $250,000 wouldn't be subject to a reduction, FTX debtors explained:

"Eligible customers that have a preference settlement amount of less than $250,000 during the nine-day period would be able to accept the settlement without any reduction of claim or payment."

However, as part of the amended plan, FTX may exclude from the settlement any insiders, affiliates and customers who may have had knowledge of the commingling and misuse of customer deposits and corporate funds, it said.

Former FTX CEO Sam Bankman-Fried is two weeks into his fraud trial on matters relating to his involvement in FTX’s collapse to bankruptcy last November.

Magazine: Deposit risk: What do crypto exchanges really do with your money?

FTX creditors unimpressed with exchange’s bankruptcy exit plan

August 2, 2023 Coin Telegraph

Coin Telegraph

FTX’s official creditor committee said the current plan would add costs and delays to what’s already on track to be a historically expensive bankruptcy.

A body representing FTX customers said it is “extremely disappointed” by the exchange’s draft bankruptcy exit plan and claims it was ignored by FTX’s restructuring team.

In a July 31 court filing, FTX’s Official Committee of Unsecured Creditors (UCC) said despite its repeated requests and previous promises from the team, it “did not have a single call or meeting” with FTX to discuss its draft Chapter 11 plan.

The plan outlines and categorizes customer claims into classes and creates a path forward for FTX to re-launch as an offshore exchange. The UCC warned it would put forward its own plan for FTX customers to vote on if it continued to be ignored.

*Excerpt of the UCC's filing claiming FTX's restructuring team did not properly consult it. Source: Kroll*

The UCC took issue with what it considered to be a late filing of the plan that created "the appearance of progress.” It explained the plan was one-sided and largely ignored suggestions the UCC raised during discussions.

“Put simply, the Debtors chose to publicly file their ideas for a plan.”

Another concern was the plan does not appoint someone with relevant crypto experience to run a potentially-rebooted FTX.

The plan should also create a regulatory-compliant recovery token and allocate value to customers most affected by FTX’s collapse in order to gain support from the “millions of customers and creditors whose votes are necessary to confirm a plan,” it said.

Additionally, the UCC claimed the current plan will cause more costs and delays. Ultimately, it asserted that it would have no choice but to put forward its own plan “for which customers and creditors will actually vote in favor.”

It was, however, appreciative that the restructuring team signaled a willingness to amend the plan to include the UCC’s recommendations, saying that negotiations will start “very soon.”

The Debtors filed a template for a plan of reorganization last night. Business level negotiations between the Committee and the Debtors over the terms of the plan have not happened yet, but will start very soon.
— Official Committee of Unsecured Creditors of FTX (@FTX_Committee) August 1, 2023

“This will take willingness on the part of the Debtors to listen and engage and not attempt to substitute their judgment for that of the parties who truly know and understand the cryptocurrency markets,” it added.

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FTX Debtors Unveil Report That Identifies and Discusses Control Failures by Sam Bankman-Fried Led Management

April 10, 2023 Bitcoin.com

SBF’s inner circle received $3.2B, mainly from Alameda: Court filings

March 16, 2023 Coin Telegraph

Alameda

Billions worth of loans and payments flowed from FTX entities to Sam Bankman-Fried and five other former executives of FTX and Alameda Research.

FTX and Alameda Research's former top brass received $3.2 billion in payments and loans from FTX-linked entities, according to the FTX administrators handling the firm's restructuring.

FTX, now helmed by CEO John Ray III, has been tracking missing funds from the exchange since its collapse, which it estimates to be $8.9 billion in total.

According to a March 15 statement from FTX Debtors, financial statements it filed in the Delaware Bankruptcy Court point to billions of dollars worth of loans and payments that allegedly flowed to Sam Bankman-Fried and high-ranking executives, which came mainly from trading house Alameda Research.

Sharing the FTX Debtors’ press release just issued: https://t.co/r7PlneGSXF
— FTX (@FTX_Official) March 16, 2023

Bankman-Fried however reportedly received the lion’s share of the funds at $2.2 billion.

Others named in the list include former FTX director Nishad Singh, FTX co-founder Gary Wang, and former CEO of Alameda Research Caroline Ellison, among others.

It provided a rough breakdown of the payments made to the FTX executives, as follows:

$2.2 billion to Sam Bankman-Fried
$587 million to Nishad Singh — former FTX director of engineering
$246 million to Zixiao "Gary" Wang — FTX cofounder
$87 million to Ryan Salame — former co-CEO, FTX Digital Markets (FTX’s Bahamian entity)
$25 million to John Samuel Trabucco — former co-CEO, Alameda
$6 million to Caroline Ellison — former CEO, Alameda

The amounts exclude over $240 million used for various purchases, such as luxury properties in the Bahamas, donations to political and charitable causes and “substantial transfers” to non-FTX subsidiaries, it noted.

FTX’s management said it is currently investigating its rights to pursue potential action against the recipients, along with their subsequent transferees, and that ongoing efforts are “expected to result in the further identification of assets, liabilities and transfers.”

It added it’s looking at ways to claw back the funds from the former executives but said the “amount and timing of eventual monetary recoveries cannot be predicted at this time.”

Bankman-Fried is facing 12 charges relating to conspiracy, wire and securities fraud in connection to the alleged mishandling of funds at FTX and its affiliates. He previously plead not guilty to eight similar original charges.

Ellison, Wang and Singh have pleaded guilty to charges similar to those brought against Bankman-Fried and are cooperating with investigations spearheaded by federal prosecutors.

The first known instance of an executive from FTX or Alameda assisting authorities came as Salame blew the whistle to Bahamian regulators of the potential fraud being perpetrated at FTX which lead them to shutter the exchange just two days later on Nov. 11.

FTX debtors