9 months ago
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Despite the positive developments, FTX has acknowledged that it does not anticipate fully repaying all customers.
In a bid to repay customers whose accounts were frozen following the collapse of the FTX Derivatives Exchange in 2022, the crypto firm has seen its cash reserves double to $4.4 billion. The company, marred by fraud allegations and mismanagement, is unloading crypto assets and hoarding cash as part of its restructuring efforts under the leadership of John J. Ray III.
FTX Cash Pile Growth
According to a report from Bloomberg, FTX’s four largest affiliates, including FTX Trading Ltd. and Alameda Research LLC, nearly doubled the group’s cash pile from $2.3 billion in late October 2023 to $4.4 billion at the end of the year. This substantial increase comes as the company strategically sells digital assets, aiming to recover funds to repay customers.
The rise in FTX’s cash stockpile aligns with the increasing value of customer accounts since the platform’s collapse. Bankruptcy advisers have been working diligently to track down assets, strike deals benefiting smaller account holders, and pursue legal action against former associates and firms that withdrew funds before the Chapter 11 filing.
FTX revealed that it had successfully raised $1.8 billion through December 8 by selling off a portion of the firm’s digital assets, with bankruptcy advisers actively seeking ways to recover approximately $8.7 billion in misappropriated customer assets. The company has also engaged in Bitcoin derivative trades to hedge exposure and generate additional yield on its digital holdings.
FTX has been exploring options to potentially restart the exchange, indicating a commitment to overcome its troubled past. Additionally, the estate may have sold 22 million GBTC shares in January, worth nearly $1 billion, to further assist creditors in recovering lost funds.
Challenges and FTX Customer Claims
Despite the positive developments, FTX has acknowledged that it does not anticipate fully repaying all customers. The burden is expected to fall more heavily on customers of FTX.com, and a contentious proposal has been made, pegging the value of digital assets at the time of the company’s bankruptcy filing.
This stance, however, has led to challenges from dozens of FTX customers who argue that this approach would cause them to miss out on the gains from the yearlong Bitcoin rally and the rebound of other tokens.
Customer claims, particularly those exceeding $1 million, have experienced a noteworthy increase in trading prices. As of Friday, these claims were trading at around 73 cents on the dollar, up remarkably from around 38 cents on the dollar in October. Actual trading prices are contingent on the specific claim’s value and various other factors, as reported by investment firm and bankruptcy claims broker Cherokee Acquisition.
Meanwhile, the bankruptcy estate has received approval to auction off luxury properties in the Bahamas, including the Orchid Penthouse worth $40 million. The proceeds from these sales are intended to increase capital available for distribution to FTX account holders and creditors.
