FTX had less than $1 billion in liquid assets against $9 billion in liabilities

FTX had less than $1 billion in liquid assets against $9 billion in liabilities

Sam Bankman-Fried’s premier international FTX exchange had just $900 million in marketable assets against $9 billion in liabilities the day before it collapsed into bankruptcy, according to investment material from the Financial Times.

The largest portion of those liquid assets listed on an FTX international balance sheet dated Thursday was $470 million in Robinhood stock owned by a Bankman-Fried vehicle not listed in Friday’s bankruptcy filing, which included 134 corporate entities.

The document, shared with potential investors ahead of the bankruptcy, provides a detailed picture of the financial hole in the FTX crypto empire and suggests that customers of FTX international could suffer large losses on cash and crypto assets they held on the exchange.

FTX’s collapse has dealt a powerful blow to a crypto industry that has already suffered a string of corporate failures this year.

Bankman-Fried had been a leading figure in the sector and had presented himself as an entrepreneur keen to bring the Wild West crypto market into line with mainstream rules. The 30-year-old had been backed by blue-chip investors, became a major donor to the US Democratic Party and plastered his FTX exchange logo on the Miami Heat arena during his meteoric rise after founding his trading venue in 2019.

Bankman-Fried on Friday put his $32 billion international exchange, along with FTX US and his trading firm Alameda Research, into bankruptcy proceedings in federal court in Delaware.

John J Ray, the veteran insolvency practitioner brought in to run the bankruptcy as FTX chief, said on Friday that the cryptocurrency group “has valuable assets” and that the bankruptcy proceedings would allow the company to “assess the situation and . . . maximize recovery for stakeholders”.

The process has already run into problems after just under 24 hours, incorrectly listing devices that FTX didn’t own in its initial filing and suffering an apparent hack on Friday night.

FTX declined to comment.

Friday’s bankruptcy filing gave few details about the group’s financial health but said both assets and liabilities range between $10 billion and $50 billion, and that the number of creditors exceeds 100,000.

A spreadsheet listing FTX international’s assets and liabilities, seen by the Financial Times, points to the problems that sent Bankman-Fried crashing back to earth. It refers to $5 billion of withdrawals on Sunday, and a negative $8 billion entry described as “hidden, poorly internally labeled ‘fiat@’ account”.

Bankman-Fried told the Financial Times that the $8 billion related to funds that were “inadvertently” extended to his trading firm, Alameda, but declined to comment further. Earlier this week he did tweeted that FTX international had $4 billion in readily marketable assets when it faced Sunday’s $5 billion increase in withdrawals.

“There were many things I wish I could do differently than I did, but the biggest ones are represented by these two things: the ill-labeled internal bank-related account [sic]and the size of customer withdrawals during a run at the bank,” the spreadsheet adds.

In the investment material, FTX Trading Ltd, the company behind the largest international exchange, is registered with liabilities of USD 8.9 billion, the largest part of which is USD 5.1 billion in US dollar balances.

Healthy businesses usually have assets that match or exceed their liabilities. The spreadsheet says FTX Trading had a total of $9.6 billion in assets, but it’s unclear how much of that value could be realized.

The vast majority of FTX Trading’s registered assets are either illiquid venture capital investments or crypto tokens that are not widely traded, according to the spreadsheet, which warns that the numbers “are rough values ​​and may be slightly off; there is also obviously a risk of typos, etc. They also change a little over time when deals happen.”

The company’s biggest asset on Thursday was $2.2 billion worth of a cryptocurrency called Serum. Serum’s market cap was $88 million on Saturday, according to data provider CryptoCompare, suggesting FTX’s holdings would be worth much less if sold to the market. CryptoCompare’s figures take into account the coin’s liquidity.

On Friday, the Financial Times reported that Alameda and FTX between them had about $5.4 billion in illiquid venture capital investments, according to other documents provided to investors earlier this week.

Bankman-Fried had raced to raise emergency financing but was unable to persuade investors to save his collapsed business empire.

The new investment material shows he sought to raise $6-10 billion including from a convertible preferred stock and pay a 10 percent dividend that could later be converted into common stock in FTX international at a valuation of between $12-15 billion. “This is only a lower limit of the terms that investors can get,” the material adds.

As of Friday afternoon, Bankman-Fried was looking to sell the $472 million Robinhood shares, the largest liquid asset listed for FTX Trading, in privately negotiated deals he arranged on the Signal messaging app, according to a person directly involved in the negotiations .

The person noted that the Robinhood shares were owned by an Antigua and Barbuda entity called Emergent Fidelity, which is personally controlled by Bankman-Fried, according to U.S. securities filings. Emergent Fidelity is not among the entities listed in Friday’s bankruptcy filing.

Bankman-Fried was entertaining offers at about a 20 percent discount to Robinhood’s volume-weighted average price, or about $9 a share, said the investor, who ultimately declined to buy because of perceived legal risks.

Bankman-Fried acquired a 7.6 percent stake in Robinhood in May and had hinted at considering a full acquisition of the popular trading app.

The second largest liquid asset was $200 million in cash held by Ledger Prime, a crypto investment firm owned by Alameda. The documents do not include any other US dollar balances held by FTX Trading.

In total, the spreadsheet says FTX Trading’s assets were $900 million in “liquid” assets, $5.5 billion in “less liquid” assets consisting of crypto tokens, and $3.2 billion in illiquid private equity investments. There is also an obscure $7mn holding called “TRUMPLOSE”. There are no bitcoin assets listed, despite $1.4 billion in bitcoin debt.

Other documents provided to investors say FTX US, Bankman-Fried’s onshore exchange, held $115 million in cash. Of that amount, $48 million was reported as corresponding US dollar customer balances of $60 million.

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