FTX’s new CEO said Saturday that the bankrupt crypto exchange is looking to sell or restructure its global empire, even as Bahamian regulators and FTX spar in court documents and press releases over whether to file for bankruptcy in New York or Delaware.
“Based on our review over the past week, we are pleased to learn that many of FTX’s regulated or licensed subsidiaries, both in the US and abroad, have solvent balance sheets, responsible management and valuable franchises,” said FTX CEO John Ray. the statement said.
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Ray, who replaced FTX founder Sam Bankman-Fried when the company filed for Chapter 11 bankruptcy protection on Nov. 11, added that in the coming weeks a “priority” is to “explore sales, recapitalizations or other strategic transactions with respect to these subsidiaries and others that we determine as we continue our work.”
Ray’s statement came amid a flurry of filings Saturday morning in Delaware bankruptcy court. In those applications, FTX asked for permission to pay outside vendors, consolidate bank accounts and open new ones.
The exact timing of the possible sale is unclear. FTX noted that it has not set a specific timeline for the completion of this process and said it “does not intend to disclose further developments until we determine that further disclosure is appropriate or necessary.”
Both FTX and the Bahamas Securities Regulatory Authority are seeking jurisdiction over the bankruptcy proceedings in two different US courts. Last week, regulators in the Bahamas moved potentially hundreds of millions in “digital assets” from FTX’s custody to their own, acknowledging the move in a press release after FTX’s lawyers accused them of doing so in an emergency lawsuit.
Ray singled out some of the company’s healthier subsidiaries for praise. One example is LedgerX, a derivatives platform regulated by the Commodity Futures Trading Commission. LedgerX was one of the few FTX-related entities that did not enter bankruptcy proceedings and continues to operate today. A platform that FTX was acquired in 2021allows traders to buy options, swaps and futures bitcoin and Ethereum.
FTX’s new CEO asked employees, suppliers, customers, regulators and government stakeholders to “be patient” with them.
FTX’s statement says it has there may be more than one million creditors in these Chapter 11 cases.
FTX and its accountants found 216 bank accounts in 36 banks with positive balances around the world. Cash balances across all entities totaled approximately $564 million, of which $265.6 million is held in LedgerX on a restricted basis.
FTX lawyers also want to use a “cash pooling system,” combining all the cash assets of each of FTX’s disparate entities into one consolidated balance sheet and into new bank accounts that FTX is currently in the process of opening.
In particular, FTX’s lawyers wrote that they “worked and will continue to work in close contact with [existing FTX banks] to ensure that previously authorized signers do not have access” to any previous FTX accounts that will continue. Previous reports and court filings indicate that Sam Bankman-Fried had almost complete control over the money management and account access.
FTX bank accounts reflect the global influence of the crypto-asset empire. Institutions in Cyprus, Dubai, Japan and Germany held a wide range of global currencies. FTX subsidiaries held more than a dozen accounts at Signature Bank, a US-based institution that made an aggressive foray into crypto customer service in 2021. With the exception of one Bank of America account for Blockfolio, no major US banks are listed. Blockfolio was acquired by FTX in the summer of 2020.
In another motion, FTX lawyers moved to gain access to $9.3 million in payments to what FTX described as “critical” suppliers. No list was provided, but the FTX movement established criteria for “critical supplier” status.
In welcome news for customers, FTX’s lawyers have applied to the court for permission to redact “certain confidential information”, including the names and “all related identifying information” of FTX’s customers. “Public distribution [FTX’s] customer list can provide […] competitors have an unfair advantage to contact and harass their customers,” the statement said, potentially jeopardizing FTX’s ability to divest assets or businesses.
FTX lawyers want the trial to continue in Delaware. Bahamas regulators, on the other hand, say they do not recognize the validity of these Chapter 11 proceedings and want to pursue a Chapter 15 proceeding in New York.
Chapter 15 bankruptcy is the route that defunct hedge fund Three Arrows Capital pursued. The Three Arrows explosion set off a spiraling crisis that disabled Voyager, Celsius, and eventually FTX.
The Chapter 11 process sought by FTX would allow the company to be restructured or sold to the highest bidder, though it’s unclear who that might be. Rival exchange Binance initially made the offer before withdrawing it. This twist deepened the liquidity crisis at FTX and revealed a multi-billion dollar hole.
FTX’s first bankruptcy hearing is scheduled for Tuesday in Delaware.
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