On March 2, 2023, the FTX Debtors released their second stakeholder presentation, which contained a preliminary analysis of the shortcomings of the now-defunct cryptocurrency exchange. The latest presentation reveals a significant shortfall, as approximately $2.2 billion of the company’s total assets are found in FTX-related addresses, but only $694 million are considered “Category A Assets” or liquid cryptocurrencies such as Bitcoin, Tether, or ethereum. Additionally, John J. Ray III, FTX’s current CEO, said the debtor’s efforts have been significant and added that the exchange’s assets are “highly mixed.”
A preliminary summary of what contributed to the $8.9 billion FTX shortfall
FTX debtors and CEO John J. Ray III released a comprehensive presentation documenting FTX’s shortcomings. The preliminary report mentions the cyberattack occurred the day after FTX filed for Chapter 11 bankruptcy protection on November 11, 2022. In a now-deleted Telegram chat channel, FTX US General Counsel Ryan Miller described the exchange is hacked and that the platform is not safe. The preliminary analysis of the deficiency applies to this particular cyber attack everywhere.
The report also mentions that both FTX and FTX US typically hold digital assets in clearing wallets that are not segregated for individual clients. The debtors note that due to the cyberattack, the company’s computing environment is protected and “remains subject to certain restrictions” limiting access to important data. The report categorizes FTX’s holdings into two groups: “Category A Assets,” which have larger market caps and trading volumes, and “Category B Assets,” which do not meet the liquidity requirements of A Category Assets.
However, despite the identification of all assets, a shortfall of $8.9 billion remains. “There is a significant deficit on the FTX.com exchange at the time of the petition, defined as the difference between the digital asset claims on the FTX.com ledger and the digital assets available to satisfy those claims,” the report stated. “The shortage is particularly significant for A-assets. Only a small amount of cash, stablecoins, [bitcoin], [ethereum]and other Category A assets remain in portfolios previously linked to the FTX.com exchange.”
The report also notes that while the FTX US deficit is significant, it is smaller than that of the international exchange. IN press releaseExecutive Director Ray shared his thoughts on the presentation and mentioned that funds are mixed and record keeping is insufficient.
“This is the second in a series of presentations that the FTX Debtors expect as we continue to uncover the facts of this situation,” Ray said in a statement. “It took a huge effort to get here. The assets of the exchanges were highly mixed and their books and records incomplete and in many cases missing altogether. He emphasized that the information provided by the debtors is preliminary and subject to change.
An interesting aspect of the debtors latest performance is that ftx token (FTT)the company’s exchange coin, is classified as a category B asset. While BTC and ETH are Class A assets, SOL, MATIC, UNI, SHIB, PAXG, WBTC and WETH are also considered Class A assets. The report also highlights daily deposits and withdrawals made 90 days prior to the bankruptcy petition date.
Additionally, the exchange shortfall does not include Alameda Research’s assets, which consist of $956 million worth of solan ( SOL ) and apto ( APT ), $820 million held on third-party exchanges, $185 million in stablecoin assets held in cold storage repositories, and $169 million in bitcoins (BTC) stored in cold rooms.
What do you think will be the implications of a significant FTX shortage for stakeholders? Let us know what you think about this topic in the comments section below.
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