FTX could be revived as more customers’ funds recovered, say lawyers

Defunct cryptocurrency exchange FTX has recovered $7.3bn (£5.8bn) of customer funds and could be restarted as a going concern as soon as next year, the company’s lawyers have said.

“The situation has stabilised, and the dumpster fire is out,” FTX attorney Andy Dietderich said at the hearing at a Delaware bankruptcy court.

FTX spectacularly collapsed in November triggering a “crypto winter” and its founder, Sam Bankman-Fried was later arrested and extradited from the Bahamas to the US.

In mid-November, when FTX filed for bankruptcy, the company had collected just $3.3bn of assets to distribute among stakeholders. Ongoing recovery efforts have more than doubled that figure, court filings show, including $800m of cash recovered and a further $600m of “settlements and investments receivable”.

But the biggest sum has been in “category A crypto” tokens with large and liquid markets. FTX now has more than $4bn of crypto assets under its control, a total that has been bolstered by a sharp recovery in cryptocurrency prices.

Bitcoin, which had dropped below $20,000 after FTX’s collapse, broke $30,000 for the first time since June 2022 this week, with other cryptocurrencies including ethereum charting a similar course.

That price increase has put more than $1bn back in the coffers of FTX, court filings show. The company plans to complete an assessment of the possibility of restarting the exchange by the end of the June, and ultimately confirm its goals within a year after that date.

But Dietderich said the actual customer shortfall remains unknown, according to a court report from Reuters. The company’s legal team is still working to accurately recreate internal records of FTX’s accounts, and external estimates from the US Commodity Futures Trading Commission put missing funds at more than $8bn.

Other FTX funds are still locked up in the Bahamas, where the Caribbean nation’s own securities commission seized assets related to the winding-up of FTX’s local subsidiary.

The ensuing battle over jurisdiction between FTX’s US-based legal team and the Bahamian regulators has yet to be resolved, but the bulk of the assets at stake are FTX’s in-house FTT token.

The token, which is thinly traded and largely valued based on the health of FTX itself, has a supposed market value in the billions, but FTX’s US team dispute that, arguing that its true value is as low as $170m.

FTX could recover further funds by selling subsidiaries such as Japanese exchange FTX Japan, which were largely ringfenced from the parent company and have continued to operate with only brief pauses during the bankruptcy process.

In a court filing from Sunday, FTX’s new administration admitted it was having to comb through QuickBooks and Slack chats to uncover the company’s financial position.

“Approximately 80,000 transactions were simply left as unprocessed accounting entries in catch-all QuickBooks accounts titled “Ask My Accountant,” the filing says. “Further complicating matters, QuickBooks entries were often made months after transactions occurred, rendering impossible real-time financial reporting and risk management.”