FTX bankruptcy team says the exchange owed $8.7B

FTX, the collapsed cryptocurrency exchange currently undergoing bankruptcy proceedings, has made progress in recovering customer funds, according to a new report released by the bankruptcy team. The report, made public yesterday, reveals that FTX has managed to recover $7 billion out of the $8.7 billion owed to its customers.

The recovery efforts have been complicated by the extensive commingling of funds, which has posed challenges in tracing and retrieving the remaining amount. The report exposes actions taken by the former management of FTX, with the assistance of a senior attorney, to hide their activities as early as August 2022.

Approximately $6.4 billion of the funds owed to customers were in fiat currency and stablecoins, and they are believed to have been misappropriated. Despite recovering $7 million to date, the bankruptcy team remains hopeful that further funds can be reclaimed.

The report reveals that the misappropriated funds were utilised for speculative trading, venture investments, acquisitions, political donations, charitable contributions, and investments in luxury real estate in the Bahamas.

John Ray, the CEO appointed by FTX to oversee the recovery process, acknowledged the complexity of the task at hand. He stated, “Tracing substantial assets of the debtors to their original sources of funding or differentiating between the FTX Group’s operating funds and customer deposits is extremely challenging.”

In a startling revelation, the 33-page document accuses FTX’s top management and at least one senior attorney of engaging in deceitful practices. The report alleges that they provided false information to banks and auditors, fabricated documents, and engaged in a series of jurisdictional moves, relocating from the US to Hong Kong and finally to the Bahamas, in an attempt to facilitate their actions and avoid detection.

Furthermore, the bankruptcy team claims that Sam Bankman-Fried, the key figure behind FTX, provided false testimony before Congress regarding the protection of customer funds. Bankman-Fried had previously said in a separate press release that customer protection was a top priority at the exchange.

This report marks the second disclosure by John Ray, following the initial examination that revealed accounting failures and highlighted inadequate management control under Bankman-Fried’s watch.

FTX’s bankruptcy proceedings are currently taking place in Delaware, while Bankman-Fried is expected to face criminal charges and appear in court in October.