FTX will sell or restructure global empire, says CEO

FTX’s new CEO said Saturday that the bankrupt crypto exchange plans to sell or restructure its global empire, even as Bahamian regulators and FTX argue in court filings and press releases about whether to proceed with the bankruptcy filing in New York or in Delaware .

“Based on our review over the past week, we are pleased to learn that many of FTX’s regulated or licensed subsidiaries inside and outside the United States have strong balance sheets, responsible management and valuable franchises,” said FTX CEO John Ray in a statement .

Ray, who replaced FTX founder Sam Bankman-Fried when the company filed for Chapter 11 bankruptcy protection on Nov. 11, added that “a priority” in the coming weeks is “sales, recapitalizations or other strategic ones.” Review transactions relating to these affiliates and others that we identify in the course of our work.”

Ray’s testimony came amid a flurry of filings Saturday morning in the Delaware bankruptcy court. In those filings, FTX asked permission to pay outside vendors, consolidate bank accounts, and set up new ones.

The exact timing of a possible sale is unclear. FTX indicated that it has not set a specific timeline for the completion of this process and said that it “does not intend to disclose further developments unless and until it determines that further disclosure is appropriate or necessary”.

Both the FTX and Bahamian securities regulators are seeking jurisdiction over the bankruptcy proceedings in two separate U.S. courts. Last week, Bahamian regulators moved potentially hundreds of millions of “digital assets” from FTX custody to their own, acknowledging the act in a press release after FTX lawyers accused them of doing so in an emergency court filing.

Ray praised some of the company’s healthier subsidiaries. One example was LedgerX, a derivatives platform regulated by the Commodity Futures Trading Commission. LedgerX was one of the few FTX-related properties that is not part of the bankruptcy proceedings and is still operational to this day. The platform, which FTX acquired in 2021, allows traders to buy options, swaps and futures on Bitcoin and Ethereum.

The new FTX CEO urged employees, suppliers, customers, regulators and government officials to “be patient” with them.

FTX said in a filing that there could be more than a million creditors in these Chapter 11 cases.

FTX and its auditors had identified 216 bank accounts at 36 banks worldwide with positive balances. Cash balances from all companies totaled approximately $564 million, of which $265.6 million was held by LedgerX on a restricted basis.

The FTX attorneys also intend to implement a “cash pooling system” that would pool all of the cash holdings of each and every FTX entity on a consolidated balance sheet and in new bank accounts that FTX is currently opening.

Notably, FTX attorneys wrote that they “work closely with and will continue to work together [existing FTX banks] to ensure that previous authorized signatories do not have access to previous FTX accounts that are still in use. Previous reports and court filings have shown that Sam Bankman-Fried had near-absolute control over cash 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 affiliates held more than a dozen accounts with Signature Bank, an American institution that made an aggressive push into serving crypto customers in 2021. With the exception of a Bank of America account for Blockfolio, major American banks are not on the list. Blockfolio was acquired by FTX in Summer 2020.

In another petition, FTX attorneys requested access to $9.3 million for seller payments, which FTX called “critical.” No list was provided, but the FTX application established criteria for critical vendor status.

In welcome news for customers, FTX’s attorneys petitioned the court for permission to redact “certain confidential information,” including the names and “any associated identifying information” of FTX’s customers. “Public Distribution of [FTX’s] customer list could give […] gives competitors an unfair advantage to contact and poach their customers,” the filing said, potentially jeopardizing FTX’s ability to sell assets or businesses.

FTX attorneys want the Delaware case to continue. On the other hand, Bahamian regulators claim that they do not recognize the authority of these Chapter 11 proceedings and plan to hold a Chapter 15 trial in New York.

Chapter 15 bankruptcy is the path taken by defunct hedge fund Three Arrows Capital. The Three Arrows implosion triggered a spiraling crisis that brought down Voyager, Celsius, and eventually FTX.

The Chapter 11 process FTX is seeking would allow the company to be restructured or sold to the highest bidder, although it’s not clear who that might be. Rival exchange Binance first made an offer before drawing it. This turnaround deepened a liquidity crisis in FTX, exposing a multi-billion dollar hole.

FTX’s first hearing in its bankruptcy case is scheduled for Tuesday in Delaware.

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