Company advisers have identified a significant amount of crypto that it will be more difficult to sell without depressing the market price of those digital tokens, FTX attorney Andrew Dietderich said. The company is also trying to sell off other “nonstrategic investments” made by FTX that have a book value of $4.6 billion, he said.
It is not yet clear how much of a shortfall FTX’s creditors will face as company advisers continue working to salvage what they can from the crypto giant’s shocking implosion in November. But the company, once one of the world’s largest cryptocurrency exchanges, has identified more than 9 million customer accounts, Dietderich said, suggesting there will be an incredibly long line of people looking to be made whole.
Federal regulators have estimated that FTX customer losses exceed $8 billion. John J. Ray III, the corporate wind-down expert now leading the company, told lawmakers last month the company will not be able to recover all of its losses and expects the process to take “months, not weeks.”
FTX co-founder Sam Bankman-Fried pleaded not guilty to eight criminal charges of fraud and money laundering in federal court in Manhattan last week. Federal prosecutors and regulators have accused him of orchestrating a years-long scheme to defraud the company’s customers by diverting their deposits to his affiliated investment firm, Alameda Research, and then using the funds as a personal piggy bank.
“We know what Alameda did with the money,” Dietderich told the bankruptcy court on Wednesday. “It bought planes, houses, threw parties, made political donations. It made personal loans to its founders. It sponsored the FTX Arena in Miami, a Formula 1 team, the League of Legends, Coachella, and many other businesses, events, and personalities.”
Bankman-Fried and his inner circle also made risky cryptocurrency bets, “often unsuccessfully,” Dietderich said and invested in a range of businesses. “We know all this has left a shortfall in the value to repay customers and creditors,” he said. “The amount of the shortfall is not yet clear. It will depend on the size of the claims pool and our recovery efforts.”