FTX will sell or restructure global empire, CEO says

FTX’s new CEO said on Saturday that the bankrupt crypto exchange wants to sell or restructure its global empire, even as Bahamian regulators and FTX squabble in lawsuits and press reports over whether the bankruptcy filing should proceed in New York or Delaware.

“Based on our research last week, we are pleased to learn that many of FTX’s regulated or licensed subsidiaries, inside and outside the United States, have solvent balances, responsible management and valuable franchises,” said FTX chief John Ray. in a statement.

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Ray, who replaced FTX founder Sam Bankman-Fried when the company filed for Chapter 11 bankruptcy protection on Nov. to investigate these matters”. subsidiaries and others we identify as our work progresses.”

Ray’s statement came with a flurry of filings Saturday morning in Delaware bankruptcy court. In those documents, FTX requested permission to pay third-party vendors, consolidate bank accounts, and create 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, saying it “does not intend to disclose further developments unless and until it determines that further disclosure is appropriate or necessary.”

Both the FTX and Bahamas securities regulators are seeking jurisdiction over the bankruptcy process in two different US courts. Last week, Bahamian regulators may have moved hundreds of millions of “digital assets” from FTX custody to their own custody, acknowledging the act in a press release after FTX lawyers accused them of doing so in an emergency suit.

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 not part of the bankruptcy proceedings and remains operational today. The platform, which FTX acquired in 2021, allows traders to buy options, swaps and futures on bitcoin and ethereum.

FTX’s new CEO asked employees, suppliers, customers, regulators and government stakeholders 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 worldwide, across 36 banks, with positive balances. Cash balances across all entities totaled approximately $564 million, of which $265.6 million was held in limited custody with LedgerX.

FTX attorneys also want to use a “cash pooling system” where all of the cash assets of each disparate FTX entity are pooled into one consolidated balance sheet statement and into new bank accounts, which FTX is currently opening.

In particular, FTX attorneys wrote that they “worked closely and will continue to work with [existing FTX banks] to ensure that prior authorized signatories have no access” to previous FTX accounts that will continue to be used. Past reporting and court filings have shown that Sam Bankman-Fried had near-absolute control over cash management and access to the accounts .

FTX’s bank accounts reflect the global influence of the crypto asset empire. Institutions in Cyprus, Dubai, Japan and Germany had a wide range of global currencies. FTX subsidiaries had more than a dozen accounts with Signature Bank, a US institution that made an aggressive foray into serving crypto clients in 2021. With the exception of one Bank of America account for Blockfolio, major US banks are not on the list. Blockfolio was acquired by FTX in the summer of 2020.

In another petition, FTX lawyers sought access to $9.3 million for supplier payments that FTX called “critical.” No list was provided, but the FTX motion established criteria for “critical supplier” status.

In welcome news to clients, FTX attorneys asked the court for permission to redact “certain confidential information,” including the names and “all associated identifying information” of FTX’s clients. “Public Dissemination of [FTX’s] client list […] competitors an unfair advantage in contacting and extorting their customers,” the filing said, potentially jeopardizing FTX’s ability to sell assets or businesses.

FTX attorneys want proceedings to continue in Delaware. In contrast, regulators in the Bahamas claim they do not recognize the authority of those Chapter 11 proceedings and want to hold a Chapter 15 trial in New York.

Chapter 15 bankruptcy is the route the defunct hedge fund Three Arrows Capital has taken. Three Arrows’ implosion triggered a spiraling crisis that destroyed Voyager, Celsius, and eventually FTX.

The Chapter 11 lawsuit that FTX is seeking would allow restructuring or sale of the company to the highest bidder, though it’s not clear who that could be. Rival exchange Binance initially made an offer before withdrawing. That turnaround deepened a liquidity crunch at FTX and revealed a billion-dollar hole.

FTX’s first hearing in the bankruptcy proceedings is scheduled for Tuesday in Delaware.

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