FTX recovers $7B in assets and the FTX Debtors’ second interim report sheds light on the arduous task of tracing funds. It further reveals deliberate actions that complicated the process. FTX, under the leadership of CEO John Ray, has successfully recovered approximately $7 billion in liquid assets, with ongoing efforts to identify additional funds. Nonetheless, the extensive commingling of assets poses challenges to their endeavor.
FTX’s Recovery Progress
In the recently released FTX Debtors’ second interim report on June 26, CEO John Ray disclosed that the company has recovered $7 billion in liquid assets to date. Despite the achievement, FTX remains dedicated to the ongoing search for additional assets that they have misappropriated.
According to the FTX Debtors, comprising FTX and its affiliates, approximately $8.7 billion of customer assets were misappropriated. Among these funds, approximately $6.4 billion were in fiat and stablecoins. Notably, FTX did not differentiate between these two categories in its accounting practices.
Deliberate Actions, Concealment and Evidences of Misrepresentation
The FTX Debtors’ report alleges that the former FTX leadership intentionally commingled and misused customer deposits. Furthermore, they assert that these actions were veiled with the assistance of a senior FTX Group attorney and other accomplices.
Consequently, it is challenging to trace substantial assets back to their original sources. The same goes for distinguishing between the FTX Group’s operating funds and customer deposits.
The report vividly depicts the intricate flows of FTX customer funds from primary deposit accounts, as identified thus far. These flows were made possible by misrepresenting their purpose to banks and engaging in numerous false representations. The extent of misrepresentation extended to former CEO Sam Bankman-Fried’s statements to the United States Congress.
Moreover, the report highlights the repeated involvement of an unidentified senior FTX attorney. Allegedly, he terminated a less senior attorney for raising objections to the company’s deceptive practices. It further alleges that they employed the misappropriated funds for political and charitable donations. They also used some for investments and acquisitions like luxury real estate.
Varying Estimates of Liability
The report reveals that FTX Senior Executives, including SBF, Gary Wang, Nishad Singh, and Alameda Research CEO Caroline Ellison, informally tracked FTX.com’s undisclosed fiat currency liability resulting from the extensive commingling and misuse of customer deposits. Their estimates ranged between $8.9 billion to $10 billion, slightly surpassing the FTX Debtors’ estimation.