FTX owes its biggest lenders billions of dollars. When will the exchange pay the money back?
The size of FTX’s debt to the exchange’s fifty largest creditors exceeds the $3.1 billion mark, according to new documents in the trading platform’s bankruptcy lawsuit. The names of the organisations FTX owes are not being disclosed. However, the figures mentioned by the lawyers are enough to conclude about the enormous scale of financial problems that await investors and users of the crypto exchange. At the same time, it could take years or even decades for the latter to be compensated for their losses.
It should be noted that court documents reveal other curious details about FTX’s operations. As it became known the day before, the FTX exchange and trading company Alameda ended 2021 with a loss of 3.7 billion dollars.
Court document mentioning the losses of FTX and Alameda
That said, former FTX chief Sam Bankman-Fried had previously confirmed that the platform had made more than a billion dollars in 2021. Apparently, in this case, he simply did not recall the amount of losses.
What will happen to the FTX cryptocurrency exchange
Each of FTX’s top ten creditors alone has at least $100 million in claims for repayment, which adds up to more than $1.45 billion. The statement explains that the debt is unrelated to the company’s insider debt, so the final figure could still change as more information becomes available.
According to Decrypt’s sources, FTX owes its biggest creditor $276 million. The third-largest creditor has a claim against the company of $175 million. While that entity is not named, it can be assumed that it is the Genesis platform.
Genesis’ official Twitter promises that its legal team will resolve the problems with FTX
Earlier, its representatives said that their $175 million was “stuck” on the bankrupt exchange. And this is just the tip of the iceberg: before that it was reported that the number of creditors of the exchange could reach one million.
Today it has become known that representatives of Genesis allow bankruptcy, the apparent reason for which would be too tight a connection with the platform FTX. In this case, on November 9 staff stated that they have a "trading relationship with FTX", but it does not affect its ability to serve its own customers. Apparently, such a rejoinder was premature.
Genesis’ tweet that the company’s relationship with FTX allegedly does not affect it in any way
Genesis is not disclosing creditor information for one purpose – to shield all parties to the litigation from additional financial trouble. Here’s a quote.
The public dissemination of a debtor’s FTX client list can give its competitors an unfair advantage to contact and poach those clients, as well as hinder the debtor’s ability to sell their assets and maximise the value of their assets at the right time.
Another problem is the miscounting of those to whom FTX owes funds. This was previously stated by the exchange’s new chief executive, John Ray III, who is now pursuing its bankruptcy case.
The debtor has not historically kept proper books and records, and is now working to gain access to certain sources of information.
The beginning of the FTX debtors’ document
A court document filed on Sunday set a date for the first day of the FTX bankruptcy hearing. It is due to take place on Tuesday in Wilmington, Delaware.
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As you can see, the FTX bankruptcy case is seriously complicated by the fact that the management of the exchange has previously been rather negligent in its financial reporting. Unfortunately, users and creditors of the exchange cannot yet be reassured by encouraging news – this is the opinion of financial insolvency lawyer Stephen Irel, a partner at Co Cordis in Australia.
He said the day before that in the liquidation process the exchange’s “realisation” of its crypto assets and the decision to distribute them will be a “daunting task”. Investors and customers should prepare for the worst – the process could take years or even decades. Ordinary clients will be in the same queue as the big FTX lenders during the distribution of funds. That is not to say yet that anyone will have a strong preference in the timing of returns.
Simon Dixon, founder of investment platform BnkToTheFuture, who was heavily involved in the Celsius bankruptcy proceedings, said that anyone who held funds on FTX would become creditors and a creditors’ committee would be set up to represent their interests. He said that the remaining assets would eventually be available to creditors, depending on what remained after the bankruptcy costs.
In other words, the FTX liquidation story could be a kind of Mt. Gox of this decade in the sense that creditors will have to go through a long legal battle before they have a chance to get their money back. Although FTX still won’t match the scale of coin losses with Mt. Gox for the entire industry.
We don't think it's really worth counting on a quick recovery of lost money. Yet the financial situation of FTX and Alameda has been dire, with experts reporting 900 million in liquid assets and 9 billion in liabilities. Accordingly, the case here will not end with a simple sale of assets on hand, because there are not enough of them in any case. So there will be a long way to go - and investors should prepare for it.
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