FTX will sell or restructure global empire, says CEO

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

“Based on our review last week, we are pleased to learn that many of FTX’s regulated or licensed affiliates, inside and outside the United States, have sound balance sheets, responsible management and valuable franchises,” said FTX chief John Ray. in a report.

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Ray, who replaced FTX founder Sam Bankman-Fried when the company filed for Chapter 11 bankruptcy protection on November 2. 11, added that it is “a priority” in the coming weeks to “explore sales, recapitalizations or other strategic transactions regarding these subsidiaries, and others that we identify as our work continues”.

Ray’s statement is accompanied by a series of filings Saturday morning in Delaware bankruptcy court. In these documents, FTX requested permission to pay external vendors, consolidate bank accounts and create new ones.

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

Securities regulators in FTX and the Bahamas are seeking jurisdiction over the bankruptcy process in two different US courts. Bahamian regulators last week moved potentially hundreds of millions of “digital assets” from FTX’s custody to their own, acknowledging the act in a press release after FTX lawyers accused them of doing it. do in an emergency file.

Ray praised some of the company’s healthiest 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 its bankruptcy proceedings and remains operational today. The platform, acquired by FTX 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 accountants had identified 216 bank accounts, at 36 banks, with positive balances globally. Cash balances across all entities totaled some $564 million, including $265.6 million in the custody of LedgerX on a restricted basis.

FTX’s attorneys also want to use a “cash pooling system,” merging all of the cash assets of each disparate FTX entity into a single consolidated balance sheet and into new bank accounts, which FTX is currently in the process of opening.

Notably, attorneys for FTX wrote that they “are working and will continue to work closely with [existing FTX banks] to ensure that prior authorized signatories do not have access “to any prior FTX accounts that will continue to be used. Earlier reports and court documents have indicated that Sam Bankman-Fried had near absolute control over the management cash flow and access to accounts.

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

In another petition, attorneys for FTX decided to access $9.3 million for payments from vendors that FTX called “critical.” No list was provided, but the FTX motion established criteria for “critical vendor” status.

In good news for clients, FTX attorneys have asked the court for permission to remove “certain confidential information”, including the names and “all associated identifying information” of FTX clients. “Public broadcast of [FTX’s] customer list could give […] competitors an unfair advantage to contact and poach their clients,” the filing reads, potentially jeopardizing FTX’s ability to sell assets or businesses.

FTX’s attorneys want the proceedings to continue in Delaware. Bahamian regulators, on the other hand, say they do not recognize the authority of these Chapter 11 proceedings and want to hold a Chapter 15 process in New York.

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

The Chapter 11 process sought by FTX would allow for the company to be restructured or sold to the highest bidder, although it is unclear who that might be. Rival exchange Binance initially made an offer before withdrawing it. This reversal deepened a liquidity crisis at FTX and exposed a multi-billion dollar hole.

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

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