A lawyer for FTX said Wednesday in a Federal bankruptcy hearing in Delaware that lawyers have located over $5 billion of cash, liquid cryptocurrency, and other liquid investments belonging to the company measured as of November 11, the date FTX filed for bankruptcy protection.
In a ruling from the bench, federal bankruptcy Judge John T. Dorsey granted FTX's motion to keep its customer's names under seal.
The $5 billion in newfound assets do not include crypto in custody with the Securities Commission of the Bahamas valued at approximately $425 million as of the company's petition date, the attorney added. "That position was valued at about $170 million at the end of 2022. It contains a large amount of FTT and is highly volatile," said Andrew Dietderich a partner at law firm Sullivan & Cromwell advising FTX.
FTX's total located assets were previously said to be around $1 billion on December 20, according to reporting from CoinDesk on what FTX's legal counsel said in a closed meeting with creditors.
The attorney said the FTX’s bankruptcy team is also, "underway on plans to monetize 300 other non-strategic investments with a book value of $4.6 billion."
The total amount of the shortfall between FTX's assets and the amount it owes customers and other creditors, however, is still "not yet clear," Dietderich added.
"We know what Alameda did with the money," Dietderich told the court about FTX's associated hedge fund that prosecutors have alleged illegally used FTX customer funds to carry out risky investments.
Dietderich also said the debtor bankruptcy team knows Bankman-Fried instructed FTX CTO Gary Wang to create the "Alameda backdoor." Previously mentioned in court filings, this secret feature allowed Alameda to borrow from customers on the exchange without their permission.
According to Dietderich, the size of Alameda's line of credit with FTX was $65 billion.
"It bought planes, houses, threw parties, made political donations, made personal loans to its founders. It sponsored the FTX Arena in Miami, a Formula One team, the League of Legends, Coachella, and many other businesses, events, and personalities. It gambled on cryptocurrency investments, often unsuccessfully."
Also at issue during Wednesday's hearing was whether names and personally identifying information of FTX’s 9 million customers should be kept confidential while the company works to reorganize or sell the troubled firm.
"I'm going to overrule the objections and allow [the names] to remain sealed at this point," Judge Dorsey said following arguments from several parties. "But I'm not going to leave it open for [six months]. I'm going to…approve an order that extended it for three months."
In court, Dietderich revealed the company had identified more than 9 million customer accounts with about 120 billion associated transactions.
Kevin Cofsky of Perella Weinberg Partners testified that FTX's customer lists, including both names and contact information, are a key company asset.
"A significant component of the business is the customers themselves," Cofsky told Judge Dorsey, reasoning that the company would maintain more value it could pass on to creditors and prospective buyers if customers are protected from poaching by industry competitors.
“That will give buyers confidence that…what they are buying has value,” Cofsky told Judge Dorsey.
In a declaration filed in the proceedings, Cofsky added that customers would not have anticipated their private information being disclosed, explaining that "a hallmark feature of cryptocurrency is a holder's ability to remain anonymous to the public."
In early December, a group of media organizations including Bloomberg L.P., Dow Jones, The New York Times Company, and The Financial Times filed a motion to intervene in the bankruptcy proceedings to reject the request of the debtors to keep FTX creditor names private. Media companies indicated in their arguments the public's right to access the names.
The U.S. Trustee joined in the news organizations' arguments that FTX's customer names should be made public, given that bankruptcy proceedings usually require disclosure of creditor names and addresses.
Wednesday's hearing follows a Tuesday court filing in the bankruptcy of crypto lender BlockFi in which creditors asked their personal information remain under seal. The U.S. Trustee has objected to the motion, arguing that "disclosure is the basic premise of bankruptcy." The issue will be covered in a January 17 hearing.
Customers of bankrupt crypto lender Celsius, which includes hundreds of thousands of retail investors, had their information published in a publicly available court record at the beginning of October.
The court will have a status hearing Jan. 20 on the matter.
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Last night, at an industry event hosted in San Francisco by this editor, venture capitalist Alfred Lin of Sequoia Capital sat down for a one-on-one conversation about the evolution of his storied investment firm, which has enjoyed a largely unblemished record of stunning success — a record since marred by its roughly $200 million investment in the crypto currency exchange FTX. The investment, once a source of pride for the firm, has tarnished not only Sequoia but also Lin, who led the deal on behalf of Sequoia and who was also the firm's point of contact with CEO Sam Bankman-Fried for a year and a half.
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