Recovering Funds after the FTX Collapse: What Investors Need to Know
Founded by Sam Bankman-Fried and Gary Wang in May 2019, FTX was one of the largest centralized cryptocurrency exchanges in the world. Bankman-Fried started FTX with Alameda Research, which was a quantitative trading firm co-founded by him. The firm uses high-frequency trading strategies to trade in crypto markets.
FTX had over one million users and was one of the leading companies in the crypto exchange, with a valuation of $32 billion at its peak. The crypto exchange platform handled around $1 billion in transactions each day. But now that the exchange has completely collapsed, all of its users and investors are worried about their hard-earned investments.
How much did FTX owe to its investors?
Crypto investors are suffering from the FTX collapse as they had untold amounts of fiat currency on the exchange with their major investment coins like bitcoin and altcoins.
After FTX declared bankruptcy, it lost more than $8 billion of its customers’ money in its collapse. People intended to use the money for their own benefit, but their hopes were dashed.
According to Time.com, the court document revealed that the company owes customers $102 million and creditors nearly $3.1 billion.
A large amount of money was sunk into risky bets and debts for Alameda Research.
Since declaring bankruptcy, FTX has been subjected to several cyberattacks, with hackers stealing approximately $400 million worth of cryptocurrency.
FTX and Alameda’s research found between $10 billion and $50 billion of liabilities and similar assets.
Will the investors be able to recover their funds after FTX fallout?
The former FTX CEO’s mismanagement of the corporate financial funds made it difficult to recover the funds. The biggest fear for FTX customers is that they may never recover their money again.
FTX’s current CEO, John J. Ray III, stated that they may not be able to recover all the losses faced by the corporation. Federal regulators estimate that FTX customer losses will exceed $8 billion.
Until now, they have recovered $5 billion worth of crypto and cash and $4.6 billion of assets. Although the exact amount of customer deposits is yet to be determined, FTX’s US branch has identified approximately $181 million in digital assets.
FTX is out to sell its non-strategic investments and assets; they have estimated a book value of $4.6 billion, but that’s the book value; the fair value, which represents the real value, is yet to be identified.
However, the advisors say that with $5 billion of liquid assets, including crypto and cash, it will be difficult to sell their crypto holdings without tanking the price of that crypto.
“We are making important progress in our efforts to maximize recoveries, and it has taken a Herculean investigative effort from our team to uncover this preliminary information,” CEO John states.
The case is still under investigation, and individuals are likely to recover at least some of their lost assets.
The terms and services applied to the customer for their lost assets are still being determined, and the legal authorities are in the process of determining every step for the full recovery of the company’s assets.
According to some bankruptcy experts, the recovery of assets may take several years based on the current situation of the company.
The collapse of FTX
In November 2022, a report exposing Alameda’s balance sheet was revealed, and FTX then began to decline.
After the following event, the report that disclosed an FTX-affiliated trading firm with Alameda Research led the customers to withdraw their cryptos from the FTX exchange platform.
Binance, the world’s largest crypto exchange platform and FTX’s main competitor, announced that it would sell off its entire position in FTT tokens, which prompted investors to sell their FTT tokens as well, prompting FTX to declare a liquidity crisis.
Binance strikes a deal to buy FTX, intending to fully acquire FTX and help cover the liquidity crunch. Later, Binance backed out of the deal, which created a domino effect in the overall crypto market’s fall.
FTX’s U.S. branch filed for chapter 11 bankruptcy on November 11, 2022. Bankman-Fried stepped down as FTX CEO, and John J. Ray was court-appointed CEO of FTX. He is particularly skilled at recovering funds and restructuring failed corporations.
The former CEO, Sam Bankman-Fried, was arrested in connection with multiple wire fraud charges, including FTX.
Disclaimer: This article solely reflects the writer’s personal views and research. Individuals should not consider this the ultimate or the only source for making any decisions.
