New FTX chief says crypto group will pursue reorganisation or sale

Collapsed crypto exchange FTX will attempt to sell or reorganise its businesses, its new chief executive said on Saturday as the company prepared to appear before a US bankruptcy court.

“Based on our review over the past week, we are pleased to learn that many regulated or licensed subsidiaries of FTX, within and outside of the United States, have solvent balance sheets, responsible management and valuable franchises,” said John Ray III.

Ray replaced FTX founder Sam Bankman-Fried as chief executive when dozens of the group’s subsidiaries filed for bankruptcy protection on November 11, after the company was unable to meet billions of dollars of withdrawal requests from customers.

FTX has subsequently said that it believes it may have more than one million creditors. It is due to appear at an initial bankruptcy court hearing in Delaware on Tuesday.

“[I]t will be a priority of ours in the coming weeks to explore sales, recapitalisations or other strategic transactions with respect to these subsidiaries,” Ray said.

FTX asked the court to allow it to keep confidential the names and identities of its creditors, arguing that FTX did not have traditional debtholders and that disclosing its customers would harm it competitively.

“Public dissemination of the debtors’ customer list could give the debtors’ competitors an unfair advantage to contact and poach those customers,” FTX said.

FTX sought the bankruptcy court’s permission to pay outside vendors which it said were essential to keep its operations functioning while it attempted to reorganise. Among these are software providers as well as companies that provide security and storage of crypto assets. FTX has initially asked the court to approve $9mn in vendor payments.

In a separate filing FTX asked the court to approve a new cash management system. It said it had confirmed cash holdings of $565mn but because it had only been able to verify balances at 144 of its 216 known bank accounts, it did “not yet know the total amount of cash [it] hold[s]”.

FTX announced that the company had retained Perella Weinberg Partners as its investment banker to work alongside lawyers at Sullivan & Cromwell and consultants from Alvarez & Marsal.

Ray cited two FTX US subsidiaries, Embed Clearing and LedgerX, as well as units in Japan, Turkey and the UAE as attractive assets. FTX’s US arm bought Embed Clearing, a brokerage tech and infrastructure provider, in June. It acquired LedgerX, a US derivatives platform, last October.

In a court filing on Thursday Ray detailed the chaos at the Bahamas-based FTX, describing a “complete failure of corporate controls and . . . a complete absence of trustworthy financial information”. 

Two other prominent cryptocurrency companies have filed for bankruptcy this year, Voyager Digital and Celsius Holdings. Like FTX, each attempted to reorganise or sell itself rather than immediately seek to liquidate. Voyager had signed a deal to sell itself to FTX, but that is unlikely to go ahead given FTX’s current troubles.

Ray has vowed to investigate allegations of misconduct against Bankman-Fried and other executives.

The bankruptcy court judge John Dorsey will on Tuesday be asked to intervene in a brewing fight between Ray and the Bahamas.

The island nation has sought to keep jurisdiction in relation to FTX Digital, an FTX subsidiary that is not one of the entities that has filed for bankruptcy in Delaware. FTX Digital is facing liquidation proceedings in the Bahamas.

FTX wrote in a court filing earlier this week that there was “credible evidence that the Bahamian government is responsible for directing unauthorised access to the debtors’ systems for the purpose of obtaining digital assets of the debtors — that took place after the commencement of these [bankruptcy] cases”.

In a statement released on Thursday, the Securities Commission of the Bahamas said that on November 12 it “took the action of directing the transfer of all digital assets of FTX Digital Markets Ltd to a digital wallet controlled by the Commission, for safekeeping”.