FTX identifies $5bn in liquid assets as it is cleared to explore some sales

FTX has identified $5bn in liquid assets, lawyers for the company said at a court hearing on Wednesday where the bankrupt crypto exchange was cleared to pursue a quick sale of four subsidiaries to raise funds to repay creditors.

Andrew Dietderich, a partner at Sullivan & Cromwell who is representing FTX, which filed for bankruptcy in November, said the $5bn includes cash, securities and liquid cryptocurrencies. But he said the restructuring team being led by chief executive John Ray still cannot determine the gap between the companies’ assets and what it owes to creditors.

“The amount of the shortfall is not yet clear,” Dietderich said.

FTX has tracked down more than $500mn in cash belonging to the companies formerly run by Sam Bankman-Fried since late November, the company disclosed in court filings on Tuesday, which put its total cash holdings at $1.7bn.

Bankman-Fried faces criminal charges in connection with what prosecutors have described as a vast fraud to abscond with customer money from FTX and funnel it to his private trading firm Alameda Research. Bankman-Fried has denied the charges and pleaded not guilty. Two of his closest associates have pleaded guilty to US fraud charges.

The company’s collapse has left 9mn customers facing the loss of money they had entrusted to the exchange. Dietderich said FTX had “started a strategic review process for our assets” and was considering the swift sale of four FTX subsidiaries as well as an eventual reorganisation or sale of FTX US and the main international exchange FTX.com. 

Delaware bankruptcy judge John Dorsey on Wednesday gave the green light to go forward with the process to sell the four subsidiaries, which include FTX’s units in Europe and Japan as well as two regulated US companies, brokerage tech and infrastructure provider Embed and crypto derivatives platform LedgerX.

Dietderich said the businesses had been identified for a possible early sale because they were recently bought by FTX and “they are less integrated, and in some cases not integrated at all, with FTX”. 

FTX has appointed Perella Weinberg Partners as its investment banker to lead the sale and has said more than 100 parties are interested in buying one or more of the subsidiaries.

The court will also allow FTX to keep the names of its creditors secret for at least three more months in order to protect sensitive commercial information that might be valuable to the company.

“A customer list in any bankruptcy is something that is protected . . . as a trade secret,” Dorsey said in announcing his decision. FTX had asked to keep the list private for at least six months, which was challenged by the US trustee, and several media organisations including the Financial Times.

“The bankruptcy process operates like the rest of the court system on the bedrock principle that the public has a right to access judicial records,” Juliet Sarkessian, a lawyer for the US trustee, told the court.

FTX will be back in bankruptcy court next week when Dorsey will hear an objection from an FTX creditor regarding Sullivan & Cromwell continuing to work for it. Four US senators this week wrote to the judge saying the top Wall Street law firm could not be entrusted with investigating wrongdoing at FTX because of its work for the company before it filed for bankruptcy. Sullivan & Cromwell has said its pre-bankruptcy work was limited and that it was able to properly fulfil its duties as counsel.

Dorsey said the letter was “inappropriate” and would have “no impact whatsoever on my decision in this case”.