The new leadership of FTX is busy tracing financial records and selling assets in order to make customers whole, and from its own reports sounds as if it is meeting with some significant success thus far. But apparently at least about $415 million of its funds have walked out the door in the form of stolen crypto, as hackers have hit both domestic and foreign exchanges since the company went into a tailspin in November.
Stolen crypto contributing to $8 billion FTX shortfall
The company’s financial records, which the team of attorneys handling the cleanup say are the worst they’ve ever seen, indicate that it will be about $8 billion short of making good to various clients and investors. About $5 billion of that has been recovered thus far, but the stolen crypto will likely have to be replaced by selling off other components of the company or even the former CEO’s personal possessions.
The money appears to have been taken during a short window in November, right after former leader Sam Bankman-Fried stepped down as the company’s mismanagement of deposits was exposed. Thus far at least half of the stolen crypto has been traced to mixer services and is very likely gone for good.
Bankman-Fried won’t be able to make good on the debt, living with his parents in California on house arrest (as he awaits an October trial that will likely not go well for him) and having seen his $26 billion personal fortune reduced to essentially nothing. But there are indications that at least some of the stolen crypto is to be covered by the sale of his mansion in the Bahamas, which would at least account for most of the amount that has disappeared into mixer services already.
Plans drawn up to sell affiliates, investments to cover company debts
At this point the company has documented about $323 million in stolen crypto taken from its international exchange, and $90 million from the domestic exchange. The timing of the theft does raise natural questions about whether it was some sort of inside job, but there are not yet any clear indications of who might have been involved or if there is a realistic chance of recovering the funds that have not yet been spirited away via mixer services.
FTX is looking at selling off affiliates and non-strategic investments to cover what is owed to its clients, but the total damage is still not clear as the recovery team is still working through company records. Customer funds on deposit were transferred to partner hedge fund Alameda Research and used to pay off its debts; former CEO of the fund Caroline Ellison is cooperating with prosecutors and has reportedly testified that she and Bankman-Fried were aware of the illegality of their actions and that the financial states of the companies were knowingly concealed from investors.
